Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 2017March 31, 2018

OR

For the transition period from ___________ to _____________

Commission file number: 001-09043

Indicate by a 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 filefile 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 requiredrequired 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 a checkcheck mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.

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 20, 2017,May 14, 2018, the registrant had 2,610,568 shares of common stock, $0.01 par value per share, outstanding.

MedAmericaMedAmerica Properties Inc.

Form 10-Q

Table of Contents

Part I — Financial Information

Item 1. Financial Statements

See Notes to Condensed Consolidated Financial Statements

MEDAMERICA PROPERTIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Item 2. Management’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the accompanying unaudited Financial Statements and notes thereto included under Part I, Item 1 of this Quarterly Report on Form 10-Q. In addition, reference should be made to our audited Consolidated Financial Statements and notes thereto and related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC”).

Cautionary Statement Concerning Forward-Looking StatementsStatements

This Quarterly Report on Form 10-Q contains information about the Company, some of which includes “forward-looking“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,” of our 20162017 Annual Report on Form 10-K, filed with the SEC on March 31, 2017.April 2, 2018. We have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Accordingly, the 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 our 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. We undertake no obligation to update forward-looking statements, except as required by law.

Overview

MedAmerica is a real estate management company with limited operations. After exploring various industries, in 2016, the board of directors determined to pursue the acquisitionsourcing, financing, asset management and managementco-investment of well-located medical office buildings throughout the United StatesStates with the intention of aggregating multiple properties within certain locations allowing us to gain efficiencies and diversify risk. We will 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 will then asset and property manage the portfolios and determine the optimal exit strategy.

TheseWe will seek investments will havewith strong fundamentals 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 II,I, Section 1A –- “Risk Factors” of our 20162017 Annual Reportreport on Form 10-K, filed with the SEC on March 31, 2017.April 2, 2018.

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” in our 2017 Annual report on Form 10-K to strengthen our balance sheet and pursue our new strategy.

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. (“FINRA”) on June 20, 2017.

The name change reflects our new strategy of pursuing acquisitions 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 $0.15 or $1.50 (post-split) a share in order to raise working capital and fund our operations (the “2017 Private Placement”). Through September 30, 2017, the Company accepted subscriptions for $1,932,505 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 operating. As of October 11, 2017, the Company has received an additional $7,500 in 2017 Private Placement funds.

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 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.  

As a result of the reverse stock split, the private placement and the preferred stock exchange, there are 1,907,070 shares of common stock outstanding as of September 30, 2017 consisting of 1,056,723 shares after the reverse stock split, 592,516 shares from the 2017 Private Placement and 257,831 shares from the preferred stock and preferred dividend exchange.

Purchase of Banyan Medical Partners

On June 14, 2017, MedAmerica entered into a letter of intent with Patriot to reacquire all capital units of BMP for $9,536,582. In 2016, MedAmerica originally formed BMP and its subsidiary, 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 is 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 has been extended to December15, 2017.

Quasi-Reorganization

Critical Accounting Policies and Estimates

In response to the SEC's financial reporting release, FR-60, Cautionary Advice Regarding Disclosure About Critical Accounting Policies, the Company has selected its most subjective accounting estimation process for purposes of explaining the methodology used in calculating the estimate in addition to the inherent uncertainties pertaining to the estimate and the possible effects on the Company's financial condition.  These estimates involve certain assumptions that if incorrect could create a material adverse impact on the Company's results of operations and financial condition.  For a discussion of our significant accounting policies, seeSee Note 4 –- "Summary of Significant Accounting Policies" in the accompanying Notes to Financial Statements.

There were no material changes to our principal accounting estimates during the period covered by this report.  

Results from Operations

The following table summarizes our resultsresults for the three and nine months ended September 30, 2017March 31, 2018 and 2016:2017:

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 ninethree months ended September 30, 2017,March 31, 2018, general and administrative expenses decreased $277,183 or 42.9%increased $216,071 compared to the ninethree months ended September 30, 2016.  ThisMarch 31, 2017. The first quarter of 2017 included $117,756 of prior year expenses reimbursed by a related party relative to the Banyan Sale.  sale of BMP.

