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 June 30, 2019

☐ 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 or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

767 Fifth Avenue, Suite 4700

New York, NY 10153

(Address of principal executive office, including zip code)

(212) 388-5500

(Registrant’s telephone number, including area code)

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 every Interactive Data File required to be submitted 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 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.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.001 per share 13% Redeemable Series J Preferred Stock, par value $0.001 per share.

As of August 6, 2019, 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 June 30, 2019 (Unaudited) and December 31, 2018	3
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2019 and 2018 (Unaudited)	4
	Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2019 and 2018 (Unaudited)	5
	Condensed Consolidated Statement of Changes in Stockholders' Deficit for the six months ended June 30, 2019 and 2018 (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018 (Unaudited)	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	22


	PART II

Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 5.	Other Information	23
Item 6.	Exhibits	24
	Signatures	25

PART I

Item 1. Condensed Consolidated Financial Statements.

Voltari Corporation

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)

	June 30, 2019	December 31, 2018

Assets
Real estate investments, net	$21,340	$21,977
Cash and cash equivalents	161	556
Restricted cash	403	403
Prepaid expenses and other current assets	276	400
Deferred rent receivable	249	158
Total assets	$22,429	$23,494

Liabilities, redeemable preferred stock and stockholders’ deficit
Accounts payable and accrued expenses	$646	$537
Accrued compensation	16	15
Tenant security deposit payable	403	403
Deferred rent income	17	17
Revolving note	23,000	23,000
Interest payable	1,423	999
Accrued preferred stock dividends	2,371	2,238
Total liabilities	27,876	27,209

Commitments and contingencies

Redeemable preferred stock, $0.001 par value; 1,200,000 shares authorized, and 1,170,327 shares issued and outstanding at June 30, 2019 and December 31, 2018. Redemption value: $70,307 and $65,670 at June 30, 2019 and December 31, 2018, respectively.	$67,936	$63,431

Stockholders’ deficit
Common stock, $0.001 par value; 25,000,000 shares authorized at June 30, 2019 and December 31, 2018, 8,994,814 shares issued and outstanding at June 30, 2019 and December 31, 2018.	9	9
Additional paid-in capital	534,599	539,237
Accumulated deficit	(608,066)	(606,477)
Accumulated other comprehensive income	75	85
Total stockholders’ deficit	(73,383)	(67,146)
Total liabilities, redeemable preferred stock and stockholders’ deficit	$22,429	$23,494

The accompanying notes are an integral part of these condensed consolidated financial statements.

Voltari Corporation

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(unaudited)

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2019	2018	2019	2018

Revenue	$528	$418	$1,055	$499

Operating expenses
General and administrative, excluding depreciation	322	413	730	831
Depreciation and amortization	310	245	620	289
Pending merger costs	393	-	869	-
Acquisition and transaction related	-	1	-	37
Total operating expenses	1,025	659	2,219	1,157
Operating loss	(497)	(241)	(1,164)	(658)
Other income (expenses)
Other income – net of expenses	-	78	-	78
Interest expense	(214)	(184)	(425)	(235)
Net loss	$(711)	$(347)	$(1,589)	$(815)
Series J redeemable preferred stock dividends	(2,371)	(2,066)	(4,638)	(4,042)
Net loss attributable to common stockholders	$(3,082)	$(2,413)	$(6,227)	$(4,857)

Net loss per share attributable to common stockholders	$(0.34)	$(0.27)	$(0.69)	$(0.54)

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.

Voltari Corporation

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(unaudited)

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2019	2018	2019	2018

Net loss	$(711)	$(347)	$(1,589)	$(815)
Other comprehensive income (loss):
Foreign currency translation adjustment	(3)	14	(10)	19
Comprehensive loss	$(714)	$(333)	$(1,599)	$(796)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Voltari Corporation

Condensed Consolidated Statements of Changes in Stockholders’ Deficit

(in thousands, except share data)

(unaudited)

