UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ | Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the fiscal year ended December 31, 2018
or
☐ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from __________ to __________
Commission file number: 1-9043 1-09043
MedAmerica Properties Inc. |
(Exact name of registrant as specified in its charter) |
Delaware |
| 36-3361229 |
(State of incorporation) |
| (I.R.S. Employer Identification No.) |
Boca Center, Tower I, 5200 Town Center Circle, Suite 550, Boca Raton, Florida 33486 |
(Address of principal executive offices) |
|
561-617-8050 |
( |
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act: Common stock, $0.01 par value per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1)(1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuantpursuant to Item 405 of Regulation S-K (section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a real estate managementsmaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “real estate management“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ☐ | Accelerated Filer ☐ |
Non-accelerated filer ☐ | Smaller Reporting Company ☒ |
Emerging |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $19,589,092quarter: $5,663,163 as of June 30, 2017.2018.
Indicate the number of shares outstanding of each of the registrant’sregistrant’s classes of common stock, as of the latest practicable date:2,610,568 shares of common stock, $0.01 par value per share, as of April 2, 2018.March 29, 2019.
3 | ||
3 | ||
Item 1. | 3 | |
Item 1A. | 4 | |
| Item 1B. | Unresolved Staff Comments | |
Item 2. | 6 | |
Item 3. | 6 | |
Item 4. | 6 | |
|
| |
7 | ||
Item 5. | 7 | |
Item 6. |
| |
Item 7. |
|
|
Item 7A. |
| |
Item 8. |
| |
Item 9. | Changes in and Disagreements with |
|
Item 9A. |
| |
Item 9B. |
| |
|
| |
| ||
Item 10. |
| |
Item 11. |
| |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
|
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
|
Item 14. |
| |
Item 15. |
| |
Item 16 | Form 10-K Summary | ___ |
| ||
As used in this report, all references to “MedAmerica,” the “Company,” “we,” “our” and “us” refer to MedAmerica Properties Inc.
This Annual Report on Form 10-K contains information about us, some of which includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements other than historical information or statements about our current condition. You can identify forward-looking statements by the use of terms such as “believes,” “contemplates,” “expects,” “may,” “will,” “could,” “should,” “would,” or “anticipates,” other similar phrases, or the negatives of these terms. We have based the forward-looking statements relating to our operations on our current expectations, estimates and projections about us and the markets we serve. We caution you that these statements are not guarantees of future performance and involve risks and uncertainties. These statements should be considered in conjunction with the discussion in Part I, the information set forth under Item 1A, “Risk Factors” and with the discussion of the business included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Accordingly, our actual outcomes and results may differ materially from what we have expressed or forecast in the forward-looking statements. Any differences could result from a variety of factors, including the following:
|
| |
|
| |
|
| |
|
| |
|
|
You should not place undue reliance on our forward-looking statements, which reflect our analysis only as of the date of this report. The risks and uncertainties listed above and elsewhere in this report and other documents that we file with the SEC, including this Annual Report on Form 10-K, quarterly reports on Form 10-Q, and any current reports on Form 8-K, must be carefully considered by any investor or potential investor in the Company.
As used in this report, all references to “MedAmerica,” the “Company,” “we,” “our” and “us” refer to MedAmerica Properties Inc.
Item 1. Business.Forward Looking Statements
OverviewThis Annual Report on Form 10-K contains information about us, some of which includes “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements other than historical information or statements about our current condition. You can identify forward-looking statements by the use of terms such as “believes,” “contemplates,” “expects,” “may,” “will,” “could,” “should,” “would,” or “anticipates,” other similar phrases, or the negatives of these terms. We have based the forward-looking statements relating to our operations on our current expectations, estimates and projections about us and the markets we serve. We caution you that these statements are not guarantees of future performance and involve risks and uncertainties. These statements should be considered in conjunction with the discussion in Part I, the information set forth under Item 1A, “Risk Factors” and with the discussion of the business included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Accordingly, our actual outcomes and results may differ materially from what we have expressed or forecast in the forward-looking statements. Any differences could result from a variety of factors, including the following:
● | Closing the proposed strategic transaction discussed in this Report; and | |
● | Any of our other plans, objectives, expectations or intentions contained in this Report that are not historical facts. |
MedAmerica is a real estate management company with limited operations. After exploring various industries,
You should not place undue reliance on our forward-looking statements, which reflect our analysis only as of the date of this Report. The risks and uncertainties listed above and elsewhere in 2016, the board of directors determined to pursue the sourcing, financing, asset managementthis report and co-investment of well-located medical office buildings throughout the United Statesother documents that we file with the intention of aggregating multiple properties within certain locations allowing us to gain efficienciesSEC, including this Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and diversify risk. We source, provide all due diligence and oversee the financing for co-investment partners to acquire medical office buildings in a price range typically too small for REIT investing. We then asset and property manage the portfolios and determine the optimal exit strategy.
These investments will have strong fundamentalsany Current Reports on Form 8-K, must be carefully considered by any investor or potential investor in the highly-desired healthcare real estate sector that continues to grow by demand that is supported by expectations of an increase in the aging baby boomer population. We are focused on opportunistic medical office real estate investments located in the sunbelt states. Management is looking in these attractive geographic locations for investments that meet its criteria. We believe that investing in medical office buildings will generate strong cash flow and produce significantly increased value for our stockholders. Although we believe the acquisition and management of medical office buildings is fundamentally sound, there is no assurance that we will be successful in this endeavor or that we can locate and finance properties meeting our criteria in locations desirable to us. For more information concerning these risks, please see Part I, Section 1A – “Risk Factors”.Company.
In preparation for this new strategy, our management team is focused on repositioning the Company, both operationally and financially. As described in greater detail below, we have changed the name of the Company to identify with our new direction. In addition to seeking equity and debt financing, we have taken the actions described below under “Recent Events” to strengthen our balance sheet and pursue our new strategy.
Our History
The Company was originally organized under the laws of the Commonwealth of Massachusetts in 1985, under the name VMS Hotel Investment Trust, for the purpose of investing in mortgage loans. The Company was subsequently reorganized as a Delaware corporation in 1987 and changed its name to B.H.I.T. Inc. In 2010, the Company changed its name from B.H.I.T. Inc. to Banyan Rail Services Inc. From 2009 to 2012, the Company experienced severe losses from an operating subsidiary in the rail services sector. In 2016, after exploring various industries and researching numerous companies, the board of directors elected to pursue investing in commercial real estate. The Company is pursuing the acquisition and management of strategically located medical office buildings.
In April 2017, our board of directors and the holders of a majority of our outstanding shares of common stock approved by written consent amendments to the Company’s articles of incorporation to (1) change the name of the Company from “Banyan Rail Services Inc.” to “MedAmerica Properties Inc.,” and (2) effect a 1 for 10 reverse stock split of the issued and outstanding shares of common stock of the Company. On June 15, 2017, the Company filed these amendments with the Secretary of State of the State of Delaware and the name change and reverse stock split became effective with the Financial Industry Regulatory Authority, Inc. (“FINRA”) on June 20, 2017. As appropriate, all common stock share quantities have been updated to reflect the 1 for 10 reverse stock split.
Item 1. Business.
Overview
MedAmerica is a real estate management company with limited operations. During 2018, up to the time we were introduced to the commercial real estate company described below, we were focused on seeking to acquire medical office buildings. None of our discussions concluded in any acquisitions.
As part of our search, we were introduced to the sponsor of multiple commercial real estate properties located in the United States in late 2018. After that introduction and continuing to date, we have been engaged in negotiations which, if consummated, would result in us executing merger agreements and consummating a strategic transaction (the “Transaction”) with MedAmerica becoming the owner of between 12 and 17 retail shopping centers, the sponsor of such properties appointing five of seven members of our board of directors, and the sponsor and its investors owning a substantial majority of our common stock and the sponsor and its investors ending up as our principal shareholders. We have not yet signed a binding agreement with respect to the Transaction and any such binding agreement will be subject to a number of closing conditions, including obtaining certain financing. There can be no assurance that the Transaction will be consummated.
Our History
The Company was originally organized under the laws of the Commonwealth of Massachusetts in 1985, under the name VMS Hotel Investment Trust, for the purpose of investing in mortgage loans. The Company was subsequently reorganized as a Delaware corporation in 1987 and changed its name to B.H.I.T. Inc. In 2010, the Company changed its name from B.H.I.T. Inc. to Banyan Rail Services Inc. From 2009 to 2012, the Company experienced severe losses from an operating subsidiary in the rail services sector. In 2016, after exploring various industries and researching numerous companies, the board of directors elected to pursue investing in commercial real estate. In 2017 the Company changed its name to MedAmerica Properties Inc.
The Transaction
We have been negotiating with the sponsor of several limited liability companies, each of which owns a separate shopping center located in the United States. We have reached an agreement in principal with regard to the form of merger agreement and the proposed capitalization of the combined company. The real estate mortgages for the other five shopping centers are held by entities which issued commercial mortgages-backed securities for which the approval process is lengthier or otherwise need more time to close than the shopping centers we expect to acquire at the initial closing. Accordingly, at the initial closing the Company expects to acquire 12 shopping centers at which time the current investors in the assets will own approximately 89.06% of the Company and our shareholders will own the remaining 10.94%. Assuming we sign the merger agreements and ultimately close the Transaction, the Company will initially own 12 shopping centers and will subsequently acquire an additional five shopping centers, subject to lender approval and other closing conditions. Each shopping center has its own indebtedness secured by the particular center. Assuming we close the Transaction and acquire all of the shopping centers, we will issue common stock to the sponsor and the current investors in the assets who collectively will own approximately 92.76% of our common stock on a fully diluted basis with our current shareholders owning approximately 7.24%.
Closing is subject to a number of contingencies including approval by the required percentage of partners of each property-owning entity, obtaining satisfactory resolution of the proposed accounting treatment, execution of definitive merger agreements (the terms of which have been agreed upon), our board of director’s receipt of a fairness opinion, lender approvals, obtaining $47 million of financing to refinance existing indebtedness and to provide growth capital and other customary closing conditions.
It is currently estimated that the Transaction would be expected to be consummated late in the second quarter of 2019, but there can be no assurance that there will not be delays. We cannot assure you that we will sign the merger agreements or close the Transaction. If we do not close the Transaction, our board of directors will have to reexamine its plans with regard to acquiring real estate properties. See Item 1A “Risk Factors.”
The following is a description of what we consider the key challenges and risks relating to our business and investing in our common stock. This discussion should be considered in conjunction with the discussion under the caption “Forward-Looking“Forward-Looking Information” in Part I, the information set forth under Item 1, “Business” and with the discussion of the business included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These risks comprise the material risks of which we are aware. If any of the events or developments described below or elsewhere in this Annual Report on Form 10-K, or in any documents that we subsequently file publicly were to occur, it could have a material adverse effect on our business, financial condition and/or results of operations.
Risks Relating to Our Companythe Transaction
MedAmericaBecause we have no binding agreements with respect to the proposed Transaction, the parties can elect to terminate discussions.has limited assets and operations.
MedAmericaWe have entered into a non-binding letter of intent to acquire the shopping centers in the Transaction. Because we do not currently have binding merger agreements, either party could choose not to engage in the Transaction on current terms, or at all.
The Transaction is subject to a real estate management company with limited assetsnumber of closing conditions, which may not be satisfied.
The form of merger agreement related to the proposed Transaction contains a number of closing conditions, including relating to investor consent by the current owners of the shopping centers, lender consents, obtaining financing and operations. Without revenue,certain other customary closing conditions. There can be no assurance these conditions will be satisfied or waived, in which case the Transaction will not be consummated. In addition, while we are currently dependent upon private placement capital fundraising,expect the Transaction to be signed and loansannounced and equity infusions from aconsummated by the end of the second quarter of 2019, there can be no assurance that such timing will be achieved.
If we fail to close the Transaction, we will have lost one year and incurred costs without receiving any benefit.
During the time we have been engaged in discussions, we have continued to incur costs including related party rent and office support, legal fees and investment banking fees for a fairness opinion to meetbe delivered to our cash needs. Our abilityBoard of Directors. If the Transaction is not consummated, we will not receive any benefit from these expenses.
If we fail to continue on an on-going basis is dependent upon, among other things, raising capital, obtaining debt financing and identifyingclose the Transaction, our future will be uncertain.
We spent several years seeking to acquire medical office buildingsproperties but were not successful. Following that, we have devoted substantial time focused on the Transaction. Our Board of Directors has not considered what it would do if the proposed Transaction is not consummated. Accordingly investors should consider this uncertainty in considering whether to source, manage and co-invest, among other factors, many of which are beyondpurchase, hold or sell our control.common stock.
Because there is little information in this Report about the Transaction, investors should hesitate to purchase our common stock until we announce that we have closed the Transaction or that we have terminated discussions.
Because we have no definitive agreement with respect to the Transaction, we have not disclosed any public information concerning the Transaction except as it appears in this Report. We are not disclosing:
● | The identity of the sponsor; |
● | The names of the properties or where each property is located; |
● | Any information concerning the mixture or types of tenants; |
● | Any information on the mortgages including the principal balances and key terms; or |
● | Any financial information of the limited liability companies including past revenue, net income or loss, cash flow from operations or balance sheet information including assets, liabilities and shareholders’ equity or deficit. |
Because of the risks of not closing described above and the paucity of information in this Report, investors should be hesitant to purchase shares of common stock without being able to bear a total risk of loss. Further, if we close the Transaction, our shareholders will sustain substantial dilution. See Item 1. “Business.”
If the Transaction does not close, we will need to raise additional capital, which may not be available to us and may limit our operations or growth.us.
WeIf the proposed Transaction does not close, we will need additional capital to fund the implementation of oura new business plan. We cannot assure you that any necessary subsequent financing will be successful. Our future liquidity and capital requirements are difficult to predict as they depend upon many factors, including our ability to identify and complete acquisitions and the success of any business we do acquire. We will need to raise additional funds in order to meet working capital requirements or additional capital expenditures or to take advantage of other opportunities.available. We cannot be certain that we will be able to obtain additional financing on favorable terms or at all. If we are unableBoca Equity Partners LLC ("BEP"), an entity controlled by our chairman, has committed to raise needed capital, our growth andfunding operations may be impeded.through May 2020 in the event the Transaction does not close. In addition, if we raise capital by selling additional shares of stock or convertible securities, your percentage ownership in MedAmerica will be diluted.
A growth strategy of making acquisitions subjects usRisks Relating to all ofOur Common Stock
Because the risks inherent in identifying, acquiring and operating newly acquired businesses.market for our common stock is limited, persons who purchase our common stock may not be able to resell their shares at or above the purchase price paid by them.