TheNet of the $117,756 expense reimbursement that reduced general and administrative expenses during the three months ended March 31, 2017, the overall decreaseincrease in general and administrative expenses is primarily due to:

ForInterest expense

Interest expense was $384 and $12,278 for the three monthsquarters ended September 30,March 31, 2018 and 2017, general and administrative expenses decreased $76,320 or 22.6% comparedrespectively. The decrease in interest expense was due to the three months ended September 30, 2016.repayment of a related party note payable in 2017.

The overall decrease in general and administrative expenses is primarily due to:

Income Tax Expensetax expense

AIncome tax expense was $0 for the quarters ended March 31, 2018 and 2017, respectively, due to a full valuation allowance offsets netbeing recorded by the Company for any deferred tax assets for which future realization is considered to be less likely than not. created as the result of any net operating losses generated by operations.

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 recorded an operating loss for the quarter, and has a recent 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 is 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 near future.

Net (Loss) Income

Net loss for the nine months ended September 30, 2017 included $117,756 of reimbursement of expensesfrom the transfer of Banyan Medical Partnersattributable to a Related Party.common shareholders

Net loss attributable to common stockholdersshareholders was $0.45 and $0.70($0.08) per share for the nine monthsquarter ended September 30, 2017 and 2016, respectively.

Net loss attributableMarch 31, 2018 as compared to commons stockholders was $0.32 and $0.35($0.0) per share for the three monthsquarter ended September 30,March 31, 2017. The difference of ($0.08) per common share is primarily the result of a 2017 reimbursement of deal costs by a related party of approximately $118,000 and 2016, respectively.an increase in 2018 general and administrative expenses of $86,000.

Financial Condition and LLiquidityiquidity

The Company does not currently generate revenue and is dependent on generating funds through debt or equity capital raises to cover its general and administrative costs. Beginning February 10, 2017 through the date of this filing, the Company has approached certain accredited investors seeking to raise up to $2.0 million in exchange for the Company’s common stock. As of October 11, 2017, the Company has raised $1,940,005 in the 2017 Private Placement.

Our independent certified public accounting firm issued its report datedcash balances at May 14, 2018, March 27, 2017 in connection with the audit of our financial statements as of31, 2018 and December 31, 2016 that included an explanatory paragraph describing the existence of conditions that raise substantial doubt about the Company’s ability to continue as a going concern. We believe this previous doubt about the Company’s ability to continue as a going concern has been alleviated for the foreseeable future due to the amount of funds raised by the Company in the first three quarters of 2017.

2017 were $455,843,  $479,252 and $708,382, respectively. The following table summarizesis a summary of our cash flow activity:activity for the three months ended March 31, 2018 and 2017:

Net cash usedprovided by (used) in operating activities        

For the ninethree months ended September 30, 2017,March 31, 2018, net cash used in operating activities was $520,425$216,630 as compared to net cash used inprovided by operating activities of $442,373$29,161 for the ninethree months ended September 30, 2016.March 31, 2017. The increase in cash used in operating activities was primarily due to the increase in net loss offset2017 reimbursement of deal costs by cash provided by the increasea related party, 2018 reduction in accounts payable and accrued expenses.  expenses and 2018 increase in net operating activities.

Net cash provided by (used in) investing activities

For the ninethree months ended September 30, 2017,March 31, 2018, net cash provided by investing activities was $62,284$0 as compared to net cash used inprovided by investing activities of $100,000$110,000 for the ninethree months ended September 30, 2016.March 31, 2017. The increasedecrease in cash provided by investing activities was primarily due to the decrease in property deposits.

Net cash provided by financing activities

For the ninethree months ended September 30, 2017,March 31, 2018, net cash used in financing activities was $12,500 as compared to net cash provided by financing activities was $1,609,595 as compared to $275,000of $533,432 for the ninethree months ended September 30, 2016.March 31, 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 $1,803,665$675,000 (net of costs) through the September 30,March 31, 2017. This was offset by a net decrease in the demand loan from a related party of approximately $194,070.$141,568. The $12,500 used in financing activities during the three months ended March 31, 2018 related to repayments of the note payable – insurance financing.