Six Months Ended June 30,2019

	Common Stock
	Shares	Amount	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Income	Total
Balance as of December 31, 2018	8,994,814	$9	$539,237	$(606,477)	$85	$(67,146)
Net loss	—	—	—	(878)	—	(878)
Other comprehensive loss	—	—	—	—	(7)	(7)
Redeemable preferred stock dividends	—	—	(2,267)	—	—	(2,267)
Balance as of March 31, 2019	8,994,814	$9	$536,970	$(607,355)	$78	$(70,298)
Net loss	-	-	-	(711)	-	(711)
Other comprehensive loss	-	-	-	-	(3)	(3)
Redeemable preferred stock dividends	-	-	(2,371)	-	-	(2,371)
Balance as of June 30, 2019	8,994,814	$9	$534,599	$(608,066)	$75	$(73,383)

Six Months Ended June 30,2018

	Common Stock
	Shares	Amount	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Income	Total
Balance as of December 31, 2017	8,994,814	$9	$547,680	$(604,951)	$61	$(57,201)
Net loss	—	—	—	(468)	—	(468)
Other comprehensive income	—	—	—	—	5	5
Redeemable preferred stock dividends	—	—	(1,976)	—	—	(1,976)
Balance as of March 31, 2018	8,994,814	$9	$545,704	$(605,419)	$66	$(59,640)

Net loss	-	-	-	(347)	-	(347)
Other comprehensive income	-	-	-	-	14	14
Redeemable preferred stock dividends	-	-	(2,066)	-	-	(2,066)
Balance as of June 30, 2018	8,994,814	$9	$534,638	$(605,766)	$80	$(62,039)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Voltari Corporation

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Six Months Ended
	June 30,
	2019	2018
Cash flows from operating activities:
Net loss	$(1,589)	$(815)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	620	289
Straight line rental income	(92)	(40)
Amortization of above and below market lease intangibles	17	20
Non-cash interest expense	425	235
Changes in operating assets and liabilities:
Prepaid expenses and deferred rent receivable	123	138
Accounts payable, accrued expenses and other liabilities	101	(188)
Tenant security deposit payable	-	403
Other assets	-	-
Deferred rent expense	-	(7)
Net cash provided by (used in) operating activities	(395)	35

Cash flows from investing activities:
Purchases of real estate	-	(16,894)
Net cash used in investing activities	-	(16,894)

Cash flows from financing activities:
Proceeds from debt facilities	-	17,500
Net cash provided by financing activities	-	17,500
Net increase (decrease) in cash, restricted cash and cash equivalents	(395)	641
Cash, restricted cash and cash equivalents, beginning of period	959	192
Cash, restricted cash and cash equivalents, end of period	$564	$833

Supplemental disclosure of non-cash financing activities:
Series J redeemable preferred stock dividend paid-in-kind	$4,505	$3,791

The accompanying notes are an integral part of these condensed consolidated financial statements.

Voltari Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Business Description and Basis of Presentation

Business Description

Voltari Corporation (“Voltari” the “Company” or “We”), a Delaware corporation, was incorporated in December 2012 as a wholly-owned subsidiary of Motricity, Inc. (“Motricity”). Through a reorganization, Motricity became a wholly-owned subsidiary of Voltari in April 2013. As of August 6, 2019, entities affiliated with Mr. Carl C. Icahn own approximately 98.0% of our Series J preferred stock and approximately 52.7% of our common stock.

The Company is in the business of acquiring, financing and leasing commercial real properties through its wholly owned subsidiary, Voltari Real Estate Holding LLC (“Voltari Holding”). We currently own three commercial real properties. All of our revenue is derived from the rental income we receive under the three leases associated with these properties. We have been funding our operations with borrowings under our Amended Note (as defined herein) as described in Note 4 - Liquidity and Capital Resources.

Merger Agreement

On March 22, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, Starfire Holding Corporation, a Delaware corporation (“Parent”), and Voltari Merger Sub LLC, a Delaware limited liability company and a wholly-owned subsidiary of Parent (“Merger Sub” and, together with Parent, the “Acquiring Parties”). The Acquiring Parties are affiliates of Mr. Icahn, the Company’s controlling stockholder. Pursuant to the terms of the Merger Agreement, and subject to the conditions thereof, Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation in the merger (the “Merger”). If the Merger is consummated, then the Company will become a privately held company and a wholly-owned subsidiary of Parent, which is indirectly controlled by Mr. Icahn.

