Dear Common Stockholder:

We are writing to notify you as holders of common stock (the “Common Stock”) of Medalist Diversified REIT, Inc. (the “Company”) that the Company has signed a definitive agreement to issue and sell convertible debentures (the “Convertible Debentures”) to YA II PN, LTD. (the “Purchaser”). In connection with the sale of the Convertible Debentures, the Company may issue to the Purchaser a maximum of up to 8,097,166 shares of the Company’s Common Stock upon the Purchaser’s conversion of the Convertible Debentures.

The Company is soliciting your consent to issue a maximum of 8,097,166 shares of the Company’s Common Stock to the Purchaser upon its potential conversion of the Convertible Debentures. The board of directors of the Company (the “Board”) believes the sale of the Convertible Debentures to the Purchaser and the potential issuance of shares of Common Stock upon the conversion of the Convertible Debentures is in the best interests of the Company and its stockholders for the reasons outlined in the enclosed Consent Solicitation. The Board has approved the sale of the Convertible Debentures, and the Company is seeking your authorization for the issuance of Common Stock to the Purchaser upon its potential conversion of the convertible debt as required under the rules of the Nasdaq Capital Market.

Please carefully review the enclosed information, including the Consent Solicitation, and complete, sign and return the enclosed Ballot Card according to the instructions set forth therein prior to December 4, 2020.

If you have questions at any time regarding the Convertible Debentures and the terms thereof or the issuance of the Common Stock, please contact Thomas E. Messier, the Company’s Chairman and Chief Executive Officer, by phone at (804) 344-4435 or email at This email address is being protected from spambots. You need JavaScript enabled to view it.. Thank you for your prompt attention to this information.

Kind regards,

Thomas E. Messier

Chairman and Chief Executive Officer

Medalist Diversified REIT, Inc.



MEDALIST DIVERSIFIED REIT, INC.

CONSENT SOLICITATION

This consent solicitation (this “Consent Solicitation”) is being mailed on or about November 19, 2020 to the holders (the “Common Stockholders”) of common stock (the “Common Stock”) of Medalist Diversified REIT, Inc. (the “Company” or “our”) in accordance with the Company’s Articles of Incorporation, as supplemented (the “Charter”).

This Consent Solicitation is being provided to our Common Stockholders to approve the Company’s issuance of Common Stock that may amount to over twenty percent (20%) of the current outstanding Common Stock. This potential issuance requires approval by Common Stockholders holding a majority of the outstanding shares of the Common Stock under the rules of the Nasdaq Capital Market. This Consent Solicitation includes a Ballot Card on which Common Stockholders are requested to record their votes and which must be returned to the Company according to the instructions set forth on the Ballot Card by no later than December 4, 2020.

Background

The Company entered into a Securities Purchase Agreement, dated as of October 27, 2020 (the “Securities Purchase Agreement”), with YA II PN, LTD. (the “Purchaser”). Pursuant to the Securities Purchase Agreement, the Company issued and sold a Convertible Debenture (the “Initial Convertible Debenture”) to the Purchaser in the aggregate principal amount of $1,500,000.
Pursuant to the Securities Purchase Agreement, the Purchaser has agreed to purchase an additional $2,000,000 Convertible Debenture (the “Second Convertible Debenture”) and $1,500,000 Convertible Debenture (the “Third Convertible Debenture”; and together with the Initial Convertible Debenture and Second Convertible Debenture, the “Convertible Debentures”) from the Company upon the same terms as the Initial Convertible Debenture (subject to there being no event of default under the outstanding Convertible Debentures or other customary closing conditions). The Convertible Debentures shall mature one year from the date of their respective issuances and bear interest at a rate of 5% per annum. The Second Convertible Debenture shall be purchased by the Purchaser upon the Company’s filing of a registration statement registering the shares of its Common Stock issuable upon the conversion of the Convertible Debentures (the “Conversion Shares”), and the Third Convertible Debenture shall be purchased by the Purchaser when such registration statement is declared effective by the SEC.

Pursuant to Nasdaq Rule 5635, the Company is required to obtain the majority approval of its Common Stockholders to issue the Conversion Shares which may amount to greater than twenty percent (20%) or more of the current outstanding Common Stock or twenty percent (20%) or more of the voting power of the current outstanding Common Stock. Assuming the Conversion Shares are issued at a conversion price equal to the Floor Price (defined below), the number of Conversion Shares is expected to be 8,097,166, which number is greater than twenty percent (20%) of the Company’s current outstanding Common Stock.

