FORM10-Q
| ☒ | Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934 | ||||
March 31, 2021
| ☐ | Transition Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934 | ||||
| Delaware | 20-1164345 | |||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||
1886
230-1985
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
| Class A common stock, par value $0.01 per share | CHCI | NASDAQ Capital Market | ||||||||||||
| Large accelerated filer | ☐ | Accelerated filer | ☐ | ||||||||||||
| Non-accelerated filer | Smaller reporting company | ☒ | |||||||||||||
| Emerging growth company | ☐ | ||||||||||||||
| Page | |||||||||||||
Financial Statements ASSETS Cash and cash equivalents Restricted cash Trade receivables Real estate inventories Fixed assets, net Goodwill Other assets, net TOTAL ASSETS LIABILITIES AND STOCKHOLDERS’ EQUITY Accounts payable and accrued liabilities Notes payable - secured by real estate inventories, net of deferred financing charges Notes payable - due to affiliates, unsecured, net of discount and deferred financing charges Notes payable - unsecured, net of deferred financing charges Income taxes payable TOTAL LIABILITIES Commitments and contingencies (Note 8) STOCKHOLDERS’ EQUITY (DEFICIT) Series C preferred stock $0.01 par value, 3,000,000 shares authorized, 579,158 and 0 shares issued and outstanding liquidation preference of $2,896 and $0 at September 30, 2017 and December 31, 2016, respectively Series B preferred stock $0.01 par value, 3,000,000 shares authorized, 0 and 841,848 shares issued and outstanding liquidation preference of $0 and $4,209 at September 30, 2017 and December 31, 2016, respectively Class A common stock, $0.01 par value, 11,038,071 shares authorized, 3,347,789 and 3,035,922 issued, and outstanding, respectively Class B common stock, $0.01 par value, 220,250 and 390,500 shares authorized, issued, and outstanding, respectively Additionalpaid-in capital Treasury stock, at cost (85,570 shares Class A common stock) Accumulated deficit TOTAL COMSTOCK HOLDING COMPANIES, INC. DEFICIT Non-controlling interests TOTAL EQUITY TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY Revenues Revenue—homebuilding Revenue—other Total revenue Expenses Cost of sales—homebuilding Cost of sales—other Impairment charges and recovery, net Sales and marketing General and administrative Interest and real estate tax expense Operating loss Other income, net Loss before income tax expense Income tax expense Net loss Net income (loss) attributable tonon-controlling interests Net loss attributable to Comstock Holding Companies, Inc. Paid-in-kind dividends on Series B Preferred Stock Extinguishment of Series B Preferred Stock Net loss attributable to common stockholders Basic net loss per share Diluted net loss per share Basic weighted average shares outstanding Diluted weighted average shares outstanding CHANGES IN STOCKHOLDERS’ EQUITY Cash flows from operating activities: Net loss Adjustment to reconcile net loss to net cash provided by operating activities Amortization of loan discount, loan commitment and deferred financing fees Deferred income tax benefit Depreciation expense Earnings from unconsolidated joint venture, net of distributions Stock compensation Impairment charges Changes in operating assets and liabilities: Purchaser escrow deposits Trade receivables Real estate inventories Other assets Accrued interest Accounts payable and accrued liabilities Income taxes payable Net cash provided by (used in) operating activities Cash flows from investing activities: Business acquisition, net of cash acquired Purchase of fixed assets Principal received on note receivable Collateral for letters of credit Net cash used in investing activities Cash flows from financing activities: Proceeds from notes payable Payments on notes payable Loan financing costs Distributions tonon-controlling interests Contributions fromnon-controlling interests Repurchase of Series C preferred stock Taxes paid related to net share settlement of equity awards Net cash used in financing activities Net decrease in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period Supplemental cash flow information: Interest paid, net of interest capitalized Supplemental disclosure fornon-cash activity: Business acquisition notes payable Seller’s note payable Accrued liability settled through issuance of stock Increase in Series B preferred stock value in connection with dividends paidin-kind Conversion of Class B common stock to Class A common stock Extinguishment of Series B Preferred Stock thousands) (unaudited) 2020. . Economic