UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 

 
  FORM 10-Q
 

 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017  
or  
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to                       
 
Commission File Number: 000-55419  
 

 
Voltari Corporation
(Exact name of registrant as specified in its charter)  
 
 
 
  Delaware
 
90-0933943
(State of incorporation)
 
(I.R.S. Employer
Identification Number)
 
 767 Fifth Avenue, Suite 4700
New York, NY 10153
 (212) 388-5500
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 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 Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).      Yes       No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
 
 Large accelerated filer
 
 Accelerated filer
 
 Non-accelerated filer
 
 Smaller reporting company
 
 (Do not check if a smaller reporting company) 
 Emerging growth company
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).       Yes      No
 
 As of November 6, 2017, there were 8,994,814 shares of the registrant's common stock, par value of $0.001 per share, outstanding.

 
 
 
TABLE OF CONTENTS
 
 
 
Page
 
PART I
 
 
 
 
Item 1.
Condensed Consolidated Financial Statements
 3
 
Condensed Consolidated Balance Sheets as of September 30, 2017, (Unaudited) and December 31, 2016
 3
 
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and 2016 (Unaudited)
 4
 
Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2017 and 2016 (Unaudited)
 5
 
Condensed Consolidated Statements of Changes in Stockholders' Deficit for the nine months ended September 30, 2017 (Unaudited)
 6
 
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016 (Unaudited)
 7
 
Notes to Condensed Consolidated Financial Statements
 8
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 14
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
 19
Item 4.
Controls and Procedures
 19
 
 
 
 
 
 
 
PART II
 
 
 
 
Item 1.
Legal Proceedings
 20
Item 1A.
Risk Factors
 20
Item 6.
Exhibits
 20
 
Signatures
 21
 
 
 
 
2
 
 
PART I
 
Item 1.    Condensed Consolidated Financial Statements.
 
Voltari Corporation
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)
 
 
 
September 30,
2017
 
 
December 31,
2016
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
Real estate investments, net
  $ 6,050  
  $ 6,215  
Cash and cash equivalents
    572  
    414  
Prepaid expenses and other current assets
    315  
    520  
Other assets
    113  
    101  
Total assets
  $ 7,050  
  $ 7,250  
 
       
       
Liabilities, redeemable preferred stock and stockholders’ deficit
       
       
Accounts payable and accrued expenses
  $ 479  
  $ 508  
Accrued compensation
    4  
    17  
Deferred rent income
    17  
    17  
Revolving note
    5,500  
    4,500  
Interest payable
    283  
    141  
Deferred rent expense
    19  
    25  
Accrued preferred stock dividends
    1,758  
    1,598  
Other liabilities
    116  
    116  
Total liabilities
  $ 8,176  
  $ 6,922  
 
       
       
Commitments and contingencies
     
     
 
       
       
Redeemable preferred stock, $0.001 par value; 1,200,000 shares authorized at September 30, 2017 and December 31, 2016, 1,170,327 shares issued and outstanding at September 30, 2017 and December 31, 2016. Redemption value: $55,412 and $50,355 at September 30, 2017 and December 31, 2016, respectively.
  $ 53,653  
  $ 48,024  
 
       
       
Stockholders’ deficit
       
       
Common stock, $0.001 par value; 25,000,000 shares authorized at September 30, 2017 and December 31, 2016, 8,994,814 shares issued and outstanding at September 30, 2017 and December 31, 2016.
    9  
    9  
Additional paid-in capital
    549,495  
    555,286  
Accumulated deficit
    (604,341 )
    (603,049 )
Accumulated other comprehensive income
    58  
    58  
Total stockholders’ deficit
    (54,779 )
    (47,696 )
Total liabilities, redeemable preferred stock and stockholders’ deficit
  $ 7,050  
  $ 7,250  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
3
 
 
Voltari Corporation
Condensed Consolidated Statements of Operations
(in thousands, except share data and per share data)
(unaudited)
 
 
 
Three Months Ended
 
 
Nine Months Ended
 
 
 
September 30,
 
 
September 30,
 
 
 
2017
 
 
2016
 
 
2017
 
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
  $ 81  
  $ 83  
  $ 242  
  $ 181  
 
       
       
       
       
Operating expenses
       
       
       
       
General and administrative, excluding depreciation
    374
    641  
    1,318
    2,358  
Depreciation and amortization
    44  
    72  
    133  
    216  
Impairment losses
    -  
    115  
    -  
    115  
Acquisition and transaction related
  19
    5  
  30
    22  
Total operating expenses
    437  
    833  
    1,481  
    2,711  
Operating loss
  $ (356 )
  $ (750 )
  $ (1,239 )
  $ (2,530 )
Other income and (expenses)
       
       
       
       
Other income – net of expenses
    -  
    -  
    89  
    -  
Interest expense & Revolving note fees
    (44 )
    (44 )
    (142 )
    (80 )
Net loss from continuing operations
    (400 )
    (794 )
    (1,292 )
    (2,610 )
Net income (loss) from discontinued operations
    -  
    14  
    -  
    (23 )
Net loss
  $ (400 )
  $ (780 )
  $ (1,292 )
  $ (2,633 )
Accretion of redeemable preferred stock
    (255 )
    (216 )
    (734 )
    (623 )
Series J redeemable preferred stock dividends
    (1,758 )
    (1,547 )
    (5,057 )
    (4,465 )
Net loss attributable to common stockholders
  $ (2,413 )
  $ (2,543 )
  $ (7,083 )
  $ (7,721 )
 
       
       
       
       
Net loss per share attributable to common stockholders - basic and diluted
       
       
       
       
Continuing operations
  $ (0.27 )
  $ (0.28 )
  $ (0.79 )
  $ (0.86 )
Discontinued operations
    -  
    -  
    -  
    -  
Total net loss per share attributable to common stockholders
  $ (0.27 )
  $ (0.28 )
  $ (0.79 )
  $ (0.86 )
 
       
       
       
       
Weighted-average common shares outstanding – basic and diluted
    8,994,814  
    8,994,814  
    8,994,814  
    8,994,814  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
4
 
 
Voltari Corporation
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
 
 
 
Three Months Ended
 
 
Nine Months Ended
 
 
 
September 30,
 
 
September 30,
 
 
 
2017
 
 
2016
 
 
2017
 
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
  $ (400 )
  $ (780 )
  $ (1,292 )
  $ (2,633 )
Other comprehensive gain (loss):
       
       
       
       
Foreign currency translation adjustment
    4  
    (6 )
    -  
    (6 )
Comprehensive loss
  $ (396 )
  $ (786 )
  $ (1,292 )
  $ (2,639 )
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
5
 
 
Voltari Corporation
Condensed Consolidated Statements of Changes in Stockholders’ Deficit
(in thousands, except share data)
(unaudited)
 
 
 
 Common Stock 
 
 
 
 
 