At September 30, 2017, the Company had net working capital of $943,021 as compared to net working capital deficit of $754,634 at December 31, 2016. The improvement 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, it will continue to rely upon the sale of stock or capital contributions from investors to generate cash flow and we hope to generate cash from purchasing and operating medical office buildings.

As of May 14, 2018, we have cash of $455,843.  We believe that the cash and a line of credit from a related party should meet our working capital needs for at least the next 12 months.  However, as part of our business model seking to acquire medical office buildings, we intend to seek to raise equity.  We cannot assure you that we will commence this task or that we will be successful.  

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

RevisionEvaluation of Previously Issued Financial StatementsDisclosure Controls and Procedures

AnWe carried out an evaluation, was performed under the supervision and with the participation of our management, including our new Chief Executive Officerchief executive officer and our new Chief Financial Officer,chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2017. The evaluation of our disclosure controls and procedures by our Chief Executive Officer and Chief Financial Officer included a review of the revision described(as defined in the filingSecurities Exchange Act of this Form 10-Q, where we revised our additional paid-in capital and our accumulated deficit. 1934, as amended (the “Exchange Act”) Rule 13a-15(e)) as of March 31, 2018.

Based on this evaluation, our Chief Executive Officerchief executive officer and Chief Financial Officerchief financial officer concluded that our disclosure controls and procedures were not effective as of September 30, 2017, at the reasonable assurance level, to enable us to record, process, summarize and report information required to be disclosed by us in reports that we file or submit within the time periods specified in the SEC rules or forms due to the material weakness described below.March 31, 2018. 

Material Weakness in Internal Control over Financial Reporting

A material weakness is defined as a deficiency or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim condensed consolidated financial statements will not be prevented or detected on a timely basis. In connection with the evaluation of our disclosure controls and procedures as of September 30, 2017, we identified a material weakness in our internal control over financial reporting associated with the recognition of a quasi-reorganization during the quarterly period ended June 30, 2017.  The Company subsequently determined that the Company did not meet the requirements to record the quasi-reorganization at that time.

The Company did not design and maintain effective control over the evaluation and adoption of accounting policies regarding the quasi-reorganization.  While this is considered a material weakness in internal control over financial reporting, the Company determined that the related error was not material to the results of operations or financial position for any prior annual or interim period as described above in Note 11.  

Changes in Internal Control over Financial Reporting

Other than the material weakness as set forth above during the quarter ended September 30, 2017, there              There have been no changes in our internal controlscontrols over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the quarter ended September 30, 2017,March 31, 2018, identified in connection with our evaluation that has materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Management's Remediation Initiatives

We have taken, and continue to take, the actions described below to remediate the identified material weakness. As we continue to evaluate and work to improve our internal controls over financial reporting, our senior management may determine to take additional measures to address control deficiencies or modify the remediation efforts, or in appropriate circumstances not to complete certain of the remediation measures described in this section. While our senior management are closely monitoring the implementation, until the remediation efforts discussed in this section, including any additional remediation efforts that our senior management identifies as necessary, are completed, tested, and determined effective, the material weakness described above will continue to exist.

To address this material weakness, our new management has implemented new procedures and internal controls surrounding the reporting of equity transactions, including a quasi-reorganization, to ensure that proper analysis is completed in order to determine the Company’s eligibility and proper disclosure of future equity transactions.

Part II — Other Information

Item 1. Legal Proceedings

The Company is not a party, nor is its property the subject of, any material pending legal proceedings.

Item 1A. Risk Factors

In addition to the information set forth in this Form 10-Q, you should carefully consider the risk factors discussed in Part I, Item 1A

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Private PlacementNone

In February 2017, management began approaching certain accredited investors offering unregistered shares of the Company’s common stock for $0.15 or $1.50 (post-split) a share in order to raise working capital and fund our operations (the “2017 Private Placement”). Through September 30, 2017, the Company accepted subscriptions for $1,932,505 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 related party note and accrued interest. As of October 11, 2017, the Company has received an additional $7,500 in 2017 Private Placement funds.

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 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.  

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

*Filed herewith

**Furnished herewith

Signatures

PursuantPursuant 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.

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