Our boardcommon stock trades on the OTC Markets, Inc. (“OTCQB”) which is not a liquid market. With some limited exceptions, there has approved the current strategynot been an active public market for our common stock. We cannot assure you that includes the acquisition, purchase, and management of well-located medical office buildings throughout the United States, with the intention to aggregate multiple properties with strong fundamentals in certain attractive geographic locations, particularlyan active public market for our common stock will develop or be sustained in the sunbelt states. Infuture. If an active market for our common stock does not develop or is not sustained, the future,price may decline.
Because we are subject to the “penny stock” rules, brokers cannot generally solicit the purchase of our common stock which adversely affects its liquidity and market price.
The SEC has adopted regulations which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share, subject to specific exemptions. The market price of our common stock on the OTC Markets has been substantially less than $5.00 per share and therefore we are currently considered a “penny stock” according to SEC rules. This designation requires any broker-dealer selling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules limit the ability of broker-dealers to solicit purchases of our common stock and therefore reduce the liquidity of the public market for our shares.
Moreover, as a result of apparent regulatory pressure from the SEC and the Financial Industry Regulatory Authority, a growing number of broker-dealers decline to permit investors to re-sell shares of penny stocks like ours. This may have had and may continue to make acquisitionshave a depressive effect upon the common stock price.
Due to factors beyond our control, our stock price may be volatile.
Any of or investments in, medical office buildings. To that end, we may spend significant management time and resources in analyzing and negotiating acquisitions or investments that are not consummated and the strategy may not be implemented at all. Moreover, no assurance can be given that we will identify medical office buildings to acquire, or if we do, that we will be able to acquire such properties on terms acceptable to us, or at all. Furthermore, we may seek equity or debt financing for particular acquisitions, which may not be available on commercially reasonable terms, or at all. We will also face allfollowing factors could affect the risks associated with an acquisition strategy, including, but not limited to:market price of our common stock:
● |
|
● |
|
● |
|
● |
|
● |
|
● |
| |
|
| |
|
|
If we cannot overcome these challenges,Future volatility may harm our shareholders and future shareholders.
An investment in the Company may be diluted in the future as a result of the issuance of additional securities or the exercise of options, warrants or convertible notes.
In order to raise additional capital to fund our strategic plan, we may not realize actual benefitsissue additional shares of common stock or securities convertible, exchangeable or exercisable into common stock from past andtime to time, which could result in substantial dilution to any person who purchases our common stock. Because we have a negative net tangible book value, purchasers will suffer substantial dilution. We cannot assure you that we will be successful in raising funds from the sale of common stock or other equity securities.
In the future, acquisitions, which will impair our overall business results. If we complete an investment or acquisition, we may not realizeissue preferred stock without the anticipated benefits from the transaction.approval of our shareholders, which could make it more difficult for a third party to acquire us and could depress our stock price.
Certain employees and directors own a significant interest in MedAmerica.
Certain directors and officers control 31.72% of our outstanding common shares as of December 31, 2017. Accordingly, they possess a significant vote on all matters submitted toOur Board may issue, without a vote of our shareholders, includingone or more series of preferred stock (in addition to the electionSeries A preferred stock that is currently outstanding) that have more than one vote per share. This could permit our board of the membersdirectors to issue preferred stock to investors who support us and our management and permit our management to retain control of our board. This concentrationbusiness. Additionally, issuance of ownership may have the effectpreferred stock could block an acquisition resulting in both a drop in our stock price and a decline in interest of preventing or discouraging transactions involving an actualour common stock.
If our common stock becomes subject to a “chill” or a potential change of control of MedAmerica, regardless of whether a premium is offered over then-current market prices.
The current state of debt markets could have a material adverse impact on our earnings and financial condition.“freeze” imposed by the Depository Trust Company, or DTC, your ability to sell your shares may be limited.
The cost of commercial debt may increase or may contractDTC acts as a resultdepository or nominee for street name shares or stock that investors deposit with their brokers. Although through DTC our common stock is eligible for electronic settlement rather than delivery of certain factors including the tightening of underwriting standards by lenders and credit rating agencies. Credit spreads for major sources of capital may grow significantly as investors may demand a higher risk premium. Should our borrowing cost increase, either by increasespaper certificates, DTC in the index rateslast several years has imposed a chill or by increases in lender spreads, we will need to factor such increases intofreeze on the economics of our business plan. This may result in our generating lower overall economic returnsdeposit, withdrawal and potentially reducing cash flow available for business operations and business development.
Risks Relating to Our Shares
Unregistered Sales of Equity Securities and Use of Proceeds
Private Placement
In February 2017, management began approaching certain accredited investors offering unregistered shares of the Company’s common stock for $1.50 a share in order to raise working capital and fund our operations (the “2017 Private Placement”). Through December 31, 2017, the Company accepted subscriptions for $1,940,005 in the 2017 Private Placement. The issuancestransfer of common stock were made in relianceof issuers whose common stock trades on section 4(2)the OTC Markets. Depending on the type of the Securities Actrestriction, it can prevent shareholders from buying or selling our shares and prevent us from raising money. A chill or freeze may remain imposed on a security for a few days or an extended period of 1933 for the offer and saletime (in at least one instance a number of securities not involvingyears). While we have no reason to believe a public offering and rule 506 of Regulation D of the Securities Act. The proceeds of the 2017 Private Placementchill or freeze will be used for working capital and to fund operations and repay a related party note and accrued interest.
Outstanding convertible preferred stock may depress the price ofimposed against our common stock.
As a result of the private placements including issuances of preferred stock, in 2012 and prior years, there areif it were your ability to sell your shares of outstanding preferred stock which canwould be converted into as many as 10,000 shares of our common stock. If the shares of preferred stock are converted, your ownership of the Company will be diluted. limited.
If you invest in MedAmerica, you may experience substantial dilution and the market priceSince we intend to retain any earnings for development of our shares may decrease.business for the foreseeable future, you will likely not receive any dividends for the foreseeable future.
In the event we identifyWe have not and obtain a medical office building, there may be a dilutive effect on the holders of our securities. In addition, as part of our recruitment process and in connection with our efforts to attract and retain employees and directors, we may offer stock options, restricted stock or other types of equity-based incentives to our future employees and directors. The Company’s issuance of equity-based incentives to new hires, senior management and directors, may cause you significant dilution as a result of such issuances. In 2017 we issued a significant number of common shares to raise capital and retire shares of our preferred stock. Although shares of common stock issued in conjunction with private placements and to be issued upon conversion of our preferred stock will be “restricted” securities under the Securities Act of 1933 prior to any registration statement being filed and being declared effective by the SEC, they may nonetheless be sold prior to that time in reliance on registration exemptions contained in Rule 144 of the Securities Act, subject to certain resale restrictions imposed by Rule 144. Such issuances and sales may also depress the market price of our shares.
You may not be able to sell your shares because there is a limited market for our stock.
Although our common stock is traded on the OTCQB, currently there is limited trading volume in our stock and there may be very limited demand for it as well. As a result, it may be difficult for you to sell our common stock despite the fact it is traded on the OTCQB.
We do not intend to pay any cash dividends on our common stock.
We do not anticipate paying any cash dividends on our common stock in the foreseeable future. The payment of cash dividends depends on our future, earnings, financial condition and other business and economic factors that our board of directors may consider relevant. Becauseas we do not intend to pay cashretain any earnings for development and expansion of our business operations. As a result, you will not receive any dividends the return on your investment may be limited to the market pricefor an indefinite period of the shares.time.
We do not own any real property.The Company has entered into an office lease and administrative support agreement with Boca Equity Partners LLC (“BEP”), an entity controlled by our Chairman of the Board. See “Item 13. Certain Relationships and Related Transactions, and Director Independence” below. The agreement has a month-to-month term commencing in February 2017, amended in June 2017 and most recently amended in September 2018 and provides for the Company’s use of a portion of BEP’s offices and certain overhead items at the BEP offices such as space, utilities and other administrative services for varying amounts over the term, most recently $5,000 a month. Total expense incurred under these agreements amounted to $140,000 and $138,025 for the years ended 2018 and 2017, respectively. If we were required to move, we believe that there is a large supply of commercial property available in the general area, which we could lease at comparable prices.
TheAs of the filing date of this Report, we are not aware any proceeding, threatened or pending, against the Company is notwhich, if determined adversely, would have a party, nor is its property the subjectmaterial effect on our business, results of any pending legal proceedings.operations, cash flows or financial position.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Market for Registrant’sRegistrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Shares of ourOur common stock are traded over-the-counter and sales are reportedis quoted on the OTCQB under the symbol “MAMP.“MAMP.” TheOur common stock last reported sale price astraded at $3.10 on March 29, 2019. As of April 2, 2018 was $6.00 per share. The following table lists the high and low closing sale prices of our stock during 2017 and 2016 as reported on OTCQB. These sale prices reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.
Fiscal Year Ended December 31, | ||||||||||||||||
2017 | 2016 | |||||||||||||||
High | Low | High | Low | |||||||||||||
Fourth Quarter | $ | 7.00 | $ | 4.55 | $ | 8.50 | $ | 4.00 | ||||||||
Third Quarter | $ | 12.98 | $ | 5.00 | $ | 10.00 | $ | 7.50 | ||||||||
Second Quarter | $ | 13.40 | $ | 7.00 | $ | 9.00 | $ | 6.00 | ||||||||
First Quarter | $ | 7.00 | $ | 4.00 | $ | 10.50 | $ | 6.50 | ||||||||
Therethat date there were approximately 735 stockholders686 shareholders of record of MedAmerica’s common stock as of April 2, 2018.
Common Stock
As of December 31, 2017, our certificate of incorporation authorized to issue up to 50.0 million shares of common stock, par value $0.01 per share. The holdersrecord. We believe that additional beneficial owners of our common stock are entitled to one vote per share on all matters to be voted upon by our stockholders, including the election of directors. Our shares of common stock are not convertible into any other security and do not have any preemptive rights, conversion rights, redemption rights or sinking fund provisions. Stockholders are entitled to receive dividends out of funds legally available if our board of directors,held in its discretion, determines to issue dividends and only then at the times and in the amounts that our board of directors may determine. In the event of our liquidation, dissolution, or winding up, our stockholders receive ratably any net assets that remain after the payment of all of our debts, preferred stock and other liabilities.street name.
Our certificate of incorporation also limits the number of shares that may be held by any one person or entity. No person or entity may directly or indirectly acquire shares if it would cause the person or entity to be:
|
|
|
|
|
|
Our board has the authority and has in the past exercised its discretion to exempt shareholders from the foregoing limitations if such shareholders can provide evidence to assure the board that no NOLs will be lost or limited by such exemption or the board determines such exemption is in the best interests of MedAmerica.
Dividends
We intend to reinvest our earnings, if any, in the business, and have never declared or paid, and do have no present intentions to declare or pay, any cash dividends on our common stock.
Stock Options
In 2017, we issued 60,000Recent Sales of Unregistered Securities
On June 11, 2018, the Company granted a new director 10,000 fully-vested stock options to officers and directors and 5,000 options expired on June 26, 2017.
Private Placement
In February 2017, management began approaching certain accredited investors offering unregistered shareswith an exercise price of the Company’s common stock for $1.50 a share in order to raise working capital and fund our operations (the “2017 Private Placement”). Through December 31, 2017, the Company accepted subscriptions for $1,940,005 in the 2017 Private Placement.$6.00 per share. The issuances of common stock were made in reliance on section 4(2) ofoption grant was exempt from registration under Section 4(a)(2) the Securities Act of 1933 for the offer and sale of securities not involving a public offering and ruleRule 506 of Regulation D of the Securities Act. The proceeds of the 2017 Private Placement will be used for working capital and to fund operations and repay a related party note and accrued interest.thereunder.
Item 6. Selected Financial Data.
Not applicable.required for smaller reporting companies.
Item 7. Management’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and related notes included under Item 8 of this Annual Report on Form 10-K.
Overview
As described in Item 1, for several years MedAmerica is a real estate management company with limited operations. Without revenue, we are currently dependent upon private placement capital fundraising, and loans and equity infusions from a related partywas seeking to meet our cash needs. Our ability to continue on an on-going basis is dependent upon, among other things, raising capital, obtaining debt financing and identifyingacquire medical office buildings to acquire, source, manage and co-invest, among other factors, many of which are beyond our control.
Our History
The but was unsuccessful in closing any transactions. In late 2018 the Company was originally organizedintroduced to the sponsor of a number of commercial real estate properties located in the United States. While we have an agreement in principal and we have an oral agreement with regards to the form of the merger agreement as of the date of this Form 10-K, the property-owning entities do not have the required consents of the current investors in the assets, nor the consent of the various lenders, which is required under the laws ofloan agreements and must be received prior to consummating the Commonwealth of Massachusetts in 1985, underTransaction. It is currently estimated that the name VMS Hotel Investment Trust, for the purpose of investing in mortgage loans. The Company was subsequently reorganized as a Delaware corporation in 1987 and changed its nameTransaction would be expected to B.H.I.T. Inc. In 2010, the Company changed its name from B.H.I.T. Inc. to Banyan Rail Services Inc. From 2009 to 2012, the Company experienced severe losses from an operating subsidiarybe consummated late in the rail services sector. In 2016, after exploring various industries and researching numerous companies, the board of directors elected to pursue investing in commercial real estate. The Company is pursuing the acquisition and management of strategically located medical office buildings.
In April 2017, our board of directors and the holders of a majority of our outstanding shares of common stock approved by written consent amendments to the Company’s articles of incorporation to (1) change the name of the Company from “Banyan Rail Services Inc.” to “MedAmerica Properties Inc.,” and (2) effect a 1 for 10 reverse stock split of the issued and outstanding shares of common stock of the Company. On June 15, 2017, the Company filed these amendments with the Secretary of State of the State of Delaware and the name change and reverse stock split became effective with the Financial Industry Regulatory Authority, Inc. on June 20, 2017. As appropriate, all common stock share quantities have been updated to reflect the 1 for 10 reverse stock split.
The Company’s ability to continue on a going-concern basis is dependent upon, among other things, raising capital, obtaining debt financing and finding an operating business to acquire, and other factors, many of which are beyond our control.
Recent Events
Stock Split and Name Change
In April 2017, our board of directors and the then holders of a majority of our outstanding shares of common stock approved by written consent amendments to the Company’s articles of incorporation to (1) change the name of the Company from “Banyan Rail Services Inc.” to “MedAmerica Properties Inc.,” and (2) effect a 1 for 10 reverse stock split of the issued and outstanding shares of common stock of the Company. On June 15, 2017, the Company filed these amendments with the State of Delaware and the name change and stock split became effective with the Financial Industry Regulatory Authority, Inc. on June 20, 2017.
The name change reflects our new strategy of pursuing acquisitions and management of well-located medical office buildings. Pursuant to the reverse stock split, each outstanding share of the Company’s common stock was automatically exchanged for one-tenth of a share. As a result, each stockholder now owns a reduced number of shares of the Company’s common stock. The stock split affects all stockholders uniformly and does not affect any stockholder’s percentage ownership in the company or the proportionate voting rights and other rights and preferences of the stockholders, except for adjustments that may result from the treatment of fractional shares, which have been rounded to the nearest whole share. The number of the Company’s authorized shares of common stock was not affected by the stock split.