 
Shares 
 
 
Amount
 
 
Additional Paid-in Capital
 
 
Accumulated Deficit
 
 
Accumulated Other Comprehensive Income
 
 
Total
 
Balance as of December 31, 2016
    8,994,814  
  $ 9  
  $ 555,286  
  $ (603,049 )
  $ 58  
  $ (47,696 )
Net loss
     
     
     
    (1,292 )
     
    (1,292 )
Other comprehensive loss
     
     
     
     
     
     
Redeemable preferred stock dividends
     
     
    (5,057 )
     
     
    (5,057 )
Accretion of redeemable preferred stock
     
     
    (734 )
     
     
    (734 )
Balance as of September 30, 2017
    8,994,814  
  $ 9  
  $ 549,495  
  $ (604,341 )
  $ 58  
  $ (54,779 )
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
6
 
 
Voltari Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
 
 
Nine Months Ended
 
 
 
September 30,
 
 
 
2017
 
 
2016
 
Cash flows from operating activities:
 
 
 
 
 
 
Net loss
  $ (1,292 )
  $ (2,633 )
Loss from discontinued operations
    -  
    23  
Adjustments to reconcile net loss to net cash used in operating activities:
       
       
Depreciation and amortization
    133
 
    216  
Amortization of lease intangible
    32
 
    31  
Stock-based compensation expense
    -  
    (3 )
Impairment charges
    -  
    115  
Non-cash interest expense
    142  
    80  
Other non-cash adjustment
    -  
    (6 )
Changes in operating assets and liabilities:
       
       
Accounts receivable
    -
 
    13  
Prepaid expenses and other current assets
    205  
    436  
Accounts payable and accrued expenses
    (43 )
    (78 )
Other assets
    (12 )
    -
 
Deferred rent expense
    (7 )
    (1 )
Net cash used in operating activities - continuing operations
    (842 )
    (1,807 )
    Net cash used in operating activities - discontinued operations
    -  
    (7 )
Net cash used in operating activities
    (842 )
    (1,814 )
 
       
       
Cash flows from investing activities:
       
       
Purchases of real estate
    -  
    (2,817 )
Proceeds from the sale of fixed assets
    -  
    3  
Net cash used in investing activities - continuing operations
    -  
    (2,817 )
Net cash provided by investing activities - discontinued operations
    -  
    3  
Net cash used in investing activities
    -  
    (2,814 )
 
       
       
Cash flows from financing activities:
       
       
Proceeds from debt facilities
    1,000  
    3,550  
Net cash provided by financing activities
    1,000  
    3,550  
Effect of exchange rate changes on cash and cash equivalents
    -  
    -  
Net increase (decrease) in cash and cash equivalents
    158  
    (1,078 )
Cash and cash equivalents at beginning of period
    414  
    1,180  
Cash and cash equivalents at end of period
  $ 572  
  $ 102  
 
       
       
Supplemental disclosure of non-cash financing activities:
       
       
Series J redeemable preferred stock dividend paid-in-kind
  $ 4,896  
  $ 4,323  
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
 
7
 
 
Voltari Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited)
 
1. Business Description and Basis of Presentation
 
Business Description
 
Voltari Corporation (“Voltari” or the “Company”) is in the business of acquiring, financing and leasing commercial real properties. The Company had previously been engaged in the business of providing mobile marketing and advertising solutions to brands, marketers and advertising agencies. In August 2015, we began implementing a transformation plan pursuant to which, among other things, we exited our mobile marketing and advertising business. It is anticipated that the majority of the costs related to the transformation plan were incurred during 2015 and 2016. Additional amounts to be incurred during the balance of 2017, if any, cannot be reasonably estimated. We have been funding our operations with borrowings under our Amended Note (as defined herein) as described in Note 5. We expect to continue to rely on borrowings to provide working capital in the near term.
 
Basis of Presentation
 
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q for interim financial reporting pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. The condensed consolidated balance sheet as of December 31, 2016, included herein was derived from the audited financial statements as of that date, but does not include all disclosures required by U.S. GAAP.
 
The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all normal recurring adjustments which are necessary for a fair statement of the results of the interim periods. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the fiscal year ended December 31, 2016, included in our Annual Report on Form 10-K for the year ended December 31, 2016. The results of operations for the three and nine months ended September 30, 2017 are not necessarily indicative of the results to be expected for the full year or for any other period. Certain amounts from prior periods have been reclassified to conform with the presentation in the current period.
 
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions in certain circumstances that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant estimates include those involved in the valuation of long lived assets, valuation allowance on the deferred tax asset, redeemable preferred stock, litigation and other loss contingencies. Actual results could differ from those estimates.
 
2. Summary of Significant Accounting Policies
 
Our significant accounting policies are those that we believe are both important to the portrayal of our financial condition and results of operations.
 
Significant Accounting Policies - Real Estate Investments
 
As a result of our entry into the business of acquiring, financing and leasing commercial real properties, we have adopted the following significant accounting policies. Management believes there have been no other material changes to our significant accounting policies discussed in Note 2 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, except for the standards adopted this year.
 
Investments in real estate are recorded at cost. Improvements and replacements are capitalized when they extend the useful life of the asset. Costs of repairs and maintenance are expensed as incurred. The fair value of the tangible assets of an acquired property with an in-place operating lease will be determined by valuing the property as if it were vacant, and the “as-if-vacant” value will then be allocated to the tangible assets based on the fair value of the tangible assets. The fair value of in-place leases will be determined by considering current market conditions, as well as costs to execute similar leases. The fair value of above- or below-market leases will be recorded based on the present value of the difference between the contractual amount to be paid pursuant to the in-place lease and the Company's estimate of the fair market lease rate for the corresponding in-place lease, measured over the remaining term of the lease, including any below-market fixed-rate renewal options for below-market leases.
 
 
8
 
 
 Voltari Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited)
 
Depreciation is computed using the straight-line method over the estimated useful lives of up to 43 years for buildings, 13 years for land improvements, five (5) years for fixtures and improvements and the shorter of the useful life or the remaining lease term for tenant improvements and leasehold interests. Capitalized above-market lease values are amortized as a reduction of rental income over the remaining terms of the respective leases. Capitalized below-market lease values are amortized as an increase to rental income over the remaining terms of the respective leases and expected below-market renewal option periods. The value of in-place leases, exclusive of the value of above-market and below-market in-place leases, are amortized to expense over the remaining periods of the respective leases.
 
Recently Adopted Accounting Pronouncements
 
In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, Compensation - Stock Compensation . ASU 2016-09 simplifies the accounting for share-based payment transactions, including a policy election option with respect to accounting for forfeitures either as they occur or estimating forfeitures, as well as increasing the amount an employer can withhold to cover income taxes on equity awards. Additionally, ASU 2016-09 requires the cash paid to a taxing authority when shares are withheld to pay employee taxes to be classified as a "financing activity" rather than an "operating activity," as was done previously on the Statement of Cash Flows. We adopted this standard effective January 1, 2017, and, as a result, we will be accounting for future forfeitures as they occur.
 