Convertible Debt Terms

Pursuant to the Convertible Debentures, subject to certain limitations and as long as the Convertible Debentures remain outstanding, the Purchaser has the right at any time to convert all or a portion of the Convertible Debentures into fully paid and nonassessable shares of Common Stock at a conversion price which shall be the lower of (i) $2.47 per share (the “Fixed Conversion Price”), or (ii) 88% of the lowest daily volume weighted average trading price of the Company’s Common Stock during the ten trading days prior to the conversion; provided that, the Purchaser may not convert for a price lower than $0.6175 per share (the “Floor Price”). If the Purchaser were to convert all of the debt outstanding under the Convertible Dentures at the Fixed Conversion Price, then the Purchaser would receive approximately 2,024,292 shares of Common Stock. If the Purchaser were to convert all of the debt outstanding under the Convertible Dentures at the Floor Price, then the Purchaser would receive approximately 8,097,166 shares of Common Stock.
The Purchaser, together with any affiliate, will be limited from beneficially owning more than 4.99%, or up to 9.8% at the option of the Purchaser, of the number of shares of Common Stock outstanding immediately after giving effect to any conversion.

Summary

The Board has carefully reviewed the terms of the sale of the Convertible Debentures, and it and the Company’s management believe the sale of the Convertible Debentures will support the growth of the Company and is in the best interests of its Common Stockholders. In order to move forward with the sale of the Second and Third Convertible Debentures, the Company is required to gain the consent of its Common Stockholders for the potential issuance of the Conversion Shares as required by the rules of the Nasdaq Capital Market.
In order to further assist your review of this Consent Solicitation, you may access copies of the Securities Purchase Agreement and Form of Secured Convertible Debenture at the SEC’s EDGAR website at the following address:
https://www.sec.gov/Archives/edgar/data/1654595/000110465920120514/0001104659-20-120514-index.htm.

Proposal

Pursuant to Nasdaq Rule 5635(e)(4), the Company must obtain consent of the holders of a majority of the outstanding shares of the Company’s Common Stock if the Company intends to issue common stock (or securities convertible into or exercisable for common stock) equal to twenty percent (20%) or more of the current outstanding Common Stock or twenty percent (20%) or more of the voting power of the current outstanding Common Stock.

In order to sell the Second and Third Convertible Debentures, the Company seeks the consent of at least a majority of its Common Stockholders to authorize and issue up to a maximum of 8,097,166 shares of Common Stock, based on a conversion price equal to the Floor Price . The Board has recommended that holders of Common Stock vote “FOR” the issuance of the Common Stock to the Purchaser upon its conversion of the Convertible Debentures.

This Consent Solicitation provides information regarding the Company and the sale of the Convertible Debentures as of November 19, 2020. COMMON STOCKHOLDERS are urged to carefully review the information contained in this CONSENT SOLICITATION prior to deciding how to vote.

Voting Procedures

Owners of record of shares of our Common Stock at the close of business on November 13, 2020, the record date for this Consent Solicitation as set by our Board, are entitled to vote. Accompanying this Consent Solicitation is a Ballot Card for use by Common Stockholders to cast their votes. Common Stockholders are urged to complete, sign, and return the accompanying Ballot Card as promptly as possible either online or by mail, fax or email as described on the Ballot Card.
If you hold your shares through a broker, bank or other nominee, you are considered the beneficial owner of shares held in street name and your broker or nominee is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker on how to vote your shares.

To approve the issuance of the Common Stock as contemplated in this Consent Solicitation, the affirmative vote of Common Stockholders holding a majority of the outstanding shares of Common Stock must be cast in favor of the issuance. The Company is requesting that all Ballot Cards be properly completed, signed and returned according to the directions set forth on the Ballot Card prior to 5:00 P.M. Eastern Time on December 4, 2020 (the “Voting Deadline”). If the Company receives multiple Ballot Cards from a Common Stockholder, the Company will be entitled to use the Ballot Card with the latest date of postmark or receipt by the Company.

Any ballot card not received by the Company by the Voting Deadline will not be counted.

Other Matters

No person is authorized by the Company to give any information or make any representations regarding the sale of the Convertible Debentures by the Company or this Consent Solicitation other than as set forth in this Consent Solicitation. Any such other information or representations must not be relied upon as having been authorized by the Company.
Statements made in this Consent Solicitation are made as of the date hereof or such earlier date as may be specified herein. The delivery of this Consent Solicitation shall not create any implication that there has not been a change in any information contained herein since the date hereof.
Common Stockholders should not construe the contents of this Consent Solicitation or any prior or subsequent communications from or with the Company or any professional connected with the Company as legal, tax or investment advice. Common Stockholders should consult with their own legal counsel, accountant or investment advisor concerning the matters discussed herein. In addition, this Consent Solicitation shall not constitute an offer for Common Stock.