Private Placement
In February 2017, management began approaching certain accredited investors offering unregistered shares of the Company’s common stock for or $1.50 a share in order to raise working capital and fund our operations (the “2017 Private Placement”). Through December 31, 2017, the Company accepted subscriptions for $1,940,005 in the 2017 Private Placement. The issuances of common stock were made in reliance on section 4(2) of the Securities Act of 1933 for the offer and sale of securities not involving a public offering and rule 506 of Regulation D of the Securities Act. The proceeds of the 2017 Private Placement will be used for working capital and to fund operations and repay a related party note and accrued interest.
Preferred Stock Exchange
In April 2017, we offered our preferred shareholders shares of our common stock in exchange for their Preferred Stock and Preferred Dividends accrued as of December 31, 2016. Pursuant to the offer, each share of Preferred Stock would be exchanged for 20 shares of common stock. All preferred shareholders, except one, accepted our offer resulting in the conversion of 9,875 shares of Preferred Stock and $301,656 of Preferred Dividends into 257,831 shares of (post-split) common stock which were issued in the thirdsecond quarter of 2017. The effective date of the exchange is June 30, 2017. This exchange resulted in deemed dividends on preferred stock conversion of $148,125.
As a result of the reverse stock split, the private placement and the preferred stock exchange,2019, but there is effectively 2,610,568 shares of common stock outstanding as of December 31, 2017 consisting of 1,056,900 shares from the reverse stock split, 1,293,337 shares from the 2017 private placement, 2,500 shares from a prior year private placementcan be no assurance that were issued in 2017 and 257,831 shares from the preferred stock and preferred dividend exchange.there will not be delays.
Letter of Intent to Acquire Banyan Medical Partners
On June 14, 2017, MedAmerica entered into a letter of intent with Patriot Equity LLC (“Patriot”) to reacquire all capital units of Banyan Medical Partners LLC (“BMP”) for $9,536,582. In 2016, MedAmerica originally formed BMP and its subsidiary, Banyan Surprise Plaza LLC (“BSP”), to embark on a new strategy to pursue the acquisition of well-located medical office buildings, particularly in the sunbelt states. In August 2016, BSP entered into an agreement to purchase the Surprise Medical Plaza, located in Surprise, Arizona. Although the Company pursued various options to finance the acquisition, management was unable to complete the transaction in the time frame provided for in the purchase agreement. As a result, the board decided to transfer BMP and BSP to Patriot, an entity owned by Gary O. Marino, the Company’s chairman of the board, in March 2017. BSP subsequently completed the acquisition of the Surprise Medical Plaza property. The letter of intent entered into between MedAmerica with Patriot was non-binding, provided for a ninety-day exclusive diligence period, and was contingent upon the Company obtaining financing to complete the acquisition. The letter of intent was extended to December 15, 2017 at which time it expired. The Company has no current plans to further pursue this acquisition.
Quasi-Reorganization
In preparing the Company's September 30, 2017 consolidated financial statements, the Company determined that events that would have allowed us to complete the previously disclosed Quasi-Reorganization pursuant to Section 210 of the Codification of Financial Reporting Policies ("Quasi-Reorg") effective June 30, 2017 did not materialize during the subsequent quarter. As such we have subsequently determined that we do not meet all the requirements necessary to complete the Quasi-Reorg during this period. The revision does not result in any change to total equity of the Company; it only affected individual equity account balances. The Company assessed the materiality of this misstatement in the June 30, 2017 interim period financial statements in accordance with the SEC's Staff Accounting Bulletin (SAB) No. 99, Materiality, codified in ASC No. 250, Presentation of Financial Statements, and concluded that the misstatement was not material to any interim period. In accordance with SAB 108, the Company has adjusted the quarter ended June 30, 2017 financial statements. There was no impact to the statement of operations or cash flows.
June 30, 2017 | ||||||||||||
As Originally Reported | Adjustment | As Corrected | ||||||||||
Series A Preferred stock | $ | 5.00 | $ | - | $ | 5.00 | ||||||
Common stock | 158,461 | - | 158,461 | |||||||||
Additional paid-in-capital | 1,000,226 | 110,652,881 | 111,653,107 | |||||||||
Accumulated deficit | - | (110,652,881 | ) | (110,652,881 | ) | |||||||
Treasury stock | - | - | - | |||||||||
Total stockholders' equity (deficit) | $ | 1,158,692 | $ | - | $ | 1,158,692 | ||||||
Critical Accounting Policies and Estimates
ForThe following is a discussion of our significantsignificant accounting policies, see Note 4 – "Summarypolicies.
Use of Significant Accounting Policies"Estimates
The preparation of financial statements, in conformity with accounting principles generally accepted in the accompanying NotesUnited States ("U.S. GAAP"), requires management to Financial Statements.make certain estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenues and expenses and disclosures of contingent assets and liabilities at the date and period ending of the financial statements. Actual results could differ from those estimates.
Cash
The Company considers all cash, bank deposits and highly liquid investments with an original maturity ofthree months or less to be cash equivalents. From time to time our cash deposits exceed federally insured limits.
Equipment and Furnishings
Equipment and furnishings are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from 3 to 7 years. Expenditures for repairs and maintenance are charged to expense as incurred. For assets sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any related gain or loss is reflected in income for the period in the statement of operations.
Fair Value of Financial Instruments
Recorded financial instruments as of December 31, 2018, consist of cash and cash equivalents, accounts payable, certain accrued liabilities and short-term obligations. The related fair values of these financial instruments approximated their carrying values due to either the short-term nature of these instruments or based on the interest rates currently available to the Company.
Income (Loss) Per Common Share
The Company computes net income (loss) per common share in accordance with the provisions included in Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 260, Earnings per Share. Under ASC 260, basic and diluted income (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares and common share equivalents outstanding during the period. Basic income (loss) per common share excludes the effect of potentially dilutive securities, while diluted income (loss) per common share reflects the potential dilution that would occur if securities or other contracts to issue common shares were exercised for, converted into or otherwise resulted in the issuance of common shares. The Company’s potentially dilutive securities are not included in the computation of diluted loss per share because their impact is anti-dilutive due to the net loss.
Income Taxes
The Company accounts for income taxes using FASB ASC Topic 740, " Income Taxes ", which requires the recognition of deferred tax liabilities and assets for expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
The Company follows the provisions regarding Accounting for Uncertainty in Income Taxes, which require the recognition of a financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. We had no material unrecognized tax benefits and no adjustments to our financial position, results of operations or cash flows were required. Generally, federal, state and local authorities may examine the Company's tax returns for three years from the date of filing and the current and prior three years remain subject to examination as of December 31, 2018. We do not expect that unrecognized tax benefits will increase within the next twelve months. We recognize accrued interest and penalties related to uncertain tax positions as income tax expense.
Retained Earnings Distributions
The Company’s preferred stockholders are entitled to receive payment before any of the common stockholders upon a liquidation of the Company, and we cannot pay dividends on our common stock unless we first pay dividends required by our preferred stock.
Preferred Stock Dividends
The holders of Series A Cumulative Preferred Stock (“Preferred Stock”) shall be entitled to receive cumulative, non-compounded, cash dividends on each outstanding share of Preferred Stock at the rate of 10% of the issuance price per annum (“Preferred Dividends”), which began accumulating on January 1, 2010. The Preferred Dividends shall be payable semiannually to the holders of Preferred Stock, when and as declared by the Board of Directors.
Recently Issued Accounting Pronouncements
Management has determined that all recently issued accounting pronouncements will not have a material impact on the Company’s financial statements or do not apply to the Company’s operations.
Results of Operations
The following table summarizes our results for the years ended December 31, 20172018 and 2016:2017:
Year Ended December, 31 | Variance | Year ended December 31, | Variance | |||||||||||||||||||||||||||||
2017 | 2016 | $ | % | 2018 | 2017 | $ | % | |||||||||||||||||||||||||
General & administrative expenses | $ | 698,774 | $ | 859,401 | $ | (160,627 | ) | -18.7 | % | $ | 601,024 | $ | 698,774 | $ | (97,750 | ) | -14.0 | % | ||||||||||||||
Loss from operations | (698,774 | ) | (859,401 | ) | (160,627 | ) | -18.7 | % | (601,024 | ) | (698,774 | ) | 97,750 | -14.0 | % | |||||||||||||||||
Interest expense | (17,002 | ) | (13,208 | ) | 3,794 | 28.7 | % | (1,516 | ) | (17,002 | ) | 15,486 | -91.1 | % | ||||||||||||||||||
Net loss | $ | (715,776 | ) | $ | (872,609 | ) | $ | (156,833 | ) | 18.0 | % | $ | (602,540 | ) | $ | (715,776 | ) | $ | 113,236 | -15.8 | % | |||||||||||
General and Administrative Expenses
General and administrative expenses include: compensation expense, professional fees, insurance, office and rent expenses and costs related to being a public company.
For the year ended December 31, 2017,2018, general and administrative expenses decreased $160,627$97,750 or 18.7%14% compared to the year ended December 31, 2016.2017. The 2018 results included $125,090 of expenses reimbursed by a related party controlled by the Company’s Chairman relating to services provided by the Company’s President & CEO. The 2017 general and administrative expenses reflectsreflect a reimbursement of $117,756 of prior year expenses reimbursed by a related party relative toarising from the sale of BMP. Banyan Medical Partners LLC (“BMP”).
The overall decrease in general and administrative expenses is primarily due to:
● | A decrease in |
● | A decrease in |
● | A decrease in |
● | A decrease |
● | Offset by an increase in |
● | An increase in |
● | An increase in taxes of approximately $10,000; |
● | An increase in insurance of approximately $3,500; |
● | An increase in rent of approximately |
● | An increase in |
|
|
|
|
Interest expense
InterestInterest expense was $17,002$1,516 and $13,208$17,002 for the years ended December 31, 20172018 and 2016,2017, respectively. The increasedecrease in interest expense was due to the increase inrepayment of a related party note payable balance and the longer length of time outstanding during 2017.
Income tax expense
Income tax expense was $0 for the years ended December 31, 20172018 and 2016,2017, respectively, due to a full valuation allowance being recorded by the Company for any deferred tax assets created as the result of any net operating losses generated by operations.
A valuation allowance offsets net deferred tax assets for which future realization is considered to be less likely than not. A valuation allowance is evaluated by considering all positive and negative evidence about whether the deferred tax assets will be realized. At the time of evaluation, the allowance can be either increased or reduced. A reduction could result in the complete elimination of the allowance if positive evidence indicates that the value of the deferred tax assets is no longer impaired and the allowance is no longer required.
The Company’sCompany’s net deferred tax assets before valuation allowance as of December 31, 2018 and 2017, were $2,231,703 and 2016, were $2,125,133, and $2,838,189, respectively, most of which relates to net operating losses that expire in varying amounts through December 31, 2037.2038. The Company recorded an operating loss for the year and has a history of operating losses. After assessing the realization of the net deferred tax assets, we have recorded a valuation allowance of 100% of the value of the net deferred tax assets as we currently believe it more likely than not that the Company will not realize operating profits and taxable income so as to utilize the net operating losses in the near future.
On December 22, 2017, the Tax Cuts and Jobs Act (the "Tax Act") was enacted in the United States, resulting in significant changes from previous tax law. The Tax Act reduced the federal corporate income tax rate to 21% from 35% effective January 1, 2018. Our federal income tax expense for periods beginning in 2018 will be based on the new rate. The Tax Act also provides for immediate deduction of 100% of the costs of qualified property that have been incurred and the property placed in service during the period from September 27, 2017 to December 31, 2022. This provision will begin to phase down each year beginning January 1, 2023 and will be completely phased out as of January 1, 2027.
In connection with the initial analysis of the impact of the Tax Cuts and Jobs Act (the “Tax Act”), we remeasured our deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. As a result, we recorded a decrease in our deferred tax assets of approximately $1,067,000$1,067,000 with a corresponding adjustment to deferred income tax expense. This adjustment was fully offset by a decrease in the valuation allowance for the yearyears ended December 31, 2017. 2017 and 2018.
Net loss attributable to common shareholdersshareholders
Net loss attributable toto common shareholders was ($0.56)0.23) per share for the year ended December 31, 20172018 as compared to ($0.94)0.57) per share for the year ended December 31, 2016.2017. The difference of ($0.38)0.34) per common share is primarily the result of a reduction in net loss attributable to common shareholders of $112,481$261,361 and an increase of 498,6401,094,403 in the weighted average number of common shares outstanding.
Financial Condition and LiquidityCash Flow
Our cash balances at December 31, 2017 and 2016 were $708,382 and $450, respectively. The following is a summary of our cash flow activity for the years ended December 31, 20172018 and 2016:2017:
Years Ended December 31, | ||||||||
2017 | 2016 | |||||||
Net cash used in operating activities | $ | (835,646 | ) | $ | (688,758 | ) | ||
Net cash provided by (used in) investing activities | $ | (72,616 | ) | $ | (110,000 | ) | ||
Net cash provided by financing activities | $ | 1,616,194 | $ | 471,826 | ||||
Year ended December 31, | ||||||||
2018 | 2017 | |||||||
Net cash used in operating activities | $ | (523,425 | ) | $ | (835,646 | ) | ||
Net cash used in investing activities | $ | - | $ | (72,616 | ) | |||
Net cash provided by (used in) financing activities | $ | (45,236 | ) | $ | 1,616,194 | |||
Net cash used in operating activities
For the year ended December 31, 2017,2018, net cash used in operating activities was $835,646$523,425 as compared to net cash used in operating activities of $688,758$835,646 for the year ended December 31, 2016.2017. The increasedecrease in cash used in operating activities was primarily due to the reduction in 2017 and 2018 reimbursement of non-cash directors compensation, a note assumedcosts by a related party, in 2017 and offset by a2018 reduction in 2017accounts payable and accrued expenses and 2018 decrease in net loss.operating activities.
Net cash provided by (used in)used in investing activities
For the year ended December 31, 2017,2018, net cash usedprovided by investing activities was $72,616$0 as compared to net cash used in investing activities of $110,000$72,616 for the year ended December 31, 2016.2017. The decrease in cash used byin investing activities was primarily due to the decrease in property deposits.
Net cash provided by (used in) financing activities
For the year ended December 31, 2017,2018, net cash used in financing activities was $45,236 as compared to net cash provided by financing activities wasof $1,616,194 as compared to $471,826 for the year ended December 31, 2016.2017. The increasedecrease in net cash provided by financing activities was due primarily to the 2017 Private Placement which was launched on February 2017 and raised $1,810,264 (net of costs) through December 31, 2017. This was offset by a net decrease in the demand loan from a related party of approximately $194,070.