Recently Issued Accounting Pronouncements
 
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers . The guidance in this ASU supersedes nearly all existing revenue recognition guidance under U.S. GAAP and creates a single, principle-based revenue recognition framework that is codified in a new FASB ASC Topic 606. The core principle of this guidance is for the recognition of revenue to depict the transfer of goods or services to customers at an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The new revenue standard is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those years. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The new standard allows for either full retrospective or modified retrospective adoption. Currently, all revenues are derived from lease contracts which are not within the scope of this guidance. We don't expect this standard will have any impact on our condensed consolidated financial statements.
 
In February 2016, the FASB issued ASU 2016-02, Leases. The guidance significantly changes the accounting for leases by requiring lessees to recognize assets and liabilities for leases greater than 12 months on their balance sheet. The lessor model stays substantially the same; however, there were modifications to, conform lessor accounting with the lessee model, eliminate real estate specific guidance, further define certain lease and non-lease components, and change the definition of initial direct costs of leases requiring significantly more leasing related costs to be expensed upfront. ASU 2016-02 is effective for us in the first quarter of 2019, and we are currently assessing the impact of this standard to our condensed consolidated financial statements.
 
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805), Clarifying the Definition of a Business The amendments in this ASU provide a more robust framework to use in determining when a set of assets and activities is a business. The amendments provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable. The guidance changes the definition of a business to exclude acquisitions where substantially all the fair value of the assets acquired are concentrated in a single identifiable asset or a group of similar identifiable assets. Given this change in definition, we believe most of our real estate acquisitions will be considered asset acquisitions. The new guidance will be applied prospectively to any transactions occurring in the period of adoption. ASU 2017-01 is effective for financial statements issued for annual periods beginning after December 15, 2017, including interim periods within those periods . Under the new standard, transaction costs would be capitalized under asset acquisitions and expensed for business combinations. We are currently assesing the impact of this standard to our condensed consolidated financial statements.
 
In February 2017, the FASB issued ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets . ASU 2017-05 clarifies that ASC 610-20 applies to all nonfinancial assets (including real estate) for which the counterparty is not a customer and clarifies that all businesses are derecognized using the deconsolidation guidance. Additionally, it defines an in substance nonfinancial asset as a financial asset that is promised to a counterparty in a contract in which substantially all the fair value of the assets promised in the contract is concentrated in nonfinancial assets, which excludes cash or cash equivalents and liabilities. The new guidance is expected to impact the gain recognized when a real estate asset is sold to a non-customer and a noncontrolling interest is retained. Under the current guidance, a partial sale is recognized and carryover basis is used for the retained interest, however, the new guidance eliminates the use of carryover basis and generally requires a full gain to be recognized. ASU 2017-05 is effective for us in the first quarter of 2018, and we are currently assessing the impact of this standard to our condensed consolidated financial statements.
 
In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718), Scope of Modification Accounting to provide clarity and to reduce diversity in practice related to a modification when applying the guidance in ASC 718, Compensation – Stock Compensation. The guidance in ASC 718 defines a “modification” as a change in the terms or conditions of a share-based payment award. The amendments provide guidance about when changes in terms or conditions of a share-based payment award require an entity to apply the existing modification guidance in ASC 718. The amendments in this Update are effective for all entities for annual periods, and interim periods within those annual reporting periods, beginning after December 15, 2017. We are currently assesing the impact of this standard to our condensed consolidated financial statements.
 
 
9
 
 
 Voltari Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited)
 
3. Real Estate Investments
 
During 2015 and 2016 we acquired two real estate properties, one located in Long Branch, NJ and the other in Flanders, NY.
 
Information related to major categories of real estate investments, net, is as follows (in thousands):
 
  
 
 
As of
 
 
Useful life
 
September 30,
2017
 
 
December 31,
2016
 
Real Estate Investments, at cost:
 
 
 
 
 
 
 
   Land
 
  $ 2,345  
  $ 2,345  
   Building, fixtures and improvements
10 - 43 yrs.
    3,494  
    3,494  
      Total tangible assets
 
    5,839  
    5,839  
Acquired Intangibles - In-place leases
5 to 13 yrs.
    607  
    607  
Total cost of Real Estate Investments
 
    6,446  
    6,446  
Less: Accumulated depreciation and amortization
 
    (396 )
    (231 )
Total cost of Real Estate Investments, net
 
  $ 6,050  
  $ 6,215  
 
Depreciation expense for the nine months ended September 30, 2017 and 2016 amounted to $91 thousand and $70 thousand, respectively.
 
Intangible amortization expense for the nine months ended September 30, 2017 and 2016 amounted to $74 thousand and $68 thousand, respectively, of which $32 thousand of favorable leases amortization was reflected as a reduction in revenue, for both periods.
 
Expected in-place lease and favorable lease amortization for each of the next five (5) years, and thereafter, is as follows (in thousands):
 
Years Ending December 31,
 
 
 
Balance of 2017
  $ 25  
2018
    99  
2019
    99  
2020
    57  
2021
    16  
Thereafter
    124  
Total
  $ 420  
 
F uture minimum base rental receipts due to us over the next five (5) years, and thereafter is as follows (in thousands):
 
Year Ending December 31,
 
 
 
Balance of 2017
  $ 87  
2018
    348  
2019
    348  
2020
    239  
2021
    160  
Thereafter
    1,356  
Total
  $ 2,538  
 
 
10
 
 
Voltari Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited)
 
4. Discontinued Operations
 
There were no discontinued operations expenses for the three and nine months ended September 30, 2017. The effect of discontinued operations on the condensed consolidated statements of operations for the three and nine months ended September 30, 2016 were as follows (in thousands):
 
 
 
Three Months 
Ended
September 30, 2016
 
 
 
Mobile Marketing & Advertising
 
Revenue
  $ -  
Operating income
    14  
Other income
    -  
Pre-tax income
    14  
Net income from discontinued operations
  $ 14  
 
 
 
Nine Months Ended
September 30, 2016 
 
 
 
Mobile Marketing & Advertising
 
Revenue
  $ -  
Operating loss
    (23 )
Other income (expense), net
    -  
Pre-tax loss
    (23 )
Net loss from discontinued operations
  $ (23 )
 
5. Revolving Note
 
On August 7, 2015, we, as borrower, and Koala Holding LP (“Koala”), as lender, an affiliate of Carl C. Icahn, our controlling stockholder, entered into a revolving note (the “Prior Note”). Pursuant to the Prior Note, Koala made available to us a revolving loan facility of up to $10 million in aggregate principal amount. Borrowings under the Prior Note bore interest at a rate equal to the greater of the LIBOR rate plus 350 basis points, per annum, and 3.75%, per annum. The Prior Note also included a fee of 0.25%, per annum, on undrawn amounts and matured on the earliest of (i) December 31, 2017, (ii) the date on which any financing transaction, whether debt or equity, was consummated by us (or our successors and assigns) with net proceeds in an amount equal to or greater than $10 million, and (iii) at our option, a date selected by us that was earlier than December 31, 2017. Subject to the terms and conditions of the Prior Note, we could repay all or any portion of the amounts outstanding under the Prior Note at any time without premium or penalty, and any amounts so repaid would, until the maturity date, be available for re-borrowing. As collateral for the Prior Note, we pledged and granted to Koala a lien on our limited liability company interest in Voltari Real Estate Holding LLC (“Voltari Holding”). As of March 29, 2017, borrowings on this facility totaled $5.0 million.
 