Security Act). Material estimates are utilized in the valuation of deferred tax related disclosures. Land and land development costs Cost of construction (including capitalized interest and real estate taxes) Level 3 of the fair value hierarchy. As of March 31, 2021 and December 31, 2020, the Company had equity method investments in real estate ventures at fair value of $4.7 million and $6.3 million, respectively. The Balance at beginning of period Additions Releases and/or charges incurred Balance at end of period Interest incurred and capitalized Real estate taxes incurred and capitalized Total interest and real estate taxes incurred and capitalized Interest expensed as a component of cost of sales Real estate taxes expensed as a component of cost of sales Interest and real estate taxes expensed as a component of cost of sales Fees earned are generally based upon employee time spent as well as a cost-plus arrangement for subcontractors used. Generally, environmental remediation services represent a series of performance obligations delivered over time and revenue is recognized over time. Three Months Ended September 30, 2017 Gross revenue Gross profit (loss) Net loss Depreciation and amortization Interest expense Total assets Three Months Ended September 30, 2016 Gross revenue Gross profit (loss) Net (loss) income Depreciation and amortization Interest expense Total assets Nine Months Ended September 30, 2017 Gross revenue Gross profit (loss) Net loss Depreciation and amortization Interest expense Total assets Nine Months Ended September 30, 2016 Gross revenue Gross profit (loss) Net (loss) income Depreciation and amortization Interest expense Total assets accrued interest balance of $7.7 million was exchanged for 1,482,300 shares of the Company’s Series C Non-Convertible Preferred Stock, par value $0.01 per share and a stated liquidation value of $5.00 per share (the “Series C Preferred Stock”), issued by the Company to CDS. The Company year ended December 31, 2020. The Company recognized PPP funding as a contra-expense during the three months ended June 30, 2020, when qualified expenses were incurred. The Lender received notice that the PPP Loan was fully forgiven by the SBA in April 2021. December 31, 2022 at 0% interest. 2017 2018 Total Statement of Operations: Total net revenue Total expenses Net income Comstock Holding Companies, Inc. share of net income Construction revolvers Development and acquisition notes Mezzanine notes Line of credit Secured-other Total secured notes Deferred financing charges, net of amortization Net secured notes Unsecured financing, net of unamortized deferred financing charges of $72 and $121 Notes payable, unsecured, net of $1.9 million and $2.1 million discount and unamortized deferred financing charges, respectively Total notes payable 2017 2018 2019 2020 2021 and thereafter Total The fair value of the fixed and floating rate debt was estimated using a discounted cash flow analysis on the blended borrower rates currently available to the Company for loans with similar terms. The following table summarizes the carrying amount and the corresponding fair value of fixed and floating rate Carrying amount Fair value debt. to employees. Real estate inventories - Assets General and administrative - Expenses options and restricted stock awards. ASSETS Net Working Capital Net Fixed Assets Intangible Assets(1) Goodwill(2) Total Purchase Price ITEMFINANCIAL STATEMENTSAmounts in thousands, except share and per share data) September 30,
2017 December 31,
2016 (unaudited) $ 2,086 $ 5,761 1,014 1,238 1,332 613 48,501 49,842 329 255 1,702 — 1,049 2,112 $ 56,013 $ 59,821 $ 8,828 $ 7,721 27,572 26,927 15,078 15,866 1,396 911 29 19 52,903 51,444 $ 442 $ — — 1,280 33 30 2 4 177,374 176,251 (2,662 ) (2,662 ) (186,545 ) (184,778 ) (11,356 ) (9,875 ) 14,466 18,252 3,110 8,377 $ 56,013 $ 59,821 March 31,
2021December 31,
2020ASSETS Current assets: Cash and cash equivalents $ 6,657 $ 7,032 Trade receivables, net 1,437 1,482 Trade receivables - related parties 4,922 3,598 Prepaid and other assets, net 327 242 Total current assets 13,343 12,354 Equity method investments at fair value 4,665 6,307 Fixed assets, net 242 266 Goodwill 1,702 1,702 Operating lease right-of-use assets 7,749 7,914 Intangible assets, net 19 36 TOTAL ASSETS $ 27,720 $ 28,579 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accrued personnel costs $ 961 $ 2,442 Accounts payable 692 523 Accrued liabilities 1,221 964 Short term operating lease liabilities 581 569 Short term notes payable 96 5 Total current liabilities 3,551 4,503 