If the Merger Agreement is adopted by our stockholders and the Merger is completed, each share of the Company’s common stock (the “Common Stock”), other than (i) shares of Common Stock owned by Parent, Merger Sub, or any of their respective subsidiaries or affiliates (other than the Company and its directors and officers) (collectively, the “Purchaser Group”), (ii) shares owned by the Company or the Company’s subsidiaries, and (iii) shares of Common Stock for which appraisal rights have been properly and validly perfected and not validly withdrawn or lost, will be converted into the right to receive $0.86 in cash, without interest and less any applicable withholding taxes.

In addition, if the Merger Agreement is adopted by our stockholders and the Merger is completed, each outstanding share of the Company’s 13% Redeemable Series J Preferred Stock (the “Preferred Stock”), other than (i) shares of Preferred Stock owned by the Purchaser Group, (ii) shares of Preferred Stock owned by the Company or the Company’s subsidiaries, and (iii) shares of Preferred Stock for which appraisal rights have been properly and validly perfected and not validly withdrawn or lost, will be converted into the right to receive an amount in cash equal to the “redemption price,” which consists of the liquidation preference per share plus any prorated declared but unpaid dividends on the Preferred Stock, as more particularly described in the Company’s certificate of incorporation, without interest and less any applicable withholding taxes (the “Redemption Price”).

As of the close of business on August 6, 2019, there were 8,994,814 shares of Common Stock issued and outstanding, of which 4,739,620 shares were owned by the Purchaser Group, and 1,170,327 shares of Preferred Stock issued and outstanding, of which 1,147,388 shares were owned by the Purchaser Group. If the Merger were to be consummated, the aggregate consideration to be paid by Parent for the 4,255,194 shares of Common Stock not owned by the Purchaser Group would be approximately $3.7 million, and the aggregate Redemption Price to be paid to holders of Preferred Stock other than the Purchaser Group would be approximately $1.4 million, assuming the Merger is consummated on August 20, 2019.

To assist in evaluating the fairness of the Merger to the Company and its stockholders, other than the Purchaser Group, the Board of Directors formed a special committee of independent directors to, among other things, evaluate and negotiate a potential transaction with the Purchaser Group or any alternative strategic transaction (the “Special Committee”). The Special Committee consists of Mr. Firestone, Mr. Lewis and Mr. Shea. The Special Committee and, acting upon the unanimous recommendation of the Special Committee, the Board, have each unanimously determined that the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger, are fair to and in the best interests of the Company and its common stockholders (other than the Purchaser Group) and approved and declared advisable the Merger Agreement and the Merger and the other transactions contemplated by the Merger Agreement.

Voltari Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited)

The Company filed a Definitive Proxy Statement with the SEC on July 10, 2019 and has called a special meeting of its common stockholders for the purpose of voting on the adoption of the Merger Agreement, which special meeting is to be held at the offices of Brown Rudnick LLP, 7 Times Square, New York, NY 10036, on August 20, 2019 at 9:30 A.M., local time, unless adjourned or postponed to a later date.

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, 2018 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 period. 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, 2018 included in our Annual Report on Form 10-K for the year ended December 31, 2018. The results of operations for the three and six months ended June 30, 2019 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 the 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 allocating the costs of real estate investments, valuation of long-lived and intangible assets, provision for income taxes, and accounting for our redeemable preferred stock. Actual results could differ from those estimates.

2. Summary of Significant Accounting Policies

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 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, 2018, except for the standards adopted this period.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. The Company’s restricted cash consists of a security deposit held on behalf of the tenant located at the McClatchy Property.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Condensed Consolidated Balance Sheets that sums to the total of such amounts shown in the Condensed Consolidated Statements of Cash Flows.

	Dollars in Thousands
	As of June 30,
	2019	2018
Cash and cash equivalents	$161	$344
Restricted cash	403	489
Total cash, cash equivalents, and restricted cash	$564	$833

Voltari Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited)

Significant Accounting Policies - Real Estate Investments

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.

Depreciation is computed using the straight-line method over the estimated useful lives of up to 43 years for buildings, up to 13 years for 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.