On March 29, 2017, we and Koala amended and restated the Prior Note (the “Amended Note”). Pursuant to the Amended Note, Koala made available to the Company a revolving loan facility of up to $30 million in aggregate principal amount (the “Commitment”). The Company may, by written notice to Koala, request that the Commitment be increased (the “Increased Commitment”), provided that the aggregate amount of all borrowings, plus availability under the aggregate Increased Commitment, shall not exceed $80 million. Koala has no obligation to provide any Increased Commitment and may refuse to do so in its sole discretion. The Amended Note provides that the net proceeds thereunder in excess of $10 million will be used by the Company for the acquisition, improvement, development, modification, alteration, repair, maintenance, financing or leasing of real property, including any fees and expenses associated with such activities. Borrowings under the Amended Note will bear interest at a rate equal to the LIBOR Rate (as defined in the Amended Note) plus 200 basis points, per annum, subject to a maximum rate of interest of 3.75%, per annum. The Amended Note matures on the earliest of (i) December 31, 2020, (ii) the date on which any financing transaction, whether debt or equity, is consummated by the Company (or its successors and assigns) with net proceeds in an amount equal to or greater than $30 million, and (iii) at the Company’s option, a date selected by the Company that is earlier than December 31, 2020 (the “Maturity Date”). The Amended Note also allows the Company to, upon written notice to Koala not more than 60 days and not less than 30 days prior to the Maturity Date, request that Koala extend the Maturity Date to December 31, 2022. Koala may, in its sole discretion, agree to extend the Maturity Date by providing written notice to the Company on or before the date that is 20 days prior to the Maturity Date.
 
 
11
 
 
Voltari Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited)
 
If an event of default (as defined in the Amended Note) exists, the Amended Note will bear interest at a default rate equal to the greater of (i) the LIBOR Rate plus 300 basis points, per annum, or (ii) 4.5%, per annum. Subject to the terms and conditions of the Amended Note, the Company may repay all or any portion of the amounts outstanding under the Amended Note at any time without premium or penalty. The amounts available under the Commitment or Increased Commitment, as the case may be, will increase and decrease in direct proportion to repayments and reborrowings under the Amended Note, respectively, from time to time. As collateral for the Amended Note, the Company has pledged and granted to Koala a lien on the Company’s limited liability company interest in Voltari Holding.
 
As of September 30, 2017, borrowings under the Amended Note equaled $5.5 million. The outstanding balance, including interest of $0.3 million, totaled $5.8 million.
 
6. Redeemable Preferred Stock
 
Upon completion of our rights offering in October 2012, we issued 1,199,643 shares of Series J preferred stock and warrants to acquire 1,014,982 common shares (the "Warrants") in exchange for approximately $30 million in cash proceeds. Net proceeds from the rights offering of approximately $27.8 million were allocated between Series J preferred stock and common stock warrants based on their estimated relative fair market values at the date of issuance as determined by management with the assistance of a third party valuation specialist. The portion of the net proceeds from the rights offering attributable to the Series J preferred stock was determined to be approximately $26.4 million and is included in Redeemable preferred stock on our consolidated balance sheets at September 30, 2017, and December 31, 2016.
 
Our Series J preferred stock contains certain redemption features and is classified as mezzanine equity at September 30, 2017, and December 31, 2016 since the shares are (i) redeemable at the option of the holder upon the occurrence of certain events and (ii) have conditions for redemption which are not solely within our control. Our Series J preferred stock is redeemable at the option of the holder if the Company undergoes a change in control, which includes a person becoming a beneficial owner of securities representing at least 50% of the voting power of our company, a sale of substantially all of our assets, and certain business combinations and mergers which cause a change in 20% or more of the voting power of our company, and if we experience an ownership change (within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended), which results in a substantial limitation on our ability to use our net operating losses and related tax benefits. In the event that a redemption event were to occur, currently the Company would be precluded, under the terms of the Series J preferred stock and applicable Delaware law, from making any material redemptions.
 
The difference between the carrying value of the Series J preferred stock and its liquidation value is being accreted over an anticipated redemption period of five years using the effective interest method, which is fully accreted as of September 30, 2017. The shares of Series J preferred stock have limited voting rights and are not convertible into shares of our common stock or any other series or class of our capital stock.
 
Holders of the Series J preferred stock are entitled to an annual dividend of 13% through December 31, 2017, after which it adjusts to 14%, which is payable in-cash or in-kind at our discretion, on a quarterly basis. To date, we have elected to pay all quarterly dividend payments on our Series J preferred stock, in the cumulative amount of $24.4 million, in-kind rather than in-cash. Accordingly, we have increased the carrying value of our redeemable preferred stock for the amount of the paid-in-kind dividend payments. Dividends on the Series J preferred stock and the accretion increase the amount of net loss that is attributable to common stockholders and are presented as separate amounts on the condensed consolidated statements of operations.
 
Our Series J preferred stock has a preference upon dissolution, liquidation or winding up of the Company in respect of assets available for distribution to stockholders. The liquidation preference of the Series J preferred stock is initially $25 per share. If the dividend on the Series J preferred stock is paid in-kind, which has been the case to date, the liquidation preference is adjusted and increased quarterly (i) through December 31, 2017, by an amount equal to 3.25% of the liquidation preference per share, as in effect at such time and (ii) thereafter by an amount equal to 3.5% of the liquidation preference per share, as in effect at such time. The quarterly adjustment will continue until the shares are redeemed, or until the Company's affairs are liquidated, dissolved or wound-up.
 
As of September 30, 2017, our Series J preferred stock had an aggregate redemption value of approximately $55.4 million, including paid-in-kind dividends of $24.4 million and accrued dividends of $1.8 million. We recorded accretion associated with our Series J preferred stock of $0.7 million and $0.6 million for the nine months ended September 30, 2017 and 2016, respectively.
 