At December 31, 2017,2018, the Company had net working capital of $619,702$20,394 as compared to a net working capital deficit of $754,634$619,702 at December 31, 2016.2017. The improvementdecrease in working capital is primarily due to the cash received from the 2017 Private Placement. The Company recognizes that as a result of the lack of operations,significant revenues, it will continue to rely upon the sale of stock, capital contributions from investors or loans from related parties to generate cash flow and we hope to generate cash from operating medical office buildings.flow.
Liquidity and Profitability
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction ofof liabilities in the normal course of business. Accordingly, the consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company management believes that cash on hand, cash flow generated internally by the Company and a line of credit from a related party will be adequate to fund its limited overhead and other cash requirements for the next twelve months.
At December 31, 2016, the Company had a cash balance of $4502018 and a working capital deficit of $754,634 with substantial doubt about its ability to continue as a going concern. During 2017 the Company executed a Private Placement. At December 31, 2017 the Company had a cash balance of approximately $708,000$139,721 and $708,382, respectively and working capital of approximately $620,000.$20,394 and $619,702, respectively.
We have undertaken, and will continue to implement, various measures to address our financial condition, including:
Curtailing costs and consolidating operations, where feasible.
Seeking debt, equity and other formsPending the closing of financing, including funding through strategic partnerships.
Reducing operations to conserve cash.
Investigating and pursuing transactions with third parties, including strategic transactions and relationships.
The Company management believes that these measures, coupled with cash on hand, cash flow generated internally bythe Transaction, the Company and a line of credit from a related party will be adequateexpects to fund its limited overhead and other cash requirements for the next twelve months. However, there can be no assurance that we will be able to secureborrow funds from an affiliate of its Chairman in order to meet operating expenses. If the additional funding we need.Transaction closes, the Company anticipates that it will have adequate working capital and will not have to resort to related party loans. If our efforts to do so are unsuccessful, wethe proposed Transaction does not close, the Company will be requiredreliant upon BEP unless it can obtain equity or debt financing from third parties. BEP has committed to further reduce or eliminate our operations.funding operations through May 2020 in the event the Transaction does not close. .
New Accounting Pronouncements
Not applicable.
Off-Balance Sheet Financing Arrangements
We do not have any material off-balance sheet financing arrangements.
Inflation
We do not believe inflation had a material impact on our results of operations for the years ended December 31, 20172018 and 2016.2017.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 8. Financial Statements and Supplementary Data.
Our financial statements for the years ended December 31, 20172018 and 20162017 follow this annual report, beginning on page 26.23.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
On January 20, 2017, the board of directors ratified the dismissal of the Company’s independent registered accounting firm of Daszkal Bolton LLP and engaging the new firm of Zachary Salum and Auditors PA. There were no disagreements with accountants on accounting and financial disclosures.
In October 2017, Zachary Salum and Auditors PA resigned for personal reasons. The board of directors engaged the new firm of Marcum LLP. There were no disagreements with accountants on accounting and financial disclosures.Not applicable.
Item 9A.9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of December 31, 20172018, our management, under the direction of our chief executive officer and chief financial officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended. Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2017.2018.
Management’sManagement’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining an adequate system of internal control over financial reporting as defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles defined in the Exchange Act.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even when determined to be effective, can onlyonly provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.
At the end of December 31, 2017,2018, we carried out evaluations of our effectiveness of internal control over financial reporting under the direction of our Chief Executive OfficerOfficer and Chief Financial Officer. In making this evaluation, management used the criteria set forth in Internal Control Over Financial Reporting - Guidance for Smaller Public Companies (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. At December 31, 2017,2018, based upon those evaluations, management concluded that our internal control over financial reporting was effective as of December 31, 2017.2018.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the year ended December 31, 20172018 that materially effect, or are reasonably likely to materially affect, our internal control over financial reporting.
Revision
None.
Item 10. Directors, Executive Officers and Corporate Governance.
Directors and Executive Officers
Our current directors and executive officers are:
Gary O. Marino, age 73,74, joined our board in January 2007, was appointed chairman in January 2008 and also served as our chief executive officer from November 2008 until he stepped down in October 2013. Mr. Marino is the chairman, president, and chief executive officer of Boca Equity Partners LLC (“BEP”)BEP and Patriot Equity LLC (“Patriot”). Mr. Marino served as chairman, president and CEO of Patriot Rail Corp., an owner and operator of short line and regional railroads, from 2005 until 2012, and formerly held the same positions at RailAmerica, Inc. a company he founded in 1985, until his retirement in 2004. From 1984 until 1993, Mr. Marino served as chairman, president and CEO of Boca Raton Capital Corporation, a publicly owned venture capital investment company. Prior to that he spent more than fifteen years in commercial banking in New York as a senior loan officer and was also president and CEO of two small business investment companies (SBICs), as well as president of a Florida-based commercial bank. Mr. Marino received his B.A. degree from Colgate University and his M.B.A. from Fordham University. From 1966 to 1969, he served as an officer of the United States Army Ordnance Corps. He has also served on the board of directors of the American Association of Railroads. We believe Mr. Marino is well qualified to serve on the board due to his broad experience as an entrepreneur and CEO.
Paul S. Dennis, age 79,80, joined the board in January 2007 and served as interim chief executive officer, president and chief financial officer from November 28, 2016 to August 2017. Previously, Mr. Dennis served as interim chief executive officer from April 2008 and chief financial officer from February 2007 to November 2008. Mr. Dennis has served as president and CEO of Associated Health Care Management Company, Inc. since 1977. Health Care Management is a Cleveland, Ohio based company that managed eight nursing care facilities and four congregate living facilities. The company has sold all but one of its facilities. Mr. Dennis has also been a director and officer with various companies and business ventures in the hardware distribution, pharmaceuticals distribution and steel fabrication industries and a real estate developer, general contractor, owner and investor. We believe Mr. Dennis is highly qualified to serve on MedAmerica’s board due to his broad experience as an entrepreneur and CEO.
Donald S. Denbo, age 68,69, joined the board in October 2013. Mr. Denbo has over 40 years of business experience, and is a founding member of Commercial Insurance Associates, LLC (CIA), an independent insurance agency specializing in risk management for a diversified client base. His knowledge and practice is varied, as it encompasses his more than 30 years of success in the insurance industry. In addition, Mr. Denbo has been an owner of Denbo Metal Recovery and a director of Tennessee Valley Recycling LLC, Bancroft Technology Group, Jet Plex Associates, Shadow Bluff Development, Reid Hill and Greymont Kennels, LLC. Mr. Denbo’s education includes a B.S. and M.S. in Psychology from the University of Tennessee, studies at the Vanderbilt School of Medicine and a PhD in Economics from the London School of Economics. We believe Mr. Denbo is highly qualified to serve on MedAmerica’s board due to his broad experience as an entrepreneur.Economics
Joseph C. BencivengaBencivenga, age 59,60, joined the board and became the Company’s president and chief executive officer in August 2017. Mr. Bencivenga also serves as EVP Finance & Strategy for Rail USA LLC and SVP, Finance for International Rail Partners LLC since December 2017. Mr. Bencivenga has more than 30 years experience in investment banking in New York, California and London with Barclays Capital, Salomon Brothers, Drexel Burnham, and Lehman Brothers. He has also served as a board member for numerous companies providing strategic financial advice in businesses in real estate, music, gaming, solid waste management and many other industries. Prior to this role, Mr. Bencivenga was a founding partner of a $5 billion hedge fund whose business included lending to and investing private equity in small to medium sized companies. During his tenure at Barclays Capital, Mr. Bencivenga served as Managing Director/Global Head of High Yield, and his team originated over 75 high yield, mezzanine and bridge loan transactions and acted as lead or joint lead on over 20 transactions.
Bennett Marks, age 69,70, joined the board in August 2017. Mr. Marks previously served as a member of the Company’s board from November 2008 to October 2013 and chief financial officer from November 2008 to May 2010. Mr. Marks is currently EVP & CFO of Boca Equity Partners LLCBEP since January 2013. Prior to that Mr. Marks has been executive vice president and CFO of Patriot Rail Corp., an owner and operator of short line and regional railroads, since 2005. Mr. Marks has served as EVP and CFO of six publicly-held and privately-owned companies in the transportation, healthcare, manufacturing, distribution and telecommunications industries. While CFO at RailAmerica, Inc., he developed and implemented the financial framework of the company as revenues grew from $130 million to $450 million. Mr. Marks has more than twenty years of experience in public accounting, including ten years as an audit/client services partner with KPMG where he was an Associate SEC Reviewing Partner and the Administrative Partner in Charge of the West Palm Beach office. Mr. Marks is licensed CPA in Florida and New York.
Vineet Bedi, age 36, joined the board in May 2018. Mr. Bedi served as chief executive officer of FC Global Realty, Inc. (NASDAQ: FCRE) from January 2, 2018 to June, 2018. Mr. Bedi has over 15 years of experience in real estate investing, private equity, capital markets and public securities investing. Mr. Bedi was the founder, managing partner and chief investment officer of KRV Capital, LP, an alternative asset management firm investing in real estate and hard assets across the capital structure with a focus on liquid and illiquid deep value investment opportunities, from 2016 to 2018. Prior to founding KRV Capital, LP, Mr. Bedi was the founder, managing partner and chief investment officer of Booth Park Capital Management, LLC, an alternative asset management firm investing in real estate related securities, from 2013 to 2015. Previously, Mr. Bedi served as a managing director and portfolio manager at Guggenheim Partners from 2012 to 2013, where he managed an opportunistic portfolio in the public and private real estate markets.
Robert Schellig, age 73,74, was appointed senior vice president and general counsel in August 2017. Mr. Schellig has over 47 years of legal experience in the areas of regulatory compliance, acquisitions and divestitures, contract administration, government relations, real estate and litigation. Following eight years of experience as a chief trial attorney at Canadian National Railroad’s U.S. subsidiaries, he moved to the executive department where he headed the Corporate Development, Real estate Development and Government Relations Department among other duties. He served in that capacity for 14 years and then entered the private sector specializing in the same general areas of law. Mr. Schellig served as vice president –- law and then chief legal officer at Patriot Rail Corp. andHe is currently general counsel at International Rail Partners LLC before assuming his present positionas well as at MedAmerica.
Patricia K. Sheridan, age 55,56, was appointed chief financial officer in SepetmberSeptember 2017. Ms. Sheridan has over 33 years of accounting, tax, reorganization and real estate experience. Since 2011, Ms. Sheridan has served as the managing member of PKS Group LLC, a consulting firm providing financial oversight for small to mid-sized privately owned companies, high net worth individuals and family offices. Over the last 12 years, she has worked in various capacities for private real estate development firms. Prior to that Ms. Sheridan served as the president and managing director at a $750 million investment management company and multiple roles with NYSE traded Beneficial Corporation, most recently Director –- Corporate Real Estate Properties. Ms. Sheridan began her accounting career at Arthur Anderson & Co.
Mr. Bencivenga and Ms. Sheridan are husband and wife.
The board of directors has established certain attributes that it seeks in identifying candidates for directors. In particular, they look for individuals who have very highhigh integrity, business savvy, an owner-oriented attitude and a deep genuine interest in MedAmerica. These are the same attributes that Gary O. Marino, MedAmerica’s Chairman, believes to be essential if one is to be an effective member of the board of directors. In considering candidates for director, the board considers the entirety of each candidate’s credentials in the context of these attributes. In the judgment of the Board, as a whole, each of the directors possesses such attributes.
Committees of the Board
We currently have limited operations and are presently investigating potential acquisition candidates. As a result, our directors have not designated audit, nominating or other committees. Instead, these responsibilities are handled by the entire board. Without an audit committee, we have not designated a director as an “audit committee financial expert” as defined by SEC rules. Although we are pleased with the diverse skills and level of expertise that our directors possess, we may add additional directors as our operations grow and form appropriate committees at that time.
Code of Ethics
In March 2004, our board of directors unanimously adopted a code of conduct and ethics that applies to all of our officers, directors and employees, including our principal executive officer, principal financial and principal accounting officer. We will provideprovide a copy of our code without charge upon written request to Joseph C. Bencivenga, Boca Center, Tower 1, 5200 Town Center Circle, Suite 550, Boca Raton, Florida 33486.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Act of 1934 requires our directors and executive officers, and persons who own more than 10% of our common stock, to make filings with the SEC reporting their ownership of our common stock and to furnish us with copies of these filings. Sheltering Palms Foundation Inc. invested in the 2017 Private Placement, acquiring more than 10% of the Company’s outstanding stock. As a result, Sheltering Palms was required to file a Form 3 with the SEC reporting its stock ownership in the Company, but has not yet filed the report. Based solely on our review of copies of reports furnished to us, we believe all other Section 16(a) filing requirements were timely met in 2017.2018. Copies of these filings are available on our website at www.MedAmericaproperties.comwww.MedAmericaproperties.com or the SEC’s website at www.sec.gov.
Director Nominations
Our board of directors does not have a nominating committee. Instead, the board believes it is in the best interests of the Company to rely on the insight and expertise of all directors in the nominating process.process. Our directors will recommend qualified candidates for director to the full board and nominees are subject to approval by a majority of our board members. Nominees are not required to possess specific skills or qualifications; however, nominees are recommended and approved based on various criteria including relevant skills and experience, personal integrity and ability and willingness to devote their time and efforts to MedAmerica. Qualified nominees are considered without regard to age, race, color, sex, religion, disability or national origin. We do not use a third party to locate or evaluate potential candidates for director. The board of directors considers nominees recommended by stockholders according to the same criteria.
Communication with our Board of Directors
Although we do not have a formal policy regarding communications with the board of directors, shareholders may communicate with the Board by writing to us at MedAmerica, Boca Center, Tower 1, 5200 Town Center Circle, Suite 550, Boca Raton, Florida 33486 Attention: Joseph C. Bencivenga. Shareholders who would like their submission directed to a member of the board may so specify, and the communication will be forwarded, as appropriate.
Item 11. ExecutiveExecutive Compensation.
Summary Compensation Table
The following table summarizesinformation is related to the compensation paid or accrued by us to our Chief Executive Officer (principal executive officer) and the two other most highly compensated executive officers for the years endedserving as of December 31, 2017 and 2016,2018 whose compensation exceeded $100,000, which we refer to as determined in accordance with SEC rules.“Named Executive Officers.”