The Company’s revenues are derived from rental income, which include rents due in accordance with the lease terms, reported on a straight-line basis over the initial term of the leases. Our leases with our tenants are classified as operating leases.

Recently Adopted Accounting Pronouncements

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 by requiring significantly more leasing related costs to be expensed upfront. We adopted ASU 2016-02 as of January 1, 2019, and it did not have a material impact on our condensed consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”, which amends FASB ASC Topic 220, Income Statement - Reporting Comprehensive Income. This ASU allows a reclassification out of accumulated other comprehensive income into retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (the “Tax Act”) and consequently, eliminates the stranded tax effects resulting from the Tax Act. We adopted this ASU as of January 1, 2019, and it did not have a material impact on our condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

Other recent accounting pronouncements issued by the FASB (including the Emerging Issues Task Force) and the SEC did not, or are not expected to, have a material effect on the Company’s results of operations or financial position.

Voltari Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited)

3. Real Estate Investments

Information related to major categories of real estate investments, net, is as follows (dollars in thousands):

		As of
	Useful life	June 30, 2019	December 31, 2018
Real Estate Investments, at cost:
Land		$5,840	$5,840
Building, fixtures and improvements	10 - 43 yrs.	15,891	15,891
Total tangible assets		21,731	21,731
Acquired Intangibles - In-place leases	5 to 13 yrs.	1,642	1,642
Total cost of Real Estate Investments		23,373	23,373
Less: Accumulated depreciation and amortization		(2,033)	(1,396)
Total cost of Real Estate Investments, net		$21,340	$21,977

Depreciation expense for the six months ended June 30, 2019 and 2018 amounted to $553 thousand and $247 thousand respectively.

Intangible amortization expense for the six months ended June 30, 2019 and 2018 amounted to $84 thousand and $62 thousand respectively, of which a net of $17 thousand and $20 thousand, respectively, of favorable and unfavorable lease amortization was reflected as a reduction in revenue.

Included in the accumulated depreciation and amortization balance are amounts for in place leases and favorable leases, as of June 30, 2019 and December 31, 2018, amounting to $443 thousand and $359 thousand, respectively.

Expected in-place lease and favorable and unfavorable lease amortization for each of the next five (5) years, and thereafter, is as follows (dollars in thousands):

Years Ending December 31,
Balance of 2019	$84
2020	126
2021	85
2022	85
2023	85
Thereafter	734
Total	$1,199

The following table presents future minimum base rental receipts due to us over the next five (5) years (dollars in thousands):

Year Ending December 31,
Balance of 2019	$981
2020	1,851
2021	1,773
2022	1,773
2023	1,880
Thereafter	18,484
Total	$26,742

Voltari Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited)

4. 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 June 30, 2019 consisted of cash and cash equivalents of $0.2 million, and our ability to borrow on our Amended Note (as defined below). As of June 30, 2019, there is $7.0 million remaining available under our Amended Note, of which we can borrow up to $4.0 million for working capital purposes.

5. Revolving Note

On August 7, 2015, we, as borrower, and Koala Holdings LP, as lender, an affiliate of Mr. Carl C. Icahn, the Company’s controlling stockholder (“Koala”), entered into a $10 million revolving loan facility (the “Prior Note”) at a rate equal to the greater of the LIBOR rate plus 350 basis points, per annum, and 3.75%, per annum, plus a fee of 0.25% per annum on undrawn amounts. The Company sought and received the Prior Note to, in part, allay potential concerns regarding the Company’s ability to invest in and execute its transformation plan while retaining cash levels sufficient to fund its ongoing operations. There were no limitations on the use of proceeds under the Prior Note. As collateral for the Prior Note, we pledged and granted to Koala a lien on our limited liability company interest in Voltari Holding.

On March 29, 2017, we as borrower, and Koala, as lender, entered into a revolving note (the “Amended Note”), which amended and restated the Prior Note. 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. 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. 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, payable at maturity. 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 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 June 30, 2019, borrowings from this loan facility totaled $23.0 million. The outstanding balance, including accumulated interest of $1.4 million, totaled $24.4 million as of June 30, 2019.

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.