In connection with the closing of our rights offering on March 30, 2015 , entities affiliated with Mr. Carl C. Icahn, our largest shareholder, became the owner of approximately 52.3% of our common stock, which resulted in a change of control of the Company. This constituted a redemption event pursuant to the terms and conditions of the Series J preferred stock, and as a result each holder of shares of Series J preferred stock had the right to require the Company to redeem all or a portion of such holder’s shares of Series J preferred stock. Entities affiliated with Mr. Carl C. Icahn waived their option to redeem Series J preferred stock in connection with the change in control resulting from the completion of the rights offering that closed on March 30, 2015. On April 13, 2015, we redeemed 29,316 shares of Series J preferred stock for approximately $1.0 million in cash from holders not affiliated with Mr. Carl C. Icahn. Following the April 13, 2015 redemption of Series J preferred stock, entities affiliated with Mr. Carl C. Icahn became the owner of approximately 97.9% of our Series J preferred stock.
 
 
12
 
 
Voltari Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited)
 
7. Liquidity and Capital Resources
 
Our principal needs for liquidity since we began executing our transformation plan in August, 2015, have been to fund operating losses, working capital requirements, capital expenditures, restructuring expenses, acquisitions and integration and debt service. Our principal sources of liquidity as of September 30, 2017, consisted of cash and cash equivalents of $0.6 million, and our ability to borrow on our Amended Note . See Note 5, Revolving Note, of our condensed consolidated financial statements for more information.
 
In light of the above, the condensed consolidated financial statements were prepared on the basis that the Company will continue as a going concern. Therefore, the accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and liabilities or any other adjustments that might result in the event the Company is unable to continue as a going concern.
 
8. Net Loss Per Share Attributable to Common Stockholders
 
The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders for the periods indicated (dollars in thousands, except per share data):
 
 
 
Three Months Ended
 
 
  Nine months ended
 
 
 
September 30,
 
 
  September 30,
 
 
 
2017
 
 
2016
 
 
2017
 
 
2016
 
Net loss attributable to common stockholders
  $ (2,413 )
  $ (2,543 )
  $ (7,083 )
  $ (7,721 )
 
       
       
       
       
Weighted-average common shares outstanding - basic and diluted
    8,994,814  
    8,994,814  
    8,994,814  
    8,994,814  
 
       
       
       
       
Net loss per share attributable to common stockholders - basic and diluted
  $ (0.27 )
  $ (0.28 )
  $ (0.79 )
  $ (0.86 )
 
Basic net loss per share attributable to common stockholders is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the applicable period. Diluted net loss per share attributable to common stockholders includes the effects of any warrants, options and other potentially dilutive securities outstanding during the period. Due to net losses, for the periods presented, there were no potentially dilutive securities outstanding, therefore basic and diluted net loss per share attributable to common stockholders are equal. The following table presents the outstanding antidilutive securities excluded from the calculation of net loss per share attributable to common stockholders:
 
 
 
September 30,
 
 
 
2017
 
 
2016  
 
Common stock issuable upon exercise of Warrants
    1,014,958  
    1,014,958  
Options to purchase common stock
    -  
    21,150  
Total securities excluded from net loss per share attributable to common stockholders
    1,014,958  
    1,036,108  
 
9. Legal Proceedings
 
From time to time, we are subject to claims and legal proceedings arising in the normal course of business. We do not believe that we are currently party to any pending legal action that could reasonably be expected to have a material adverse effect on our business, financial condition, results of operations or cash flows.
 
10. Subsequent Events
 
On October 11, 2017, the Warrants to purchase 1,014,958 shares of common stock, expired without any such Warrants being exercised.
 
 
13
 
 
Item 2.    Management s Discussion and Analysis of Financial Condition and Results of Operations.
 
The following discussion should be read in conjunction with our condensed consolidated financial statements included elsewhere herein.
 
Forward-Looking Statements
 
Some of the statements contained in this Quarterly Report on Form 10-Q, including this Management’s Discussion and Analysis of Financial Condition and Results of Operations , contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 12E of the Securities Exchange Act of 1934, as amended, regarding our plans, objectives, expectations and intentions. Such statements include, without limitation, any statements regarding our transformation plan, our exit from the mobile marketing and advertising business and our entry into the real estate investment business, our plans to acquire additional real estate properties, including potentially higher valued properties, any statements regarding our ability to generate profits, any statements regarding various estimates we have made in preparing our financial statements, statements that refer to projections of our future operating performance, statements regarding any pro forma financial information we present, the sufficiency of our capital resources to meet our cash needs, the exit from or disposition of certain of our businesses, and the potential costs associated therewith, and the anticipated growth and trends in our businesses. These forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those anticipated.
 
Risks and uncertainties that could adversely affect our business and prospects include without limitation:
 
any financial or other information included herein (including any pro forma financial information) based upon or otherwise incorporating judgments or estimates based upon future performance or events;
 
our ability to raise additional capital or generate the cash necessary to continue and expand our operations or to fund the liquidation preference on, or redeem, our Series J preferred stock if required to do so;
 
our ability to protect and make use of our substantial net operating loss carryforwards;
 
our ability to execute real estate acquisitions;
 
risks generally associated with the commercial real estate investment business, including the credit risk associated with our tenants;
 
our ability to implement our transformation plan;
 
our ability to compete in the highly competitive real estate investment industry;
 
the impact of government regulation, legal requirements or industry standards relating to commercial real estate;
 
our limited experience acquiring and managing commercial real properties;
 
our ability to meet the criteria required to remain quoted on the OTCQB Marketplace;
 
the ongoing benefits and risks related to our relationship with Mr. Carl C. Icahn, our principal beneficial stockholder and principal lender, through certain of his affiliates;
 
the impact and costs and expenses of any litigation we may be subject to now or in the future; and
 
our leadership transitions.
 
 
14
 
 
In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential” and similar expressions intended to identify forward-looking statements. Our actual results could be different from the results described in or anticipated by our forward-looking statements due to the inherent uncertainty of estimates, forecasts, projections and pro forma financial information, and may be materially better or worse than anticipated. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements represent our estimates and assumptions only as of the date of this report. We expressly disclaim any duty to provide updates to forward-looking statements, and the estimates and assumptions associated with them, after the date of this report, in order to reflect changes in circumstances or expectations or the occurrence of unanticipated events except to the extent required by applicable securities laws. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed above, as well as the risks and uncertainties discussed in Item 1A - Risk Factors of our Annual Report on Form 10-K, for the fiscal year ended December 31, 2016. We qualify all of our forward-looking statements by these cautionary statements. We caution you that these risks are not exhaustive. We operate in a continually changing business environment and new risks emerge from time to time.
 
References in this Quarterly Report on Form 10-Q to “Voltari,” “the Company,” “we,” “us” and “our” are to Voltari Corporation and its subsidiaries.
 
Transformation Plan
 
In August 2015, we committed to and began implementing a transformation plan pursuant to which, among other things, we exited our mobile marketing and advertising business and entered into the business of acquiring, financing and leasing commercial real estate properties.  We have significantly reduced our workforce in connection with our transformation plan.
 