Name and Principal Position | Year | Salary ($) | Stock Awards ($) *** | Option Awards ($) (****) | Total | ||||||||||||
Jospeh C. Bencivenga (*) | 2017 | 25,000 | - | - | 25,000 | ||||||||||||
President and Chief Executive Officer, Director | 2016 | - | - | - | |||||||||||||
Patricia K. Sheridan (**) | 2017 | 18,750 | - | - | 18,750 | ||||||||||||
Chief Financial Officer | 2016 | - | - | - | |||||||||||||
Paul S. Dennis | 2017 | - | - | - | |||||||||||||
Interim Chief Executive and Financial Officer, President, Director | 2016 | - | 10,000 | - | 10,000 | ||||||||||||
| 2018 Summary Compensation Table | ||||||||||
Name and Principal Position (a) | Year (b) | Salary ($)(c)(1) | Total ($)(j) | |||||||
Joseph C. Bencivenga | 2018 | $ | 43,750 | $ | 43,750 | |||||
Chief Executive Officer & President (1) (2) | 2017 | 25,000 | 25,000 | |||||||
(1) Mr. Bencivenga was appointed President & CEO on August 25, (2) Mr. Bencivenga's compensation ended July 31, 2018. A related party reimbursed the Company $39,375 related to Mr. Bencivenga's compensation for services provided in 2018. |
|
|
|
Director Compensation
On August 23, 2017, the Company issued an aggregate of 60,000June 11, 2018 we granted Mr. Vineet Bedi 10,000 vested five-year stock options to directors and officers Donald S. Denbo, , Gary O. Marino, Bennett Marks and Robert Schellig. The related stock compensation expense was not material.
On August 8, 2016, the Company issued an aggregate of 220,000 shares of common stock to Donald S. Denbo, Paul S. Dennis, Mark L. Friedman, Gary O. Marino and Jon D. Ryan as compensationexercisable at $6 per share for services in connection with the proposed Transaction. Mr. Bedi is charged with day-to-day supervision of the Transaction including communications with the investment bankers and the other party as a director. The valuewell as with our counsel. None of which is reflectedour other directors were compensated for their service on the board of directors in the table below, except for Mr. Dennis compensation which is described above under Summary Compensation.2018.
The following table summarizes the compensation paid by us for the years ended December 31, 2017 and 2016, except for Messrs. Bencivenga and Dennis, which is described above under Summary Compensation.
Name and Principal Position | Year | Fees ($) | Stock Awards ($) (2) | Option Awards | |||||||||
Gary O. Marino | 2017 | - | - | - | |||||||||
Chairman | 2016 | - | 10,000 | 10,000 | |||||||||
Donald S. Denbo | 2017 | - | - | - | |||||||||
Director | 2016 | - | 10,000 | 10,000 | |||||||||
Mark L. Friedman (1) | 2017 | - | - | - | |||||||||
Director | 2016 | - | 10,000 | 10,000 | |||||||||
Bennett Marks (3) | 2017 | - | - | - | |||||||||
Director | 2016 | - | - | - | |||||||||
Name(a) | Option Awards ($)(d)(1) | Total ($)(j) | ||||||
Gary O. Marino | - | - | ||||||
Donald S. Denbo | - | - | ||||||
Mark L. Friedman | - | - | ||||||
Bennett Marks | - | - | ||||||
Paul Dennis | - | - | ||||||
Vineet Bedi (1) | - | - | ||||||
|
Outstanding Awards at Fiscal Year End Listed below is information with respect to outstanding stock options held by our Named Executive Officer outstanding as of December 31, 2018. There were no other outstanding equity awards held by our Name Executive Officer as of December 31, 2018.
(1) This award is fully vested. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table listssets forth the stock ownershipnumber of shares of our directors and executive officers (current and former) and significant stockholderscommon stock beneficially owned as of March 30, 2018.
Name and Address (1) | Common Stock | Stock Options | Total Stock Owned | Percentage Ownership | ||||||||||||
Gary O. Marino(2) | 555,601 | 10,000 | 565,601 | 21.67 | % | |||||||||||
Paul S. Dennis(3) | 148,402 | 10,000 | 158,402 | 6.07 | % | |||||||||||
Donald S. Denbo(4) | 36,684 | 10,000 | 46,684 | 1.79 | % | |||||||||||
Joe Bencivenga | 0 | 15,000 | 15,000 | 0.57 | % | |||||||||||
Patricia Sheridan | 0 | 0 | 0 | 0.00 | % | |||||||||||
Bennett Marks | 27,373 | 10,000 | 37,373 | 1.43 | % | |||||||||||
Robert Schellig | 0 | 5,000 | 5,000 | 0.19 | % | |||||||||||
Total Directors and Officers | 768,060 | 60,000 | 828,060 | 31.72 | % | |||||||||||
Sheltering Palms Foundation Inc. | 333,333 | 0 | 333,333 | 12.77 | % | |||||||||||
2378 NW 60th Street, Boca Raton, FL 33496 | ||||||||||||||||
Richard Friedman | 166,666 | 0 | 166,666 | 6.38 | % | |||||||||||
730 Intracoastal Drive, Ft. Lauderdale, FL 33304 | ||||||||||||||||
Total Directors, Officers, and Beneficial Owners of More than 5% of Common Stock | 1,268,059 | 60,000 | 1,328,059 | 50.87 | % | |||||||||||
|
|
|
|
29, 2019 by (i) those persons known by us to be owners of more than 5% of our common stock, (ii) each director, (iii) our Named Executive Officer, and (iv) all of our executive officers and directors of as a group. Unless otherwise specified in the notes to this table, the address for each person is: c/o MedAmerica Properties Inc. 5200 Town Center Circle, Suite 550, Boca Raton, Florida 33486.
Equity Compensation Plan InformationApplicable percentages are based on 2,610,568 shares outstanding as of March 29, 2019, adjusted as required by rules of the SEC. Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock underlying options, warrants and convertible notes currently exercisable or convertible, or exercisable or convertible within 60 days are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Unless otherwise indicated in the footnotes to this table, the Company believes that each of the shareholders named in the table has sole voting and investment power with respect to the shares of common stock indicated as beneficially owned by them. The table includes only vested options and warrants or options and warrants that have or will vest and become exercisable within 60 days.
Name and Address | Common Stock | Stock Options | Total Stock Owned | Percentage Ownership | ||||||||||||
Gary O. Marino(1) | 555,601 | 10,000 | 565,601 | 21.67 | % | |||||||||||
Paul S. Dennis(2) | 148,402 | 10,000 | 158,402 | 6.07 | % | |||||||||||
Donald S. Denbo(3) | 36,684 | 10,000 | 46,684 | 1.79 | % | |||||||||||
Joseph Bencivenga | 0 | 15,000 | 15,000 | 0.57 | % | |||||||||||
Patricia Sheridan | 0 | 0 | 0 | 0.00 | % | |||||||||||
Bennett Marks | 27,373 | 10,000 | 37,373 | 1.43 | % | |||||||||||
Vineet Bedi | 0 | 10,000 | 10,000 | 0.38 | % | |||||||||||
Robert Schellig | 0 | 5,000 | 5,000 | 0.19 | % | |||||||||||
Total Directors and Officers | 768,060 | 70,000 | 838,060 | 32.10 | % | |||||||||||
Sheltering Palms Foundation Inc. (4) | 343,333 | 0 | 343,333 | 13.15 | % | |||||||||||
2378 NW 60th Street, Boca Raton, FL 33496 | ||||||||||||||||
Richard Friedman | 166,666 | 0 | 166,666 | 6.38 | % | |||||||||||
730 Intracoastal Drive, Ft. Lauderdale, FL 33304 | ||||||||||||||||
Total Directors, Officers, and Beneficial Owners of More than 5% of Common Stock | 1,278,059 | 70,000 | 1,348,059 | 51.63 | % | |||||||||||
We have not issued any other options, warrants or rights
(1) 32,584 shares are held individually (184 shares are held in 2017 or 2016a brokerage account), 91,348 shares of common stock are held by Banyan Rail Holdings LLC. Gary O. Marino, the Company's Chairman, is the president and a significant stockholder of Banyan Rail Holdings LLC. 351,966 shares are held by Marino Family Holdings, LLC. Mr. Marino is the manager of Marino Family Holdings, LLC. 79,703 are held by the Marino Family Dynasty Trust.
(2) 32,000 are held individually. 115,202 shares of common stock are owned by Paul S. Dennis, Trustee under our Equity Compensation Plan. In 2017 and 2016, 0 and 5,000 options, respectively, expired for our directors. The 60,000 options issuedthe Paul S. Dennis Trust Agreement dated August 9, 1983, as modified. 1,200 shares are held in 2017 were non-qualified options not coveredan IRA account.
(3) 20,800 shares are held individually. 15,884 shares are held by this plan. Our equity plans are summarized inCoalbrookedale Partners of which Mr. Denbo is the following table.president.
(4) Includes 10,000 shares owned by the Foundation's Chairman, Harvey Polly
Plan category | Number of Securities to be issued upon exercise of outstanding options | Weighted average exercise price of outstanding options | Number of secuurities remaining available for future issuance under equity compensation plans, excluding securities reflected in the first column | |||||||||
Equity compensation plans approved by security holders | 0 | $ | - | 27,200 | ||||||||
Equity compensation plans not approved by security holders | 0 | |||||||||||
Total | 0 | $ | - | 27,200 | ||||||||
Equity Compensation Plan Information
Set forth in the table below is the information regarding our common stock which may be issued under our equity compensation plans (including individual compensation arrangements) as of December 31, 2018.
Plan category | Number of Securities to be issued upon exercise of outstanding options | Weighted average exercise price of outstanding options | Number of secuurities remaining available for future issuance under equity compensation plans excluding securities reflected in the first column | |||||||||
Equity compensation plans approved by security holders | - | (1) | $ | - | 27,200 | |||||||
Equity compensation plans not approved by security holders | 70,000 | (2) | 7.71 | - | ||||||||
Total | 70,000 | $ | 7.71 | 27,200 | ||||||||
(1) Represents options outstanding under the 2010 Stock Option and Awards Plan. |
(2) Includes (i) a total of [60,000] stock options issued to directors and officers Donald S. Denbo, Paul S. Dennis, Gary O. Marino, Joseph Bencivenga, Bennett Marks and Robert Schellig in August 2017, in each case exercisable for 5 years from the grant date at the exercise price of $8.00 per share and fully vested; and (ii) 10,000 stock options issued to Vineet Bedi in June 2018 exercisable for 5 years from the grant date at the exercise price of $6.00 per share and fully vested. |
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Transactions with Related Parties
On June 1, 2015, the Company entered into a month-to-month office lease and administrative support agreement (the “Agreement”“Agreement”) with Boca Equity Partners LLC (“BEP”).BEP, an entity controlled by Mr. Gary O. Marino, our Chairman of the Board. The Agreement was effective as of January 1, 2015 and terminated on February 3, 2017, the effective date of a new agreement (the “New Agreement”). The Agreement and New Agreement provide for the Company’s use of a portion of BEP’s offices and certain overhead items at the BEP offices such as space, utilities and other administrative services for $4,750 and $6,605 per month, respectively. In addition, the New Agreement calls forrequired the Company to reimburse BEP a one-time charge in the amount of $37,122 related to the costs of the set-up of the new office and move.
On June 8, 2017, MedAmerica enteredentered into an office lease and administrative support agreement (the “Agreement”“Lease Agreement”) with BEP. The Lease Agreement hashad a month-to-month term commencing on June 1, 2017. The Lease Agreement providesprovided for the Company’s use of a portion of BEP’s offices and certain overhead items at the BEP offices such as space, utilities and other administrative services for $15,000 a month. The Lease Agreement replacesreplaced the February 3, 2017 office lease and administrative support agreement between the Company and BEP and includes additional general office and administrative staff support services. Total expense incurred under these agreements amounted to $138,025 and $99,687 for the years ended December 31, 2017 and 2016, respectively.The Lease Agreement was replaced by a new agreement in September 2018. See below.
Also on June 1, 2015,On September 13, 2018, the Company entered into aan office lease and administrative support agreement (the “Support“2018 Lease Agreement”) with BEP. The Support2018 Lease Agreement was effective as of January 1, 2015 and terminated on October 1, 2016, the effective date of a new support agreement (the “New Support Agreement”). The Support Agreement and the New Support Agreement provide for corporate support services. The Support Agreement and the New Support Agreements are forhas a month-to-month term and the New Supportcommencing on September 1, 2018. The 2018 Lease Agreement will terminate uponprovides for the Company’s paymentuse of a success fee, shouldportion of BEP’s offices and certain overhead items at the BEP offices such as space, utilities and other administrative services for $5,000 a month. The 2018 Lease Agreement replaced the Lease Agreement between the Company acquire more than 50% of the assets or capital stock of any company (an “Acquisition”) during the terms of the Support Agreement or the New Support Agreement or within the one year period following the termination of either. Within five days of the closing of any potential Acquisition, MedAmerica will payand BEP described above. Total expense incurred under all related party lease and support agreements amounted to BEP 2% of the cash purchase price paid by the Company to the seller(s)$140,000 and $138,025 for the Acquisition.years ended 2018 and 2017, respectively.
The Company’s directors have not received cash compensationDuring 2018, Mr. Joseph Bencivenga, the Company's President and CEO performed work for their services in 2017 and 2016 but were compensated with common stock and stock options. See footnote 6 to the consolidated financial statements Preferred Stock and Common Stock and footnote 9 to the consolidated financial statements Stock Based Compensation for further discussion.
As of December 31, 2017,International Rail Partners LLC (“IRP”), an entity controlled by Mr. Marino, the Company’s board of directorsChairman. The Company billed back IRP and officers beneficially own 828,060 shares of the Company’s common stock or 31.72% of the outstanding common stock. Also, Banyan Rail Holdings LLCreceived payments for compensation and Marino Family Holdings LLC owned 91,348 and 351,966 shares of common stock of the Company, respectively, includedexpenses in the shares shown in item 12 above.
In the third quarteramount of 2017, the Company hired a new president and chief executive officer and a new chief financial officer who are husband and wife. Also, in the third quarter of 2017, the Company issued 15,000 common stock options to the president and CEO and 45,000 shares to other board members and officers.$125,090.
On July 27, 2016, the Company entered into a Demand Note and Loan Agreement (the “Note”“Note”) with BEP providing for draws of up to $250,000. Loans under the Note bore interest at an annual rate of 10% and outstanding principal and interest were due on demand. This Note was replaced, cancelled and terminated on December 31, 2016 when the Company entered into a new Demand Note and Loan Agreement (“the New Note”) with BEP. The New Note balance as of December 31, 2016 was $471,826 which represents advances from BEP under the Note, advances made since the date of the Note and interest accrued thereon. The New Note bears interest at the rate of 10% per annum and is payable upon demand. BEP may, but is not requiredcommitted to makemaking advances to the Company asunder the Company may from time to time request.New Note through May 2020 in the event the Transaction does not close. . A portion of this note was assumed by Banyan Medical Partners LLC (“BMP”) and the balance was paid off during 2017. The New Note is available to the Company. Company to draw upon and the balance as of the date of this report due under the New Note is $0.
Gary O. Marino, the Company’s chairmanCompany’s Chairman of the board, is the chairman, president,Chairman, President, and chief executive officerChief Executive Officer of BEP and managing memberManaging Member of Patriot. Mr. Marino, the Company’s interim chief executive officer, president and chief financial officer,Joseph Bencivenga, Bennett Marks, Paul S. Dennis, and director, Donald S. Denbo, directors, and Patricia Sheridan, chief financial officer, also hold membership interests in BEP.
