Business Context and Reporting Period
This Form 8-K is filed by New York City REIT, Inc. (not American Strategic Investment Co.) on November 11, 2022. The filing addresses a material restatement of previously issued unaudited consolidated financial statements for the three and six-month periods ended June 30, 2022, and revisions to the period ended March 31, 2022.
Key Financial Metrics and Material Changes
The filing discloses errors related to unrecorded expenses, primarily associated with a contested proxy solicitation for the 2022 annual meeting and other administrative costs. Consequently, the following items were understated in prior filings:
- Periods Ended June 30, 2022: Property operating expenses, general and administrative expenses, total operating expenses, operating loss, net loss, comprehensive loss, accounts payable, accrued expenses, and other liabilities were understated by $1.7 million (three months) and $2.3 million (six months).
- Period Ended March 31, 2022: Similar expense and liability categories were understated by $0.6 million.
While the Q1 2022 errors were deemed immaterial individually, they are being revised in the restated Q2 2022 10-Q to correctly state the six-month net loss and equity.
Management Commentary, Risks, and Contingencies
Management and the Audit Committee, in consultation with PricewaterhouseCoopers LLP (PwC), concluded that the previously issued Q2 2022 10-Q should no longer be relied upon. An amendment to the Q2 2022 10-Q will be filed to restate the financial statements.
Internal Control Weakness: The company identified a material weakness in its internal control over financial reporting. This weakness stems from a lack of effectively designed controls to identify corporate expenses associated with non-operating or non-typical events, such as the contested proxy solicitation, including costs from new vendors or new services from existing vendors.
Investor Verification Checklist
- Verify the filing of the amended Q2 2022 10-Q to review the restated financial figures.
- Confirm the specific nature and total cost of the contested proxy solicitation expenses.
- Review the company's remediation plan for the identified material weakness in internal controls.
- Monitor for any further disclosures regarding the accuracy of other financial periods or potential regulatory inquiries.