Voltari Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited)

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 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 Condensed Consolidated Balance Sheets at June 30, 2019 and December 31, 2018.

Our Series J preferred stock contains certain redemption features and is classified as mezzanine equity at June 30, 2019, and December 31, 2018 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 was 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 was being accreted over an anticipated redemption period of five years using the effective interest method and was 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 14% (13% through December 31, 2017), 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 $38.7 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 increase the amount of net loss that is attributable to common stockholders and is 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) until October 11, 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.

As of June 30, 2019, our Series J preferred stock had an aggregate redemption value of approximately $70.3 million, including paid-in-kind dividends of $38.7 million and accrued dividends of $2.4 million.

Voltari Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited)

7. 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		Six Months Ended
	June 30,		June 30,
	2019	2018	2019	2018
Net loss attributable to common stockholders	$(3,082)	$(2,413)	$(6,227)	$(4,857)

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	$(0.34)	$(0.27)	$(0.69)	$(0.54)

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.

8. 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.

9. Cybersecurity Incident

In the first half of 2019, the Company experienced a cybersecurity incident resulting from unauthorized access to its systems, which resulted in personally identifiable information of less than 30 individuals being exposed to an unauthorized third party. The Company does not believe this incident had a material adverse effect on its business or results of operations. Following this incident, the Company has taken steps designed to improve the security of its computer systems in addition to offering credit protection to those affected. The Company maintains cyber breach and other insurance. The Company has incurred approximately $26,000 of expenses through June 30, 2019, consisting of professional fees and a $5,000 insurance deductible relating to this incident. The Company does not currently anticipate incurring material additional expenses in future periods relating to this incident.

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 the Merger and the Merger Agreement (each as defined below), 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 additional potentially higher valued properties, any statements regarding our ability to fund operating expenses from the cash flows generated by our rental income, 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;

●

risks relating to the Merger Agreement (as defined below) and the transactions contemplated thereunder, including without limitation, the Merger (as defined below):

●

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, including without limitation, consummating any purchase and sale transactions that we may enter into;

●

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;

●

risks relating to cybersecurity threats, including the misappropriation of assets or sensitive commercial or personally identifiable information, corruption of data or operational disruption;

●

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

●

risks related to our leadership transitions.

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, 2018 and in Item 1A - Risk Factors of this Report. 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.

Recent Developments

There can be no assurance that the proposed Merger will be consummated. The consummation of the Merger is conditioned on adoption of the Merger Agreement: (i) by the holders of a majority of the outstanding shares of Common Stock entitled to vote on the adoption of the Merger Agreement, and (ii) by the holders of a majority of the outstanding shares of Common Stock entitled to vote on the adoption of the Merger Agreement that are not beneficially owned by the Acquiring Parties or their affiliates.

The consummation of the Merger is also subject to certain other customary closing conditions, including (i) the absence of any law or order that is in effect and restrains, enjoins or otherwise prohibits the consummation of the Merger, (ii) the accuracy of the representations and warranties of the Acquiring Parties, in the case of the Company, and of the Company, in the case of the Acquiring Parties, as contained in the Merger Agreement (subject to certain materiality qualifiers, as applicable), and (iii) compliance by the Acquiring Parties, in the case of the Company, and by the Company, in the case of the Acquiring Parties, in all material respects with its or their obligations required to be performed by it or them under the Merger Agreement on or prior to the closing date of the Merger. Also, the obligation of the Acquiring Parties to consummate the Merger is subject to the absence of any Material Adverse Effect (as defined in the Merger Agreement) with respect to the Company from the date of the Merger Agreement to the closing date of the Merger.

There can be no assurance that the closing conditions will be satisfied, or that the Merger will be completed within the required time period pursuant to the Merger Agreement.

Business Overview

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 estate properties. We lease our properties and intend to lease any future properties pursuant to so-called “double net” or “triple net” leases. 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 such as the McClatchy Property (as defined herein). 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. As a result of the completion of the McClatchy Property acquisition (as described below), our current monthly rental income has increased to approximately $164,000.

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— 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 June 30, 2019, the average annual rental income for the property over the remaining term of the original lease is approximately $203,000, exclusive of the amortization of the above market lease intangible.