We lease our properties and intend to lease any additional properties we acquire pursuant to so-called “double net” or “triple net” leases. We are actively searching for additional properties to acquire. In order to continue to grow our real estate portfolio in a manner designed to, over time, help us generate profits, we may pursue higher valued properties than the properties we currently own. We anticipate that any such higher valued properties would likely generate relatively higher rental income, and would likely involve higher acquisition costs and may involve higher costs of maintenance. There can be no assurance that we will be successful in acquiring additional real estate properties, including any such higher valued properties, on commercially reasonable terms, if at all.
 
Any future acquisitions are intended to be initially financed through borrowings available under our Amended Note (as defined herein) with Koala Holding LP (“Koala”).
 
Real Property Acquisitions —In connection with the execution of our transformation plan, on September 17, 2015, we acquired a real estate parcel in Long Branch, New Jersey. The property is subject to a triple net lease with JPMorgan Chase Bank, N.A. ("Chase"), the original term of which expires in June, 2020 (with two, five-year renewal options), pursuant to which Chase is responsible for the payment of basic rent as well as the payment of real estate taxes, maintenance costs, utilities, tenant's insurance and other property related costs. Refer to http://investor.shareholder.com/jpmorganchase/sec.cfm for the financial statements of the tenant. The purchase price was approximately $3.63 million. As of September 30, 2017, the average annual rental income for the property over the remaining term of the original lease is approximately $203,000.
 
On May 18, 2016, we acquired a real estate parcel in Flanders, New York. The property is subject to a lease with 7-Eleven, Inc. (“7-Eleven”), the original term (the “Original Term”) of which expires in December 2029 (with four, five-year renewal options (the “Renewal Term,” and together with the Original Term, the “Term”)). During the Term, 7-Eleven is responsible for the payment of basic rent, as well as the payment of, subject to certain exceptions, real estate taxes, utilities, tenant’s insurance and other property related costs. The landlord is responsible for certain maintenance and repair costs. The purchase price was approximately $2.82 million. As of September 30, 2017, the average annual rental income for the property over the remaining Original Term is approximately $163,000.
 
Results of Operations
 
Our continuing operations for the three and nine months ended September 30, 2017 and 2016 consist of revenues and expenses related to commercial real estate operations which commenced in August 2015, as well as general and administrative costs. Continuing operations includes all personnel and facilities costs related to executive management, finance and accounting, human resources and other general corporate staff, as well as all legal and other professional fees, insurance and other costs not directly attributable to the mobile marketing and advertising business or our other discontinued operations.
 
Total revenue
 
Revenue from continuing operations for the three and nine months ended September 30, 2017 and 2016 consists of rental income from properties acquired (dollars in thousands);
 
 
 
Three Months Ended
 
 
 
 
 
Nine Months Ended
 
 
 
 
 
 
September 30,
 
 
 
 
 
September 30,
 
 
 
 
 
 
2017
 
 
2016
 
 
$ Change
 
 
2017
 
 
2016
 
 
$ Change
 
  Total revenue
  $ 81  
  $ 83  
  $ (2 )
  $ 242  
  $ 181  
  $ 61
 
 
15
 
 
Revenue for the nine months ended September 30, 2017 increased $61 thousand as a result of the addition of the Flanders property in May, 2016.
 
Operating expenses
  
 
Three Months Ended
 
 
 
 
 
Nine Months Ended
 
 
 
 
 
 
September 30,
 
 
 
 
 
September 30,
 
 
 
 
 
 
2017
 
 
2016
 
 
$ Change
 
 
2017
 
 
2016
 
 
$ Change
 
 
 
(Dollars in thousands)
 
General and administrative, excluding depreciation
  $ 374
  $ 641  
  $ (267 )
  $ 1,318
  $ 2,358  
  $ (1,040 )
Depreciation and amortization
    44  
    72  
    (28 )
    133  
    216  
    (83 )
Impairment losses
    -  
    115  
    (115 )
    -  
    115  
    (115 )
Acquisition and transaction related
  19
    5  
  14
  30
    22  
  8  
Total operating expenses
  $ 437  
  $ 833  
  $ (396 )
  $ 1,481  
  $ 2,711  
  $ (1,230 )
 
General and administrative, excluding depreciation
 
For the three months ended September 30, 2017, general and administrative expense, excluding depreciation, declined by approximately $0.3 million from the three months ended September 30, 2016, due to a:
 
$0.1 million decrease in personnel costs; and
 
$0.2 million decrease in various other administrative costs.
 
For the nine months ended September 30, 2017, general and administrative expense, excluding depreciation, declined by approximately $1.0 million from the nine months ended September 30, 2016, due to a:
 
$0.4 million decrease in personnel costs, resulting from January 2016 staff reductions, as well as staff reductions in connection with our transformation plan;
 
$0.5 million decrease in accounting, legal and professional fees resulting from the execution of our transformation plan and acquisition of the Flanders property and completion of our IRS audit; and
 
$0.1 million reduction in various other administrative costs.
 
Depreciation and amortization
 
Depreciation and amortization expense for the three and nine months ended September 30, 2017 and 2016 relates primarily to real estate investments and, in 2016, also includes general office computer equipment, furniture, computer software and leasehold improvements related to the New York City office.
 
For the three and nine months ended September 30, 2017, depreciation and amortization expense decreased less than $0.1 million from the comparable periods in 2016, primarily as a result of items related to the New York City office being fully depreciated by the end of 2016.
 
Impairment losses
 
There were no impairment losses for the three or nine months ended September 30, 2017.
 
Acquisition and transaction related
 
Acquisition and transaction related expenses for the three and nine months September 30, 2017 and 2016 relates to third party professional expenses associated with potential investments. 
 
Other Income and expenses
 
Other income and expenses for the nine months ended September 30, 2017 relates to a franchise tax refund from the State of Delaware in the amount of approximately $135,500. Professional fees directly associated, and offset against this tax refund, amounted to approximately $46,500. There was no other income and expenses for the three and nine months ended September 30, 2016.
 
For the nine months ended September 30, 2017, interest expense increased $62 thousand as a result of additional borrowings to fund our real estate purchase and operating expenses.

 
16
 
 
Net income (loss) from discontinued operations
 
 
 
 Three Months Ended
 
 
 
 
 
 Nine Months Ended
 
 
 
 
 
 
 September 30,
 
 
 
 
 
 September 30, 
 
 
 
 
 
 
 2017
 
 
 2016
 
 
 $ Change
 
 
 2017
 
 
 2016
 
 
 $ Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) from discontinued operations
  $ -  
  $ 14  
  $ (14 )
  $ -  
  $ (23 )
  $ 23  
 
Results of operations for our mobile marketing and advertising business, which terminated in August 2015, are included in discontinued operations for all periods presented. Results from discontinued operations for the three and nine months ended September 30, 2016, also reflect residual charges related to operations discontinued in 2015 and prior years. See Note 4 - Discontinued Operations to our condensed consolidated financial statements for more information.
 