During 2016, the Company established BMP, and certain other subsidiaries wholly-owned by BMP. The Company formed these entities to acquire medical office buildings in the United States. The Company was unable to raise the capital needed to consummate the first medical building opportunity. On March 9, 2017, the Company sold BMP and BMP’s wholly-owned subsidiaries to Patriot. The selling price was $277,756 in the form of BMP assuming a portion of the Company’s note payable balance due to BEP. The consideration of $277,756 was used to allow the Company to recoup the $110,000 in property deposits as of December 31, 2016, $50,000 property deposits made during 2017 and reimbursement of $117,756 of other 2016 and 2017 expenses incurred by the Company on behalf of BMP. This reimbursement of expenses is offset in general and administrative expenses.
On June 14, 2017, the Company entered into a letter of intent with Patriot to reacquire all of the capital units of BMP from Patriot, for $9,536,582 which is the purchase price of the BSP.BMP. The letter of intent iswas non-binding, providesprovided for a ninety-day exclusive diligence period, and iswas contingent upon Banyanthe Company obtaining financing to complete the acquisition. The letter was extended to December 15, 2017 at which time it expired.
Paul Dennis, a director, and interim president, interim chief executive officer and interim chief financial officer participatedparticipated in the 2017 Private Placement investing $150,000 for 100,000 shares of common stock.stock on identical terms of other investors in the offering.
Director Independence
Our board has determined that Donald S. Denbo, Bennett Marks and Bennett MarksVineet Bedi are “independent” as defined by NASDAQNasdaq Stock Market Listing Rule 5605(a)(2). Although we are not listed for trading on the NASDAQNasdaq stock market, we have selected the NASDAQNasdaq rules as an appropriate guideline for determining the independence of our board members.
Item 14. Principal Accounting Fees and Services.
On January 20, 2017, the board of directors ratified the dismissal of the Company’sCompany’s independent registered accounting firm of Daszkal Bolton LLP and engagement of the new firm of Zachary Salum and Auditors PA. Zachary Salum served as our independent registered public accounting firm through November 3, 2017 when they resigned due to personal reasons. Zachary Salum was paid $9,500 for the audit of the Company’s 2016 consolidated financial statements and $10,000 for their review of the Company’s Form 10Q’s10-Q’s for the quarters ended March 31, 2017, June 30, 2017 and an amendment to the March 31, 2017.2017 Form 10-Q. Additionally, Zachary Salum was paid $1,500 for the preparation of the Company’s 2016 tax return.
On November 8, 2017,, the board of directors ratified the appointment of Marcum LLP as independent registered public accounting firm. During 2018 Marcum LLP was paid $21,500 for their reviews of the Company’s Form 10-Q for the quarters ended March 31, 2018, June 30, 2018 and September 30, 2018 and $20,000 for the audit of the Company's consolidated financial statements for the year ended December 31, 2018. During 2017 Marcum LLP was paid $5,000$6,500 for their review of the Company’s Form 10-Q for the quarter ended September 30, 2017 and $20,000 for the audit of the company'sCompany’s consolidated financial statements for the year ended December 31, 2017.
Daszkal Bolton LLP served as our independent registered public accounting firm through January 19, 2017 as described above and was paid $48,000 and $53,109 for their review of the Company’s Form 10-Q’s for the quarters ended March 31, 2016, June 30, 2016 and September 30, 2016 and for the audit of the company's consolidated financial statements for the year ended December 31, 2015. Additionally, Daszkal Bolton LLP was paid $5,500 and $7,550 for certain tax services for the year ended December 31, 2016 and 2015, respectively. Also, Daszkal Bolton LLP was paid $3,465 and $2,050 for other tax related consulting services during the years ending December 31, 2016 and 2015, respectively.
Because of the size of our board, the directors have not designated an audit committee. Instead, these responsibilities are handled by the entire board, which considers and pre-approves any audit or non-audit services to be performed by Zachary Salum and Auditors PA and Marcum LLP.our auditors. Our board believes the services provided by Marcum LLP are compatible with maintaining our auditor’s independence.
Item 15. Exhibits, Financial Statement Schedules.
(a) Financial Statements
|
|
(b)Exhibit Index. |
|
| Exhibit 10.4 to the Form 10-K filed March 31, 2017 is incorporated by reference herein. |
| |
| |
| |
|
|
31.1* | |
|
|
31.2* | |
|
|
32.1* | |
| |
|
|
101.INS* | XBRL Instance Document |
|
|
101.SCH* | XBRL Schema Document |
|
|
101.CAL* | XBRL Calculation Linkbase Document |
|
|
101.DEF* | XBRL Definition Linkbase Document |
|
|
101.LAB* | XBRL Label Linkbase Document |
|
|
101.PRE* | XBRL Presentation Linkbase Document |
*Filed herewith.
In accordance withPursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, MedAmerica Properties Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| MedAmerica Properties Inc. |
|
|
Date: April | /s/ Joseph C. Bencivenga |
| By Joseph C. Bencivenga, |
| President and Chief Executive Officer |
| (Principal Executive Officer) |
|
|
Date: April | /s/ Patricia K. Sheridan |
| By Patricia K. Sheridan, |
| Chief Financial Officer |
| (Principal Financial and Accounting Officer) |
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of MedAmerica Properties Inc. and in the capacities and on the dates indicated.
Date: April | /s/ Gary O. Marino |
| By Gary O. Marino, |
| Chairman of the Board |
|
|
Date: April | /s/ Joseph C. Bencivenga |
| By Joseph C. Bencivenga, Director & President & CEO |
|
|
Date: April | /s/ Bennett Marks |
| By Bennett Marks, Director |
| Date: April 11, 2019 | /s/ Paul Dennis |
By Paul Dennis, Director | |
| Date: April 11, 2019 | /s/ Donald Denbo |
| By Donald Denbo, Director | |
| Date: April 11, 2019 | /s/ Vineet Bedi |
| By Vineet Bedi, Director |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
MedAmerica Properties, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheetsheets of MedAmerica Properties,, Inc. (the “Company”) as of December 31, 2018 and 2017, the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for each of the yeartwo years in the period ended December 31, 2017,2018, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the yeartwo years in the period ended December 31, 2017,2018, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statementsstatements based on our audit.audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our auditaudits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the auditaudits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our auditaudits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our auditaudits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our auditaudits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit providesaudits provide a reasonable basis for our opinion.
Marcum LLP
/S/s/ Marcum LLP
We have served as the Company’sCompany’s auditor since 2017.
Ft. Lauderdale,West Palm Beach, Florida
April 2, 201811, 2019
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Banyan Rail Services, Inc. and Subsidiaries
Boca Raton, Florida
We have audited the accompanying consolidated balance sheet of Banyan Rail Services, Inc. and Subsidiaries as of December 31, 2016, and the related consolidated statements of operations, stockholders’ (deficit) equity, and cash flows for the year then ended. Banyan Rail Services, Inc.’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Banyan Rail Services, Inc. and Subsidiaries as of December 31, 2016, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/ Zachary Salum Auditors P.A.
South Miami, Florida
March 27, 2017
Consolidated Balance Sheets |
December 31, 2017 | December 31, 2016 | December 31, 2018 | December 31, 2017 | |||||||||||||
ASSETS | ||||||||||||||||
Current assets | ||||||||||||||||
Cash and equivalents | $ | 708,382 | $ | 450 | $ | 139,721 | $ | 708,382 | ||||||||
Property deposits | - | 110,000 | ||||||||||||||
Prepaid insurance and other assets | 38,191 | 31,703 | ||||||||||||||
Prepaid insurance and other current assets | 33,784 | 38,191 | ||||||||||||||
Total current assets | 746,573 | 142,153 | 173,505 | 746,573 | ||||||||||||
Other assets | ||||||||||||||||
Equipment & furnishings, net | 21,808 | - | 18,576 | 21,808 | ||||||||||||
Total other assets | 21,808 | - | 18,576 | 21,808 | ||||||||||||
Total assets | $ | 768,381 | $ | 142,153 | $ | 192,081 | $ | 768,381 | ||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||
Current liabilities | ||||||||||||||||
Accounts payable and accrued expenses | $ | 66,319 | $ | 95,944 | $ | 92,566 | $ | 66,319 | ||||||||
Accrued dividends | 27,361 | 329,017 | 27,361 | 27,361 | ||||||||||||
Loan payable - insurance financing | 33,191 | - | 33,184 | 33,191 | ||||||||||||
Notes payable to related parties, including accrued interest of $13,208 | - | 471,826 | ||||||||||||||
Total current liabilities | 126,871 | 896,787 | 153,111 | 126,871 | ||||||||||||
Total liabilities | 126,871 | 896,787 | 153,111 | 126,871 | ||||||||||||
Commitments and contingencies | - | - | ||||||||||||||
Stockholders' equity (deficit) | ||||||||||||||||
Series A Preferred stock, $0.01 par value, 20,000 shares authorized, 500 and 10,375 issued and outstanding at December 31, 2017 and 2016, respectively | 5 | 104 | ||||||||||||||
Common stock, $0.01 par value, 50,000,000 shares authorized, 2,610,568 and 1,056,723 issued and outstanding at December 31, 2017 and issued at December 31, 2016, respectively | 26,105 | 10,567 | ||||||||||||||
Stockholders' equity | ||||||||||||||||
Series A Preferred stock, $0.01 par value, 20,000 shares authorized, 500 issued at December 31, 2018 and 2017 | 5 | 5 | ||||||||||||||
Common stock, $0.01 par value, 50,000,000 shares authorized, 2,610,568 issued at December 31, 2018 and 2017 | 26,105 | 26,105 | ||||||||||||||
Additional paid-in capital | 111,861,799 | 109,836,007 | 111,861,799 | 111,861,799 | ||||||||||||
Accumulated deficit | (111,246,399 | ) | (110,530,623 | ) | (111,848,939 | ) | (111,246,399 | ) | ||||||||
Treasury stock, at cost, for 566 shares | - | (70,689 | ) | |||||||||||||
Total stockholders' equity (deficit) | 641,510 | (754,634 | ) | |||||||||||||
Total stockholders' equity | 38,970 | 641,510 | ||||||||||||||
Total liabilities and stockholders' equity (deficit) | $ | 768,381 | $ | 142,153 | ||||||||||||
Total liabilities and stockholders' equity | $ | 192,081 | $ | 768,381 | ||||||||||||
See Notes to Consolidated Financial Statements |
Consolidated Statements of Operations |
Year Ended December, 31 | Year ended December 31, | |||||||||||||||
2017 | 2016 | 2018 | 2017 | |||||||||||||
General & administrative expenses | $ | 698,774 | $ | 859,401 | $ | 601,024 | $ | 698,774 | ||||||||
Loss from operations | (698,774 | ) | (859,401 | ) | (601,024 | ) | (698,774 | ) | ||||||||
Interest expense | (17,002 | ) | (13,208 | ) | (1,516 | ) | (17,002 | ) | ||||||||
Net loss | $ | (715,776 | ) | $ | (872,609 | ) | $ | (602,540 | ) | $ | (715,776 | ) | ||||
Dividends for the benefit of preferred stockholders: | ||||||||||||||||
Preferred stock dividends | (5,000 | ) | (103,750 | ) | (5,000 | ) | (5,000 | ) | ||||||||
Deemed dividends on preferred stock conversion | (148,125 | ) | - | - | (148,125 | ) | ||||||||||
Net loss attributable to common stockholders | $ | (868,901 | ) | $ | (976,359 | ) | $ | (607,540 | ) | $ | (868,901 | ) | ||||
Basic and diluted average number of common shares outstanding: | 1,516,165 | 1,038,895 | ||||||||||||||
Basic and diluted average number of common shares outstanding | 2,610,568 | 1,516,165 | ||||||||||||||
Net loss per share - basic and diluted | $ | (0.57 | ) | $ | (0.94 | ) | ||||||||||
Net loss per common share basic and diluted | $ | (0.23 | ) | $ | (0.57 | ) | ||||||||||
See Notes to Consolidated Financial Statements |
Consolidated Statements of Cash Flows |
Year Ended December 31, | Year ended December 31, | |||||||||||||||
2017 | 2016 | 2018 | 2017 | |||||||||||||
Cash flows used in operating activities: | ||||||||||||||||
Net loss | $ | (715,776 | ) | $ | (872,609 | ) | $ | (602,540 | ) | $ | (715,776 | ) | ||||
Adjustments to reconcile net loss to net cash used in operating activities | ||||||||||||||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||
Depreciation | 808 | - | 3,232 | 808 | ||||||||||||
Note assumed by related party | (117,756 | ) | - | (117,756 | ) | |||||||||||
Stock compensation expense | - | 165,000 | ||||||||||||||
Changes in assets and liabilities: | ||||||||||||||||
(Increase) decrease in prepaid expenses and other assets | 26,703 | (22,951 | ) | |||||||||||||
Increase (decrease) in accounts payable and accrued expenses | (29,625 | ) | 41,802 | |||||||||||||
Increase/(Decrease) in prepaid expenses and other assets | 49,636 | 26,703 | ||||||||||||||
Decrease/(Increase) in accounts payable and accrued expenses | 26,247 | (29,625 | ) | |||||||||||||
Net cash used in operating activities | (835,646 | ) | (688,758 | ) | (523,425 | ) | (835,646 | ) | ||||||||
Cash flows provided by (used in) investing activities: | ||||||||||||||||
Cash flows provided by investing activities: | ||||||||||||||||
Acquisition of equipment and furnishings | (22,616 | ) | - | - | (22,616 | ) | ||||||||||
Decrease (increase) in property deposits | (50,000 | ) | (110,000 | ) | ||||||||||||
Net cash provided by (used in) investing activities | (72,616 | ) | (110,000 | ) | ||||||||||||
Decrease in property deposits | - | (50,000 | ) | |||||||||||||
Net cash used in investing activities | - | (72,616 | ) | |||||||||||||
Cash flows provided by financing activities: | ||||||||||||||||
Payment of demand loan & accrued interest - related party | (363,208 | ) | - | - | (363,208 | ) | ||||||||||
Proceeds on demand loan - related party | 169,138 | 471,826 | - | 169,138 | ||||||||||||
Payment of note payable - insurance financing | (45,236 | ) | - | |||||||||||||
Proceeds from common stock subscribed, net of expenses | 1,810,264 | - | - | 1,810,264 | ||||||||||||
Net cash provided by financing activities | 1,616,194 | 471,826 | ||||||||||||||
Net cash provided by (used in) financing activities | (45,236 | ) | 1,616,194 | |||||||||||||
Net increase (decrease) in cash | 707,932 | (326,932 | ) | (568,661 | ) | 707,932 | ||||||||||
Cash at beginning of period | 450 | 327,382 | 708,382 | 450 | ||||||||||||
Cash at end of period | $ | 708,382 | $ | 450 | $ | 139,721 | $ | 708,382 | ||||||||
Supplemental disclosure of cash flow information: | ||||||||||||||||
Cash paid during the period for: | ||||||||||||||||
Interest | $ | 17,002 | $ | - | $ | 1,516 | $ | 17,002 | ||||||||
Taxes | $ | - | $ | - | ||||||||||||
Franchise taxes | $ | 10,130 | $ | - | ||||||||||||
Non cash financing activities: | ||||||||||||||||
Preferred stock dividend | $ | - | $ | 103,750 | ||||||||||||
Deemed dividend on preferred stock conversion | $ | 148,125 | $ | - | $ | 148,125 | ||||||||||
Issuance of common shares in lieu of cash dividends payable | $ | - | $ | 29,249 | ||||||||||||
Shares issued for common stock subscribed | $ | 1,940,005 | $ | - | $ | - | $ | 1,940,005 | ||||||||
Conversion of preferred stock dividends to common stock | $ | 301,656 | $ | - | $ | - | $ | 301,656 | ||||||||
Prepaid insurance loan financing | $ | 33,191 | $ | - | $ | 45,829 | $ | 33,191 | ||||||||
See Notes to Consolidated Financial Statements |
Common Stock | Common Stock | Preferred Stock | Additional Paid in | Accumulated | Treasury Stock | Common Stock | Common Stock | Preferred Stock | Additional | Accumulated | Treasury Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Subscribed | Shares | Amount | Capital | Deficit | Shares | Amount | Total | Shares | Amount | Subscribed | Shares | Amount | Paid in Capital | Deficit | Shares | Amount | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders’ (deficit) equity December 31, 2015 | 1,031,737 | $ | 10,318 | $ | 0 | 10,375 | $ | 104 | $ | 109,745,757 | $ | (109,658,014 | ) | 566 | $ | (70,689 | ) | $ | 27,476 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock | 2,986 | 29 | 29,220 | 29,249 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock compensation expense | 22,000 | 220 | 164,780 | 165,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss for the year ended December 31, 2016 | (872,609 | ) | (872,609 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock dividends | (103,750 | ) | (103,750 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders’ (deficit) equity December 31, 2016 | 1,056,723 | 10,567 | - | 10,375 | 104 | 109,836,007 | (110,530,623 | ) | 566 | (70,689 | ) | (754,634 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders’ (deficit) equity December 31, 2016 | 1,056,723 | 10,567 | - | 10,375 | 104 | 109,836,007 | (110,530,623 | ) | 566 | (70,689 | ) | (754,634 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retire treasury stock | - | (70,689 | ) | (566 | ) | 70,689 | - | - | (70,689 | ) | (566 | ) | 70,689 | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred stock and preferred dividends exchange for common stock | 257,831 | 2,578 | (9,875 | ) | (99 | ) | 299,177 | 301,656 | 257,831 | 2,578 | (9,875 | ) | (99 | ) | 299,177 | 301,656 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fractional Share Rounding | 180 | 2 | (2 | ) | - | 180 | 2 | (2 | ) | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock subscribed | 1,940,005 | 1,940,005 | 1,940,005 | 1,940,005 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock | 1,295,834 | 12,958 | (1,940,005 | ) | 1,797,306 | (129,741 | ) | 1,295,834 | 12,958 | (1,940,005 | ) | 1,797,306 | (129,741 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss for the year ended December 31, 2017 | (715,776 | ) | (715,776 | ) | (715,776 | ) | (715,776 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders’ equity (deficit) December 31, 2017 | 2,610,568 | 26,105 | - | 500 | 5 | 111,861,799 | (111,246,399 | ) | - | - | 641,510 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders’ equity December 31, 2017 | 2,610,568 | 26,105 | - | 500 | 5 | 111,861,799 | (111,246,399 | ) | - | - | 641,510 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss for the year ended December 31, 2018 | (602,540 | ) | (602,540 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders’ equity December 31, 2018 | 2,610,568 | 26,105 | - | 500 | 5 | 111,861,799 | (111,848,939 | ) | - | - | 38,970 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
See Notes to Consolidated Financial Statements |
MedAmerica Properties Inc. and Subsidiaries, Inc.