Long term notes payable - due to affiliates 5,500 5,500 Long term operating lease liabilities, net of current portion 7,211 7,361 TOTAL LIABILITIES $ 16,262 $ 17,364 Commitments and contingencies 0 0 STOCKHOLDERS’ EQUITY Series C preferred stock $0.01 par value, 20,000,000 shares authorized, 3,440,690 issued and outstanding and liquidation preference of $17,203 at March 31, 2021 and December 31, 2020 $ 6,765 $ 6,765 Class A common stock, $0.01 par value, 59,779,750 shares authorized, 8,057,989 and 7,953,729 issued, and 7,972,419 and 7,868,159 outstanding at March 31, 2021 and December 31, 2020, respectively 81 79 Class B common stock, $0.01 par value, 220,250 shares authorized, issued and outstanding at March 31, 2021 and December 31, 2020 2 2 Additional paid-in capital 200,141 200,147 Treasury stock, at cost (85,570 shares Class A common stock) (2,662) (2,662) Accumulated deficit (192,869) (193,116) TOTAL COMSTOCK HOLDING COMPANIES, INC. EQUITY $ 11,458 $ 11,215 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 27,720 $ 28,579 Amounts in thousands, except per share data) Three Months Ended
September 30, Nine Months Ended
September 30, 2017 2016 2017 2016 $ 13,076 $ 12,880 $ 33,375 $ 32,102 739 223 1,228 685 13,815 13,103 34,603 32,787 12,482 11,985 30,804 29,815 846 85 1,366 329 — 91 — 91 401 427 1,122 1,313 1,263 1,236 3,735 4,151 16 133 16 655 (1,193 ) (854 ) (2,440 ) (3,567 ) 21 98 69 119 (1,172 ) (756 ) (2,371 ) (3,448 ) (29 ) — (29 ) (57 ) (1,201 ) (756 ) (2,400 ) (3,505 ) 309 290 (630 ) 1,174 (1,510 ) (1,046 ) (1,770 ) (4,679 ) — 87 78 259 — — (1,011 ) — $ (1,510 ) $ (1,133 ) $ (837 ) $ (4,938 ) $ (0.45 ) $ (0.34 ) $ (0.25 ) $ (1.49 ) $ (0.45 ) $ (0.34 ) $ (0.25 ) $ (1.49 ) 3,374 3,326 3,299 3,317 3,374 3,326 3,299 3,317 Three Months Ended March 31, 2021 2020 Revenues Asset management $ 6,840 $ 5,435 Real estate services 1,477 1,531 Total revenue 8,317 6,966 Operating expenses Direct costs - asset management 6,078 4,632 Direct costs - real estate services 1,087 1,216 General and administrative 694 727 Sales and marketing 158 200 Operating income 300 191 Interest expense (58) (164) Other (loss) income, net (11) 9 Income before income tax expense 231 36 Income tax expense (2) (1) Gain (loss) on equity method investments carried at fair value 18 (47) Net income (loss) $ 247 $ (12) Income (loss) per share Basic net income (loss) per share $ 0.03 $ 0 Diluted net income (loss) per share $ 0.03 $ 0 Basic weighted average shares outstanding 8,166 8,003 Diluted weighted average shares outstanding 8,977 8,003 CASH FLOWSAmounts in thousands, except per share data) Nine Months Ended September 30, 2017 2016 $ (2,400 ) $ (3,505 ) 876 832 — 7 123 144 15 25 238 56 — 813 405 42 (425 ) (182 ) 1,497 (9,953 ) 796 527 793 391 1,046 4,560 10 21 2,974 (6,222 ) (582 ) — (17 ) (32 ) 27 26 (181 ) (32 ) (753 ) (38 ) 19,936 24,157 (22,442 ) (28,390 ) (145 ) (70 ) (3,156 ) (4,413 ) — 5,000 (89 ) — — (8 ) (5,896 ) (3,724 ) (3,675 ) (9,984 ) 5,761 12,448 $ 2,086 $ 2,464 $ (686 ) $ (44 ) $ 1,710 $ — $ 115 $ — $ 63 $ 43 $ 24 $ 78 $ 2 $ — $ 1,011 $ — Class A Class B Total Shares Amount Shares Amount Shares Amount Balance at December 31, 2020 3,441 $ 6,765 7,953 $ 79 220 $ 2 $ 200,147 $ (2,662) $ (193,116) $ 11,215 Stock compensation and issuances — — 143 2 — — 182 — — 184 Accrued liability settled through issuance of stock — — 1 — — — 7 — — 7 Shares withheld related to net share settlement of restricted stock awards — — (39) — — — (195) — — (195) Net income — — — — — — — — 247 247 Balance at March 31, 2021 3,441 $ 6,765 8,058 $ 81 220 $ 2 $ 200,141 $ (2,662) $ (192,869) $ 11,458 Class A Class B Total Shares Amount Shares Amount Shares Amount Balance at December 31, 2019 3,441 $ 6,765 7,850 $ 78 220 $ 2 $ 199,372 $ (2,662) $ (195,198) $ 8,357 Stock compensation and issuances — — 52 1 — — 212 — — 213 Accrued liability settled through issuance of stock — — 11 — — — 20 — — 20 Shares withheld related to net share settlement of restricted stock awards — — (16) — — — (31) — — (31) Net loss — — — — — — — — (12) (12) Balance at March 31, 2020 3,441 $ 6,765 7,897 $ 79 220 $ 2 $ 199,573 $ (2,662) $ (195,210) $ 8,547 AND SUBSIDIARIESThree Months Ended March 31, 2021 2020 Cash flows from operating activities: Net income (loss) $ 247 $ (12) Adjustment to reconcile net income (loss) to net cash used in operating activities Amortization of loan discount, loan commitment and deferred financing fees 0 24 Amortization and depreciation expense 49 65 Amortization of right-of-use asset 165 0 Earnings from unconsolidated joint venture, net of distributions 