On May 18, 2016, we acquired a real estate parcel in Flanders, New York. The property is subject to a double net lease with 7-Eleven, Inc. (“7-Eleven”), the original term of which expires in December 2029 (with four, five-year renewal options). During the term of the lease, 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 June 30, 2019, the average annual rental income for the property over the remaining original term of the lease is approximately $166,000, exclusive of the amortization of the above market lease intangible.

On April 23, 2018, we acquired a real estate parcel in Columbia, South Carolina. The property (the “McClatchy Property”) is subject to a triple net lease with The McClatchy Company (“McClatchy”), the original term of which is for fifteen years and expires in April 2033 (with three, five-year renewal options). During the term of the lease, McClatchy is responsible for the payment of basic rent, as well as the payment of real estate taxes, utilities, tenant’s insurance and other property related costs. The purchase price was approximately $16.89 million inclusive of all costs. Refer to http://investors.mcclatchy.com/phoenix.zhtml?c=87841&p=irol-sec for the financial statements of the tenant. On each of the fifth (5th) and tenth (10th) anniversaries of the commencement date of the lease, the base rent will be increased by ten percent (10%) above the then current base rent. As of June 30, 2019, the average annual rental income for the McClatchy property over the remaining original term of the lease is approximately $1,794,000, exclusive of the amortization of the above market lease intangible.

Results of Operation

Our operations for the three and six months ended June 30, 2018 and 2017 consist of revenues and expense related to commercial real estate operations, as well as general and administrative costs. 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.

Total revenue

Revenue from operations for the three and six months ended June 30, 2019 and 2018 consists of rental income from properties acquired.

	(Dollars in thousands)
	Three Months Ended			Six Months Ended
	June 30,			June 30,
	2019	2018	$ Change	2019	2018	$ Change
Total revenue	$528	$418	$110	$1,055	$499	$556

●

For the three and six months ended June 30, 2019, the revenue increase resulted from the acquisition of the McClatchy Property in April 2018.

Operating expenses

	(Dollars in thousands)
	Three Months Ended			Six Months Ended
	June 30,			June 30,
	2019	2018	$ Change	2019	2018	$ Change

General and administrative, excluding depreciation	$322	$413	$(91)	$730	$831	$(101)
Depreciation and amortization	310	245	65	620	289	331
Pending merger costs	393	-	393	869	-	869
Acquisition transaction costs	-	1	(1)	-	37	(37)
Total operating expenses	$1,025	$659	$366	$2,219	$1,157	$1,062

General and administrative, excluding depreciation

For the three months ended June 30, 2019, general and administrative expenses, excluding depreciation, declined by approximately $0.1 million as compared to the three months ended June 30, 2018, primarily as a result of rent reductions.

For the six months ended June 30, 2019, general and administrative expenses, excluding depreciation, declined by approximately $0.1 million as the compared to the six months ended June 30, 2018, primarily as a result of rent reductions.

Depreciation and amortization

Depreciation and amortization expense for the three and six months ended June 30, 2019 increased by $0.1 million and $0.3 million respectively, compared to the same periods in 2018, related to the acquisition of the McClatchy Property.

Pending merger costs

Pending merger costs for the three and six months ended June 30, 2019 were approximately $0.4 million and $0.9 million respectively and consisted primarily of third-party professional fees. Such costs were incurred in connection with the Merger Agreement, entered into on March 22, 2019, and the transactions contemplated thereby. Accordingly, there were no such costs for the same periods ended June 30, 2018.

Acquisition and transaction costs

There were no acquisition and transaction related expenses for the three and six months ended June 30, 2019. Acquisition and transaction related expenses for the six months ended June 30, 2018 related to third party professional expenses associated with potential real estate investments.

Other income (expenses)

Other Income - net of expenses

For the three and six months ended June 30, 2019 and June 30, 2018, other income net of expenses declined by $0.1 to none.

Interest expense

For the three months ended June 30, 2019, interest expense remained approximately the same as compared to the three months ended June 30, 2018.

For the six months ended June 30, 2019, interest expense and revolving note fees increased $0.2 million, as a result of increased borrowings, as compared to the six months ended June 30, 2018.