Notes to Consolidated Financial Statements
Note 1.1. Nature of Operations
MedAmerica Properties Inc. (the(the “Company” or “MedAmerica”), was originally organized under the laws of the Commonwealth of Massachusetts in 1985, under the name VMS Hotel Investment Trust, for the purpose of investing in mortgage loans. The Company was subsequently reorganized as a Delaware corporation in 1987 and changed its name to B.H.I.T. Inc. In 2010, the Company changed its name from B.H.I.T. Inc. to Banyan Rail Services Inc. From 2009 to 2012, the Company experienced severe losses from an operating subsidiary in the rail services sector. In 2016, after exploring various industries and researching numerous companies, the board of directors elected to pursue investing in commercial real estate. In 2018, the Company began negotiating a transaction with a sponsor of real estate properties located in the United States. The Company entered into a letter of intent with the sponsor in September 2018, which was amended in November 2018. As of March 29, 2019, no definitive agreement has been executed. It is pursuingcurrently estimated that the acquisition and managementtransaction would be expected to be consummated late in the second quarter of strategically located medical office buildings.2019, but there can be no assurance that there will not be delays.
In April 2017,2017, our board of directors and the holders of a majority of our outstanding shares of common stock approved by written consent amendments to the Company’s articlescertificate of incorporation to (1)(1) change the name of the Company from “Banyan Rail Services Inc.” to “MedAmerica Properties Inc.,” and (2)(2) effect a 1 for 10 reverse stock split of the issued and outstanding shares of common stock of the Company. On June 15, 2017, the Company filed these amendments with the Secretary of State of the State of Delaware and the name change and reverse stock split became effective with the Financial Industry Regulatory Authority, Inc. (“FINRA”) on June 20, 2017. As appropriate, all common stock share quantities have been updated to reflect the 1 for 10 reverse stock split.
Note 2.Note 2. Principles of Consolidation and Basis of Presentation
The consolidatedconsolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany account balances have been eliminated in consolidation. The accompanying Financial Statements give effect to all adjustments necessary to present fairly the financial position and results of operations and cash flows of the Company and its subsidiaries.
Note3.3. Liquidity and Profitability
The accompanying consolidated financialfinancial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the consolidated financial statements donot include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company management believes that cash on hand cash flow generated internally by the Company and a line of credit from a related party will be adequate to fund its limited overhead and other cash requirements for the next twelvemonths.
At December 31,2016,During 2017 the Company hadcompleted a cash balanceprivate placement of $450 and a working capital deficitits common stock, raising $1,940,005. As of $754,634 with substantial doubt about its ability to continue as a going concern. During 2017 the Company executed a Private Placement. At December 31, 2017, 2018, the Company had a cash balance of approximately $708,000$139,000 and working capital of approximately $620,000.$20,000.
We have undertaken, and will continue to implement, various measures to address our financial condition, including:
Curtailing costs and consolidating operations, where feasible.
Seeking debt, equity and other forms of financing, including funding through strategic partnerships.
Reducing operations to conserve cash.
| Consummate the acquisition of 12 shopping centers (the "Transaction"). We do not have an executed agreement and there can be no assurance we will be able to consummate the Transaction. |
If the Transaction is not consummated:
● | Curtailing costs and consolidating operations, where feasible. |
● | Seeking debt, equity and other forms of financing, including funding through strategic partnerships. |
● | Reducing operations to conserve cash. |
● | Investigating and pursuing transactions with third parties, including strategic |
● | Adding board member and |
The Company management believes that these measures, coupled with cash on hand cash flow generated internally by the Company and a line of credit from a related party (see Note 10) will be adequate to fund its limited overhead and other cash requirements for the nexttwelve months. However, thereThere can beno assurance that we will be able to consummate the Transaction or secure the additional funding we need. If our efforts to do so are unsuccessful, we will be required to further reduce or eliminate our operations. However, Boca Equity Partners LLC ("BEP"), an entity controlled by our chairman, has committed to funding operations through May, 2010 in the event the Transaction does not close.
MedAmerica Properties, Inc.
Notes to Consolidated Financial Statements
Note 4. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements, in conformity with accounting principles generally accepted in the United States ("U.S. GAAP"), requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenues and expenses and disclosures of contingent assets and liabilities at the date and period ending of the financial statements. Actual results could differ from those estimates.
Cash
The Company considers all cash, bank deposits and highly liquid investments with an original maturity ofthree months or less to be cash equivalents. From time to time our cash deposits exceed federally insured limits.
Equipment and Furnishings
Equipment and furnishings are stated at cost. Depreciation will beis computed using the straight-line method over the estimated useful lives of the assets, whichwhich range from 3 to 7 years. Expenditures for repairs and maintenance are charged to expense as incurred. For assets sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any related gain or loss is reflected in income for the period statement of operations.period.
Fair Value of Financial Instruments
Recorded financial instruments as of December 31, 2017, 2018, consist of cash and cash equivalents, accounts payable, certain accrued liabilities and short-term obligations. The related fair values of these financial instruments approximated their carrying values due to either the short-term nature of these instruments or based on the interest rates currently available to the Company.
Income (Loss) Per Common Share
The Company computes net income (loss) per common share in accordance with the provision included in Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 260, Earnings per Share. Under ASC 260, basic and diluted income (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares and common share equivalents outstanding during the period. Basic income (loss) per common share excludes the effect of potentially dilutive securities, while diluted income (loss) per common share reflects the potential dilution that would occur if securities or other contracts to issue common shares were exercised for, converted into or otherwise resulted in the issuance of common shares. The Company’s potentially dilutive securities are not included in the computation of diluted loss per share because their impact is anti-dilutive due to the net loss.
Income Taxes
The Company accounts for our income taxes using FASB ASC Topic 740, " Income Taxes ",", which requires the recognition of deferred tax liabilities and assets for expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
The Company follows the provisions regarding Accounting for Uncertainty in Income Taxes, which require the recognition of a financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. We applied these changes to tax positions for our fiscal years ending December 31, 2017 and December 31, 2016. We had no material unrecognized tax benefits and no adjustments to our financial position, results of operations or cash flows were required. Generally, federal, state and local authorities may examine the Company's tax returns for three years from the date of filing and the current and prior three years remain subject to examination as of December 31, 2017. 2018. We do not expect that unrecognized tax benefits will increase within the next twelve months. We recognize accrued interest and penalties related to uncertain tax positions as income tax expense.
MedAmerica Properties, Inc.
Notes to Consolidated Financial Statements
Retained Earnings Distributions
The Company’sCompany’s preferred stockholders are entitled to receive payment before any of the common stockholders upon a liquidation of the Company, and we cannot pay dividends on our common stock unless we first pay dividends required by our preferred stock.
Preferred Stock Dividends
The holders of Series A Cumulative Preferred Stock (“Preferred Stock”) shall be entitled to receive cumulative, non-compounded, cash dividends on each outstanding share of Preferred Stock at the rate of 10.0%10% of the issuance price per annum (“Preferred Dividends”), which began accumulating on January 1, 2010. The Preferred Dividends shall be payable semiannually to the holders of Preferred Stock, when and as declared by the Board of Directors.
RecentlyRecently Issued Accounting Pronouncements
Management has determined that all recently issued accounting pronouncements willnot have a material impact on the Company’sCompany’s financial statements or do not apply to the Company’s operations.
Note 5.Equipment and Furnishings
The amount of equipment and furnishings as of December 31, 2017, is as follows:
December 31, | ||||||||||||
Description | Amount | 2018 | 2017 | |||||||||
Office equipment and furnishings | $ | 21,829 | $ | 21,829 | $ | 21,829 | ||||||
Computer equipment | 787 | 787 | 787 | |||||||||
Total | 22,616 | 22,616 | 22,616 | |||||||||
Less accumulated depreciation | (808 | ) | (4,040 | ) | (808 | ) | ||||||
Equipment and furnishings, net | $ | 21,808 | $ | 18,576 | $ | 21,808 | ||||||
Depreciation expense related to equipment and furnishings amounted to$8083,232 and $808 for the yearyears ended December 31, 2017. 2018 and 2017, respectively.
7
Note 6.6. Preferred Stock and Common Stock
Stock Split
In April 2017, the board of directors and the then majority shareholder approved a 1 for 10 reverse stock split (“Stock Split”) of the issued and outstanding shares of common stock of the Company. On June 15, 2017, the Company filed an amendment to its articles of incorporation with the Delaware Secretary of State effecting the Stock Split. The Stock Split became effective with the Financial Industry Regulatory Authority, Inc. (“FINRA”) on June 20, 2017.
Pursuant to the Stock Split, each outstanding share of the Company’sCompany’s common stock was automatically exchanged for one-tenth of a share. As a result, each stockholder now owns a reduced number of shares of the Company’s common stock. The Stock Split affects all stockholders uniformly and does not affect any stockholder’s percentage ownership in the company or the proportionate voting rights and other rights and preferences of the stockholders, except for adjustments that may result from the treatment of fractional shares, which have been rounded to the nearest whole share. The number of the Company’s authorized shares of common stock was not affected by the Stock Split.
Private Placement
From February 10, 2017 through through December 31, 2017, the Company accepted subscriptions of $1,940,005$1,940,005 for unregistered shares of the Company’s common stock for $1.50$1.50 a share (the “2017“2017 Private Placement”). The issuances of common stock were made in reliance on section 4(2)Section 4(a)(2) of the Securities Act of 1933 for the offer and sale of securities not involving a public offering and rule 506 of Regulation D ofRule 506(b) under the Securities Act. The proceeds from the 2017 Private Placement will beare being used for working capital and to fund operations. Through December 31,In 2017, the Company has issued 1,293,334 shares of common stock under thisthe 2017 Private Placement. The Company issued Placement, along with 2,500 shares of common stock under a prior year Private Placement.private placement.
MedAmerica Properties, Inc.
Notes to Consolidated Financial Statements
Preferred Stock Exchange
In April 2017, wethe Company offered our preferred shareholders shares of our common stock in exchange for their Series A cumulative preferred stock (“Preferred Stock”) and accumulated preferred dividends outstanding as of December 31, 2016. Pursuant to the offer, each share of Preferred Stock would be exchanged for 20 shares of (post-split) common stock and each dollar of preferred dividend would be exchanged for 0.2 shares of common stock. All preferred shareholders, except one, accepted the offer resulting in the conversion of 9,875 shares of Preferred Stock and $301,656$301,656 of accumulated preferred dividends into 257,831 shares of common stock,, which were issued in the third quarter of 2017. The effective date of the exchange is June 30, 2017. This exchange resulted in deemed dividends on preferred stock conversion of $148,125.$148,125.