Net loss
 
 
 
 Three Months Ended
 
 
 
 
 
 Nine Months Ended
 
 
 
 
 
 
 September 30,
 
 
 
 
 
 September 30, 
 
 
 
 
 
 
 2017
 
 
 2016
 
 
 $ Change
 
 
 2017
 
 
 2016
 
 
 $ Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
  $ (400 )
  $ (780 )
  $ (380 )
  $ (1,292 )
  $ (2,633 )
  $ (1,341 )
 
For the three months ended September 30, 2017, net loss was $0.4 million, compared to net loss of $0.8 million for the three months ended September 30, 2016. The $0.4 million improvement in net loss is primarily due to a reduction of general and administrative expenses.
 
For the nine months ended September 30, 2017, net loss was $1.3 million, compared to net loss of $2.6 million for the nine months ended September 30, 2016. The $1.3 million improvement in net loss is primarily due to:
 
$0.1 million increase in rental income.
 
$0.4 million decrease in personnel costs, resulting from staff reductions in connection with our transformation plan;
 
$0.6 million decrease in accounting, legal and professional fees and other costs resulting from the execution of our transformation plan;
 
$0.1 million in depreciation and $0.1 million decrease in impairment losses.
 
Liquidity and Capital Resources
 
General
 
Our principal needs for liquidity since we began executing our transformation plan in August, 2015, have been to fund operating losses, working capital requirements, capital expenditures, restructuring expenses, acquisitions and integration and debt service. Our principal sources of liquidity as of September 30, 2017, consisted of cash and cash equivalents of approximately $.6 million and our ability to borrow on our Koala loan .
 
On August 7, 2015, we, as borrower, and Koala, as lender, an affiliate of Carl C. Icahn, our controlling stockholder, entered into a revolving note (the “Prior Note”). Pursuant to the Prior Note, Koala made available to us a revolving loan facility of up to $10 million in aggregate principal amount. Borrowings under the Prior Note bore interest at a rate equal to the greater of the LIBOR rate plus 350 basis points, per annum, and 3.75%, per annum. The Prior Note also included a fee of 0.25%, per annum, on undrawn amounts and matured on the earliest of (i) December 31, 2017, (ii) the date on which any financing transaction, whether debt or equity, was consummated by us (or our successors and assigns) with net proceeds in an amount equal to or greater than $10 million, and (iii) at our option, a date selected by us that was earlier than December 31, 2017. Subject to the terms and conditions of the Prior Note, we could repay all or any portion of the amounts outstanding under the Prior Note at any time without premium or penalty, and any amounts so repaid would, until the maturity date, be available for re-borrowing. As collateral for the Prior Note, we pledged and granted to Koala a lien on our limited liability company interest in Voltari Real Estate Holding LLC (“Voltari Holding”).
 
As of March 29, 2017, borrowings from this facility totaled $5.0 million due to borrowings in connection with our second real estate acquisition as well as for working capital requirements.
 
 
17
 
 
On March 29, 2017, we and Koala, amended and restated the Prior Note (the “Amended Note”). Pursuant to the Amended Note, Koala made available to the Company a revolving loan facility of up to $30 million in aggregate principal amount (the “Commitment”). The Company may, by written notice to Koala, request that the Commitment be increased (the “Increased Commitment”), provided that the aggregate amount of all borrowings, plus availability under the aggregate Increased Commitment, shall not exceed $80 million. Koala has no obligation to provide any Increased Commitment and may refuse to do so in its sole discretion. The Amended Note provides that the net proceeds thereunder in excess of $10 million will be used by the Company for the acquisition, improvement, development, modification, alteration, repair, maintenance, financing or leasing of real property, including any fees and expenses associated with such activities. Borrowings under the Amended Note will bear interest at a rate equal to the LIBOR Rate (as defined in the Amended Note) plus 200 basis points, per annum, subject to a maximum rate of interest of 3.75%, per annum. The Amended Note matures on the earliest of (i) December 31, 2020, (ii) the date on which any financing transaction, whether debt or equity, is consummated by the Company (or its successors and assigns) with net proceeds in an amount equal to or greater than $30 million, and (iii) at the Company’s option, a date selected by the Company that is earlier than December 31, 2020 (the “Maturity Date”). The Amended Note also allows the Company to, upon written notice to Koala not more than 60 days and not less than 30 days prior to the Maturity Date, request that Koala extend the Maturity Date to December 31, 2022. Koala may, in its sole discretion, agree to extend the Maturity Date by providing written notice to the Company on or before the date that is 20 days prior to the Maturity Date. If an event of default (as defined in the Amended Note) exists, the Amended Note will bear interest at a default rate equal to the greater of the LIBOR Rate plus 300 basis points, per annum, or 4.5%, per annum. Subject to the terms and conditions of the Amended Note, the Company may repay all or any portion of the amounts outstanding under the Amended Note at any time without premium or penalty. The amounts available under the Commitment or Increased Commitment, as the case may be, will increase and decrease in direct proportion to repayments and reborrowings under the Amended Note, respectively, from time to time. As collateral for the Amended Note, the Company has pledged and granted to Koala a lien on the Company’s limited liability company interest in Voltari Holding.
 
As of September 30, 2017, borrowings from this facility totaled $5.5 million due to borrowings in connection with our second real estate acquisition as well as for working capital requirements. The outstanding balance, including interest of $0.3 million, totaled $5.8 million.
 
To the extent we are unable to replace or refinance the Amended Note prior to its maturity we may not have sufficient capital resources to repay any amounts borrowed thereunder. There can be no assurance that we will be able to replace or refinance the Amended Note on commercially reasonable terms, if at all.
 
In August, 2015, we began implementing a transformation plan pursuant to which, among other things, we exited our mobile marketing and advertising business and entered into the business of acquiring, financing and leasing commercial real properties. We expect that the acquisition of commercial real properties, the cost of operations and working capital requirements will be our principal need for liquidity in the future. Our cash flows may be affected by many factors including the economic environment, competitive conditions in the commercial real estate industry and the success of our transformation plan. We believe we will have adequate resources to fund our operations, capital expenditures and working capital needs for the next 12 months using borrowings available under the Amended Note and our cash and cash equivalents on hand. We currently intend to leverage real properties that we may acquire, but cannot assure that we will be able to do so on commercially reasonable terms, if at all.
 
Our liquidity may be adversely affected if, and to the extent that, our remaining Series J preferred stock becomes redeemable. The Company believes that, if a redemption event were to occur, limited, if any, funds would be available for such redemption under the terms of the Series J preferred stock and applicable Delaware law.  As a result, in the event that a redemption event were to occur, the Company currently expects that it would be precluded, under the terms of the Series J preferred stock and applicable Delaware law, from making any material redemptions.
 