Net loss

	(Dollars in thousands)
	Three Months Ended			Six Months Ended
	June 30,			June 30,
	2019	2018	$ Change	2019	2018	$ Change
Net loss	$(711)	$(347)	$(364)	$(1,589)	$(815)	$(774)

For the three months ended June 30, 2019, net loss was $0.7 million, compared to a net loss of $0.3 million, for the three months ended June 30, 2018. The $0.4 million change resulted from:

●

$0.1 million increase in rental income;

●

$0.1 million decrease in general and administrative costs, depreciation and amortization and interest expense, offset by;

●

$0.1 million increase in depreciation and amortization

●

$0.4 million increase in merger costs.

●

$0.1 million decrease in other income

For the six months ended June 30, 2019, net loss was $1.6 million, compared to net loss of $.0.8 million for the six months ended June 30, 2018. The $0.8 million additional net loss is primarily due to:

●

$0.6 million increase in rental income;

●

$0.1 million decrease in general and administrative costs, depreciation and amortization and interest expense, offset by;

●

$0.3 million increase in depreciation and amortization;

●

$0.2 million increase in interest expense;

●

$0.9 million increase in merger costs, and

●

$0.1 million decrease in other income

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 June 30, 2019 consist of cash and cash equivalents of approximately $0.2 million, and our ability to borrow on our Koala loan.

On August 7, 2015, we, as borrower, and Koala, as lender, an affiliate of Mr. Carl C. Icahn, the Company’s controlling stockholder ("Koala"), entered into a $10 million revolving loan facility (the “Prior Note") at a rate equal to the greater of the LIBOR rate plus 350 basis points, per annum, and 3.75%, per annum, plus a fee of 0.25% per annum on undrawn amounts. The Company sought and received the Prior Note to, in part, allay potential concerns regarding the Company’s ability to invest in and execute its transformation plan while retaining cash levels sufficient to fund its ongoing operations. There were no limitations on the use of proceeds under the Prior Note. As collateral for the Prior Note, we pledged and granted to Koala a lien on our limited liability company interest in Voltari Holding.

As of June 30, 2019, borrowings from this facility totaled $23.0 million due to borrowings in connection with our real estate acquisitions as well as for working capital requirements. There is $4.0 million remaining available for working capital purposes.

We expect that the acquisition of future commercial real properties, the cost of operations and working capital requirements will be our principal need for liquidity in the future. We also anticipate additional transaction costs in connection with the pending Merger. 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 our cash and cash equivalents on hand, together with cash flows generated by our rental income. We also have borrowings available under the Amended Note. 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.

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.

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 to meet 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 may establish 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) may be costly to obtain 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.

Cash flows

As of June 30, 2019, and December 31, 2018, we had cash, restricted cash and cash equivalents of $0.6 million and $1.0 million, respectively. The decrease of $0.4 million reflects:

Net cash used in operating activities

●

$1.6 million in net loss, offset by:

●

$1.0 million of non-cash items;

●

$0.1 million increase in prepaid expenses and other current assets and;

●

$0.1 million increase in accrued expenses and other liabilities.

Net cash from investing activities

For the six months ended June 30, 2019, there was no cash provided by or used in investing activities.

Net cash from financing activities

For the six months ended June 30, 2019, there was no cash provided by or used in financing activities.

Off-Balance Sheet Arrangements

As of June 30, 2019, and December 31, 2018, 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.

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, 2018.

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, 2018, which could materially affect our business, financial position and results of operations. Except for the risk factors noted below, 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, 2018.

The consummation of the transactions contemplated by the Merger Agreement is contingent upon the satisfaction of a number of conditions, including approval by our common stockholders, which may not be satisfied or completed on a timely basis, if at all. Failure to complete the transactions contemplated by the Merger Agreement could negatively impact our stock price, business, financial condition, results of operations or prospects.