Subsequent to the reverse stock split, the private placement and the preferred stock exchange, there are 2,610,568 shares of common stock issued and outstanding, as of December 31, 2017 consisting of 1,059,5811,056,903 shares after the reverse stock split, 1,293,1561,293,334 shares from the private placement, 2,500 shares from a prior year private placement and 257,831 shares from the preferred stock and preferred dividend exchange.
Preferred Stock Dividends
The holdersholder of Series A Preferred Stock shall beis entitled to receive cumulative, non-compounded cash dividends on each outstanding share of Series A Preferred Stock at the rate of 10.0%10% of the Issuance Price per annum (“Preferred Dividends”), which shall beginbegan to accrue on January 1, 2010. Preferred Dividends shall beare payable semiannually to the holdersholder of Series A Preferred Stock. Any Series A Preferred Dividends due and unpaid on any Payment Date, whether or not declared by the board of directors, shall accrue with any other due and unpaid Preferred Dividends, regardless of whether there are profits, surplus or other funds of the Company legally available for payment of dividends.
Substantially all the Preferred stockholders had previously agreed to accept common stock in lieu of cash for payment of Preferred Dividends. In February 2016, the Company issued 29,856 shares of common stock in lieu of $29,249$29,249 of Preferred Dividends for those Preferred stockholders who accepted the common stock in lieu of the cash offer. The total accrued but unpaid Preferred Dividends is $27,361 and $329,017$27,361 as of December 31, 2017 2018 and December 31, 2016, respectively.2017. An additional $5,000$10,000 and $5,000 of cumulative Preferred Dividends are undeclared and unaccrued as of December 31, 2018 and 2017, respectively, and are not included in the balance sheet.
Common Stock
As of December 31, 2017, 2018, the Company’s board of directors and officers beneficially own 828,060838,060 shares of the Company’s common stock or 31.72%32.1% of the outstanding common stock. Included in the 828,060838,060 shares is 91,348are 351,966 shares owned by Marino Family Holdings LLC controlled by our chairman, Gary O. Marino, and 91,348 shares owned by Banyan Rail Holdings LLC, of which Mr. Marino is the president and 351,966 shares owned by Marino Family Holdings LLC.
On August 8, 2016, the Company issued an aggregate of 220,000 shares of common stock to its Directors as compensation for services in 2016. The Company recorded compensation expense in the amount (included in general and administrative on the Consolidated Statement of Operations) of $165,000 for the value of their services as of September 30, 2016. The compensation expense is based on the $0.75 per share market price of the Company’s stock at the time of issuance as required by applicable accounting guidance.significant stockholder.
Note 7.7. Income Taxes
The provision for income taxes consists of the following components:
As of December 31, | As of December 31, | |||||||||||||||
2017 | 2016 | 2018 | 2017 | |||||||||||||
Current | $ | - | $ | - | $ | - | $ | - | ||||||||
Deferred | - | - | - | - | ||||||||||||
| Net income tax expense | $ | - | $ | - | $ | - | $ | - | ||||||||
MedAmerica Properties Inc.
Notes to Consolidated Financial Statements
Note 7. Income Taxes (Continued)
The components of deferred income tax assets and liabilities are as follows:
As of December 31, | ||||||||||||||||
2017 | 2016 | As of December 31, | ||||||||||||||
2018 | 2017 | |||||||||||||||
Long-term deferred tax assets: | ||||||||||||||||
Stock compensation benefit | $ | 187,030 | $ | 219,778 | $ | 187,030 | $ | 187,030 | ||||||||
Net operating loss carryforward | 1,938,103 | 2,618,411 | 2,044,673 | 1,938,103 | ||||||||||||
Total long-term deferred tax assets | 2,125,133 | 2,838,189 | 2,231,703 | 2,125,133 | ||||||||||||
Valuation allowance | (2,125,133 | ) | (2,838,189 | ) | (2,231,703 | ) | (2,125,133 | ) | ||||||||
Net deferred tax assets | - | - | ||||||||||||||
| - | - | |||||||||||||||
The Company’sCompany’s federal net operating loss (“NOL”) carryforward balance as of December 31, 2017 2018 was $7,989,620,$8,407,165, which expireexpires in varying amounts through December 31,2037. 2038.
The Company’sCompany’s net deferred tax assets before valuation allowance as of December 31, 2017 2018 was $2,125,133,$2,231,703, most of which relates to net operating loss carryforwards. The Company recorded an operating loss for the year and has a history of operating losses. After assessing the realization of the net deferred tax assets, we have recorded a valuation allowance of 100% of the value of the net deferred tax assets as we believe it more likely than not that the Company will not realize operating profits and taxable income so as to utilize all of the net operating losses in the future. During the year ended December 31, 2017, 2018, the Company recorded a reductionan increase in the valuation allowance of $713,056.$106,560.
The Company is subject to income taxes in the U.S. federal jurisdiction and Florida state jurisdiction. With few exceptions, the Company is no longer subject to U.S. federal, state and local examinations by taxing authorities for the years before 2014.
MedAmerica Properties Inc.
Notes to Consolidated Financial Statements
Note 7. Income Taxes (Continued)2015.
The income tax provision differs from the expense that would result from applying statutory rate to income before income taxes principally because of permanent differences, state income taxes, the release of the valuation allowance, and the effect of the change in tax rate. The following is a reconciliation of the federal income tax provision at the federal statutory rate to the Company's tax provision attributable to continuing operations:
Year ended December 31, | Year ended December 31, | |||||||||||||||
2017 | 2016 | 2018 | 2017 | |||||||||||||
Statutory Federal Rate | 34.00 | % | 34.00 | % | 21.00 | % | 34.00 | % | ||||||||
State Income Taxes | 3.61 | % | 5.50 | % | 4.33 | % | 3.61 | % | ||||||||
| Change in Tax Rate | -149.08 | % | 0.00 | % | 0.00 | % | -149.08 | % | ||||||||
True-ups | 12.02 | % | 0.00 | % | 0.03 | % | 12.02 | % | ||||||||
NOL Expiration | -7.63 | % | 0.00 | % | ||||||||||||
| Permanent Differences | -0.17 | % | -12.00 | % | -0.05 | % | -0.17 | % | ||||||||
Valuation Allowance | 99.62 | % | -27.50 | % | ||||||||||||
Valuation allowance | -17.68 | % | 99.62 | % | ||||||||||||
| 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | |||||||||
On December 22, 2017, the Tax Cuts and Jobs Act (the "Tax Act") was enacted in the United States, resulting in significant changes from previous tax law. The Tax Act reduced the federal corporate income tax rate to21% from 35% effective January 1, 2018. Our federal income tax expense for periods beginning in 2018 will be based on the new rate. The Tax Act also provides for immediate deduction of 100% of the costs of qualified property that have been incurred and the property placed in service during the period from September 27, 2017 to December 31, 2022. This provision will begin to phase down each year beginning January 1, 2023 and will be completely phased out as of January 1, 2027.
In connection with the initial analysis of the impact of the Tax Cuts and Jobs Act (the “Tax Act”), we remeasured our deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. As a result, we recorded a decrease in our deferred tax assets of approximately $1,067,000$1,067,000 with a corresponding adjustment to deferred income tax expense. This adjustment was fully offset by a decrease in the valuation allowance for the year ended December 31, 2017.
MedAmerica Properties Inc.
Notes to Consolidated Financial Statements
Note8. Earnings (Loss) per Share
The Company excluded from its diluted earnings per shareshare calculation 500 and 10,375500 common shares issuable upon conversion of shares of convertible preferred stock that were outstanding at December 31, 2017 2018 and 2016,2017, respectively, as their inclusion would be anti-dilutive.
Note9. Stock-Based Compensation
On August 23, 2017, the Company issued an aggregate of 60,000 stock options to its directors and officers. The related stock compensation expense was not material.
On June 11, 2018, the Company issued an aggregate of 10,000 stock options to a director. The related stock compensation expense was not material.
The Company has stock option agreements with its directors and officers. Details of options activity is as follows:
Number of Shares | Weighted Average Exercise Price per Share | Weighted Average Fair Value at Grant Date | Weighted Average Remaining Contractual Life (years) | Intrinsic Value | Number of Shares | Weighted Average Exercise Price per Share |
| Weighted Average Fair Value at Grant Date | Weighted Average Remaining Contractual Life | Intrinsic Value | ||||||||||||||||||||||||||||||
Balance January 1, 2016 | 5,000 | $ | 10.30 | $ | - | 0.5 | $ | - | ||||||||||||||||||||||||||||||||
Options granted | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
Options exercised | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
Options expired | (5,000 | ) | (10.30 | ) | - | - | - | |||||||||||||||||||||||||||||||||
Balance December 31, 2016 | - | - | - | - | - | - | $ | - | - | - | - | |||||||||||||||||||||||||||||
Options granted | 60,000 | 8.00 | - | - | - | 60,000 | 8.00 | - | - | - | ||||||||||||||||||||||||||||||
Options exercised | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
Options expired | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
Balance December 31, 2017 | 60,000 | 8.00 | $ | - | 4.75 | $ | - | 60,000 | $ | 8.00 | $ | - | 4.75 | $ | - | |||||||||||||||||||||||||
Options granted | 10,000 | 6.00 | - | - | - | |||||||||||||||||||||||||||||||||||
Options exercised | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
Options expired | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
Balance December 31, 2018 | 70,000 | $ | 7.71 | $ | - | 3.86 | $ | - | ||||||||||||||||||||||||||||||||
The fair values of stock options are estimated using the Black-Scholes method, which takes into account variables such as estimated volatility, expected holding period, dividend yield, and the risk-free interest rate. The risk-free interest rate is the five-yearfive-year treasury rate at the date of grant. The expected life is based on the contractual life of the options at the date of grant. All 60,00070,000 options were fully vested at grant date. The intrinsic value is not material.
MedAmerica Properties Inc.
Notes to Consolidated Financial Statements
Note 10. Related PartiesParty Relations and Transactions
Gary O. Marino, the Company’sCompany’s chairman of the board, is the chairman, president, and chief executive officer of Boca Equity Partners LLC (“BEP”), Patriot Equity LLC (“Patriot”), Banyan Medical Partners LLC (“BMP”), and Banyan Surprise Plaza LLC (“BSP”). Mr. Marino owns 100% of Patriot, Patriot owns 100% of BMP and BSP through and along with other wholly owned subsidiaries. Mr. Marino, Mr. Paul S. Dennis, a memberMr. Donald Denbo and Mr. Bennett Marks, members of the Company's board of directors,, and Mr. Donald S. Denbo,Joseph Bencivenga, a member of the Company'sCompany’s board of directors and the Company’s President and Chief Executive Officer and Ms. Patricia Sheridan, the Company’s Chief Financial Officer also hold membership interests in BEP.
During 2016, the Company established BMP, and certain other subsidiaries wholly-owned by BMP. The Company formed these entities to acquire medical office buildings in the United States. The Company was unable to raise the capital needed to consummate the first medical building opportunity. On March 9, 2017, the Company sold BMP and BMP’s wholly-owned subsidiaries to Patriot. The selling price was $277,756$277,756 in the form of BMP assuming a portion of the Company’s note payable balance due to BEP. The consideration of $277,756$277,756 was used to recoup the $110,000$110,000 in property deposits as of December 31, 2016 and reimbursement of $117,756$117,756 of other 2016 and 2017 expenses incurred by the Company on behalf of BMP. This reimbursement of expenses is offset in general and administrative expenses.
On July 27, 2016, the Company entered into a Demand Note and Loan AgreementAgreement (the “Note”) with BEP providing for draws of up to $250,000.$250,000. Loans under the Note bore interest at an annual rate of 10% and outstanding principal and interest were due on demand. This Note was cancelled and terminated on December 31, 2016 when the Company entered into a new Demand Note and Loan Agreement (the “New Note”) with BEP for $471,826.$471,826. The New Note represents advances from BEP under the New Note, payments made since the date of the New Note and interest accrued thereon. The New Note bore interest at the rate of 10% per annum and is payable upon demand. BEP may, but is not requiredcommitted to makemaking advances to the Company under the New Note as the Company may from time to time request. The balance drawn on the New Note including accrued interest was paid in full May 31, 2017. The Note remains available to the Company to draw upon. upon until May 2020 and the balance as of the date of this report due under the New Note is $0.
On June 8, 2017, MedAmericaSeptember 13, 2018, the Company entered into an office lease and administrative support agreement (the ““2018 Lease Agreement”) with BEP. The 2018 Lease Agreement has a month-to-month term commencing on JuneSeptember 1, 2017. 2018. The 2018 Lease Agreement provides for the Company’s use of a portion of BEP’s offices and certain overhead items at the BEP offices such as space, utilities and other administrative services for $15,000$5,000 a month. The 2018 Lease Agreement replaces the February 3,June 8, 2017 office lease and administrative support agreement between the Company and BEP and includes additional general office and administrative staff support services.BEP. Total expense incurred under these agreements amounted to $138,025$140,000 and $99,687$138,025 for the years ended December 31, 2018 and 2017, and 2016,respectively.
On June 14, 2017, During 2018 the Company entered into a letter of intent with Patriot to reacquire all ofCompany's President and CEO performed work for International Rail Partners LLC (“IRP”), an entity controlled by the capital units of BMP from Patriot, for $9,536,582 which is the purchase price of the Medical Office Building. The letter of intent in non-binding, provides for a ninety-day exclusive diligence period, and is contingent upon the Company obtaining financing to complete the acquisition. The letter of intent was extended to December 15, 2017 at which time it expired.Company’s Chairman. The Company has no current plans to further pursue this acquisition.billed back IRP for compensation and expenses in the amount of $125,090 for the year ended December 31, 2018.
The Company’sCompany’s directors have not received cash compensation for their services in 20172018 or 20162017 but were compensated with common stock and stock options. See footnote 6 Preferred Stock and Common Stock and footnote 9 Stock Based Stock-Based Compensation for further discussion. In the third quarter of 2017, the Company hired a new president and chief executive officer and a new chief financial officer who are husband and wife. Also, in the third quarter of 2017, the Company issued 15,000 common stock options to the president and CEO and 45,000 shares to other board members and officers. The related stock compensation was not material.
As of December 31, 2017, 2018, the Company’s board of directors and officers beneficially own 828,060838,060 shares of the Company’s common stock or 31.72%32.10% of the outstanding common stock. Included in the 828,060838,060 shares is 91,348are 351,966 shares owned by Marino Family Holdings LLC controlled by our chairman, Gary O. Marino, and 91,348 shares owned by Banyan Rail Holdings LLC, of which Mr. Marino is the president and 351,966 shares owned by Marino Family Holdings LLC. significant stockholder.
Paul Dennis, director and previously interim president, interim chief executive officer and interim chief financial officer, participated in the 2017 Private Placement by investing $150,000$150,000 for 100,000 shares of common stock.
Note 11. Subsequent Events
The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the financial statements were issued for potential recognition or disclosure. The Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
40
34