Our ability to achieve our business and cash flow plans is based on a number of assumptions which involve significant judgments and estimates of future performance, borrowing capacity and credit and equity finance availability, which cannot at all times be assured. Accordingly, we cannot assure that cash flows from operations and other internal and external sources of liquidity will at all times be sufficient for our cash requirements. If necessary, we may need to consider actions and steps to improve our cash position and mitigate any potential liquidity shortfall, such as modifying our business plan, pursuing additional financing to the extent available, pursuing and evaluating other alternatives and opportunities to obtain additional sources of liquidity and other potential actions to reduce costs. We cannot assure that any of these actions would be successful, sufficient or available on favorable terms. Any inability to generate or obtain sufficient levels of liquidity to meet our cash requirements at the level and times needed could have a material adverse impact on our business and financial position.
  
Our ability to obtain any additional financing depends upon many factors, including our then existing level of indebtedness (if any) and restrictions in any debt facilities to which we may be subject now or in the future, historical business performance, financial projections, prospects and creditworthiness and external economic conditions and general liquidity in the credit and capital markets. Any financing (or subsequent refinancing) could also be extended only at costs and require us to satisfy restrictive covenants, which could further limit or restrict our business and results of operations, or be dilutive to our stockholders.
 
 
 
18
 
 
Cash flows
 
As of September 30, 2017, and December 31, 2016, we had cash and cash equivalents of $0.6 million and $0.4 million, respectively. The increase reflects cash provided by financing activities of $1.0 million, offset by cash used for operating activities of $0.8 million .
 
Net cash used in operating activities
 
The change in our operating assets and liabilities was driven by a decrease in prepaid expenses and other assets of $0.2 million, offset by an increase in other assets of $12 thousand, and a decrease in accounts payable and accrued expenses of $43 thousand, and a decrease in deferred rent expense of $7 thousand.
 
Net cash from investing activities
 
For the nine months ended September 30, 2017, no net cash was used in investing activities.
 
Net cash from financing activities
 
For the nine months ended September 30, 2017, cash in the amount of $1.0 million was provided by borrowings on the Amended Note.
 
Off-Balance Sheet Arrangements
 
As of September 30, 2017, and December 31, 2016, we do not have any off-balance sheet arrangements.
 
Critical Accounting Policies and Estimates
 
Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of our financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses, and related disclosures. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions and in certain cases the difference may be material. Our critical accounting policies and estimates include those involved in recognition of revenue, valuation of long-lived assets, valuation allowance on the deferred tax asset, accounting for our redeemable preferred stock, litigation and other loss contingencies. Estimates related to the allocated cost of investments in real estate among land, other tangible and intangible assets affect future depreciation and amortization expense as well as the amount of reported assets.
 
As a result of our entry into the business of acquiring, financing and leasing commercial real properties, we have adopted the significant accounting policies described in Note 2 - Summary of Significant Accounting Policies in our condensed consolidated financial statements in this Quarterly Report on Form 10-Q.
 
Recent Accounting Pronouncements
 
See discussion of recent accounting pronouncements in Note 2 - Summary of Significant Accounting Policies in our condensed consolidated financial statements in this Quarterly Report on Form 10-Q.
 
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
 
We are not required to provide qualitative and quantitative disclosures about market risk because we are a smaller reporting company.
 
Item 4. Controls and Procedures.
 
Evaluation of Disclosure Controls and Procedures
 
Our management evaluated, with the participation of our principal executive officer and our principal financial officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our principal executive officer and our principal financial officer have concluded that our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
 
Changes in Internal Control Over Financial Reporting
 
There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
 
19
 
 
PART II
 
Item 1. Legal Proceedings.
 
There have been no material changes to the legal proceedings previously disclosed in Part 1, Item 3 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
 
Item 1A. Risk Factors.
 
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A in our Annual Report on Form 10-K, for the year ended December 31, 2016, which could materially affect our business, financial position and results of operations. There have been no material changes to the risk factors disclosed in Part I, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2016.
 
Item 6. Exhibits.
 
Exhibit Number
 
Exhibit Description
 
 
 
31.1
 
Certification pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – Principal Executive Officer. *
 
 
 
31.2
 
Certification pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – Chief Accounting Officer. *
 
 
 
32.1
 
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Principal Executive Officer. *
 
 
 
32.2
 
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Chief Accounting Officer. *
 
 
 
101.INS
 
XBRL Instance Document.*
 
 
 
101.SCH
 
XBRL Taxonomy Extension Schema Document.*
 
 
 
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document.*
 
 
 
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document.*
 
 
 
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document.*
 
 
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document.*
 
*
 
Filed herewith.
 
 
20
 
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
VOLTARI CORPORATION
 
 
 
 
 
Date: November 9, 2017
By:  
/s/ Kenneth Goldmann
 
 
 
Kenneth Goldmann
 
 
 
Principal Executive Officer
(principal executive officer)
 
 
 
 
 
 
 
 
 
Date: November 9, 2017
By:  
/s/ Peter Kaouris
 
 
 
Peter Kaouris
 
 
 
Chief Accounting Officer
(principal financial officer) 
 
 
 
 
  21

 
EXHIBIT 31.1
CERTIFICATION PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, Kenneth Goldmann, certify that:
 
1.
I have reviewed this quarterly report on Form 10-Q of Voltari Corporation;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
 
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
 
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
 
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
Date:  November 9, 2017
 
 
/s/    Kenneth Goldmann
 
 
Kenneth Goldmann
 
 
Principal Executive Officer (principal executive officer)
 
 
 
 
EXHIBIT 31.2
 
CERTIFICATION PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, Peter Kaouris, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Voltari Corporation;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
 
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
 
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
 
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
Date:  November 9, 2017
 
 
/s/  Peter Kaouris
 
 
Peter Kaouris
 
 
Chief Accounting Officer
(principal financial officer)
 
 
 
 
EXHIBIT 32.1
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
I, Kenneth Goldmann, Principal Executive Officer of Voltari Corporation (the “Registrant”), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
 
1.
The Registrant’s quarterly report on Form 10-Q for the period ended September 30 , 2017  (the “Periodic Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and
 
2.
The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
 
Date: November 9, 2017
 
 
/s/    Kenneth Goldmann
 
 
Kenneth Goldmann
 
 
Principal Executive Officer
(principal executive officer)
 
 
A signed original of this written statement required by Section 906 has been provided to Voltari Corporation and will be retained by Voltari Corporation and furnished to the Securities and Exchange Commission or its staff upon request.
 
 
 
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
I, Peter Kaouris, Chief Accounting Officer of Voltari Corporation (the “Registrant”), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
 
1.
The Registrant’s quarterly report on Form 10-Q for the period ended September 30 , 2017  (the “Periodic Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and
 
2.
The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
 
Date: November 9, 2017
 
 
/s/  Peter Kaouris
 
 
Peter Kaouris
 
 
Chief Accounting Officer
(principal financial officer)
 
 
A signed original of this written statement required by Section 906 has been provided to Voltari Corporation and will be retained by Voltari Corporation and furnished to the Securities and Exchange Commission or its staff upon request.