The closing of the transactions contemplated by the Merger Agreement is subject to conditions to closing which are not wholly within the Company’s control, including, among other things, adoption of the Merger Agreement: (i) by the holders of a majority of the outstanding shares of Common Stock entitled to vote on the adoption of the Merger Agreement, and (ii) by the holders of a majority of the outstanding shares of Common Stock entitled to vote on the adoption of the Merger Agreement that are not beneficially owned by the Acquiring Parties or their affiliates. We cannot assure you that each of the conditions will be satisfied or waived in a timely manner, if at all, and the Merger may be delayed or not consummated. If the conditions are not satisfied or waived in a timely manner and the Merger is delayed or not consummated, we may lose some or all of the intended or perceived benefits of the Merger, which could cause our stock price to decline and harm our business.

We are also subject to additional risks in connection with the Merger, including, without limitation: (1) the parties’ ability to meet expectations regarding the timing and completion of the Merger; (2) the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement; (3) the effect of the announcement or pendency of the Merger on our business relationships, operating results, and business generally; (4) risks that the proposed Merger disrupts the Company’s current plans and operations; (5) the amount of the costs, fees, expenses and other charges related to the Merger; (6) the outcome of any legal proceedings that may be instituted against us, our directors or others relating to the transactions contemplated by the Merger Agreement, and potential costs associated therewith; (7) the restrictions imposed on our business and operations pursuant to the affirmative and negative covenants set forth in the Merger Agreement and the potential impact of such covenants on our business; (8) the risk that the Merger will divert management’s attention resulting in a potential disruption of our current business plan; and (9) potential difficulties in employee retention arising from the Merger.

We are subject to cybersecurity and other technological risks that may disrupt and harm our business.

Threats to information technology systems associated with cybersecurity risks and other technological risks and cyber incidents or attacks continue to grow. We depend on the accuracy, capacity and security of our information technology systems and those used by our third-party service providers. In addition, we may collect, process and retain sensitive and confidential information in the normal course of business, including personally identifiable information about our employees and other third parties. Despite the security measures we have in place and any additional measures we may implement in the future, our facilities, systems, and networks, and those of our third party service providers, are vulnerable to security breaches, computer viruses, lost or misplaced data, programming errors, human errors, employee misconduct, malicious attacks, acts of vandalism, malware, worms, hackers and other events or security issues, including physical and electronic break-ins, router disruption, sabotage or espionage, disruptions from unauthorized access and tampering (including through social engineering such as phishing attacks), impersonation of authorized users and coordinated denial-of-service attacks.

In the first half of 2019 we experienced a cybersecurity incident resulting from unauthorized access to our systems, which resulted in personally identifiable information of less than 30 individuals being exposed to an unauthorized third party. Although we do not believe this incident had a material adverse effect on our business or results of operations, this may not continue to be the case going forward. Following this incident, we have taken steps designed to improve the security of our computer systems in addition to offering credit protection to those affected. Despite these defensive measures, there can be no assurance that we are adequately protecting our information or that we will not suffer a similar attack in the future. It is also possible that our security controls over personal and other data may not prevent unauthorized access to, or destruction, loss, theft, misappropriation or release of personally identifiable or other proprietary, confidential, sensitive or valuable information of ours or others; this access could lead to potential unauthorized disclosure of confidential personal, company or third party information others could use to compete against us or for criminal, disruptive, destructive or other harmful purposes and outcomes.

In addition, hardware, software or applications we develop or obtain from third parties may contain defects in design or manufacture or other problems that could result in security breaches or disruptions. These events or any other disruption or compromise of our or our third party service providers’ information technology systems could negatively impact our business operations or result in the misappropriation, loss or other unauthorized disclosure of sensitive and confidential information, could damage our reputation, expose us to the risks of litigation and liability, disrupt our business or otherwise affect our results of operations, any of which could adversely affect our financial performance. Such events could damage our reputation, expose us to the risks of litigation and liability, disrupt our business or otherwise materially and adversely affect our results of operations. We maintain cyber breach and other insurance, but this insurance may not be sufficient to cover any losses we may experience from any cybersecurity incidents affecting our systems.

Item 5. Other Information

None.

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.

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: August 8, 2019	By:	/s/ Kenneth Goldmann
		Kenneth Goldmann
		Principal Executive Officer (Principal Executive officer)



Date: August 8, 2019	By:	/s/ Peter Kaouris
		Peter Kaouris
		Chief Accounting Officer (Principal Financial officer)

Voltari Corp 10-Q