12 105 Stock compensation 184 213 Change in fair value of equity method investment (18) 47 Changes in operating assets and liabilities: Trade receivables - related parties (1,324) 308 Trade receivables 45 398 Accrued personnel costs (1,481) (2,458) Prepaid and other assets (97) (239) Accrued liabilities 264 478 Accounts payable 169 (845) Lease liabilities (138) 8 Net cash used in operating activities (1,923) $ (1,908) Cash flows from investing activities: Purchase of fixed assets (8) (9) Distributions from equity method investments carried at fair value 1,660 144 Net cash provided by investing activities 1,652 135 Cash flows from financing activities: Proceeds from notes payable 120 5,554 Payments on notes payable (29) (81) Taxes paid related to net share settlement of equity awards (195) (31) Net cash (used in) provided by financing activities (104) 5,442 Net (decrease) increase in cash and cash equivalents (375) 3,669 Cash and cash equivalents, beginning of period 7,032 3,511 Cash and cash equivalents, end of period $ 6,657 $ 7,180 Supplemental cash flow information: Interest paid $ 58 $ 143 Supplemental disclosure for non-cash investing and financing activities: Accrued liability settled through issuance of stock $ 7 $ 20 (Amounts are in thousands, except per share data, number of units, or as otherwise noted)S-X. S-X and other applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Such financial statements do not include all of the disclosures required by GAAP for complete financial statements. In our opinion, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation have been included in the accompanying condensed consolidated financial statements. The Company has evaluated subsequent events through the date these consolidated financial statements were issued and has included all necessary adjustments and disclosures. For further information and a discussion of our significant accounting policies, other than discussed below, refer to our audited consolidated financial statements in our Annual Report on Form10-K for the fiscal year ended December 31, 2016.real estate developmentasset management and construction services company primarily focused in the Washington, D.C. metropolitan area (Washington, D.C.Metropolitan Statistical Area. In February 2021, the Company amended the entity names for several subsidiaries as part of operational efficiency enhancements initiated in the first quarter of 2021. The entity names were changed for the following Company subsidiaries: (a) CDS Asset Management, LC is now CHCI Asset Management, LC, (b) Comstock Commercial Management, LC is now CHCI Commercial Management, LC, (c) Comstock Residential Management, LC is now CHCI Residential Management, LC, (d) CDS Capital Management, L.C. is now CHCI Capital Management, LC and (e) Comstock Real Estate Services, LC is now CHCI Real Estate Services, L.C.Northern VirginiaCHCI Residential Management, LC, CHCI Commercial Management, LC, Park X Management, LC and Maryland suburbs of Washington, D.C.Comstock Environmental Services, LLC (“CES”). We have substantial experience with building a diverse range of products, including multi-family homes, single-family homes, townhouses,mid-rise condominiums, high-rise multi-family condominiums andmixed-use (residential and commercial) developments. References in these consolidated financial statementsConsolidated Financial Statements to “Comstock,” “Company,”“Company”, “we,” “our” and “us” refer to Comstock Holding Companies, Inc. together in each case with our subsidiaries and any predecessor entities unless the context suggests otherwise. and has no public trading history prior to December 17, 2004.these consolidated financial statements,this quarterly report on Form 10-Q, amounts are in thousands, except per share data, number of units,stock options, number of stock awards, or as otherwise noted.and nine months ended September 30, 2017March 31, 2021 and 2016,2020, comprehensive income (loss) equaled net income (loss); therefore, a separate statement of comprehensive income (loss) is not included in the accompanying consolidated financial statements.LiquidityCapital ResourcesWe require capital to operate, to post depositsadministrative' expenses on new potential acquisitions, to purchase and develop land, to construct homes, to fund related carrying costs and overhead and to fund various advertising and marketing programs to generate sales. These expenditures include payroll, community engineering, entitlement, architecture, advertising, utilities and interest as well as the construction costsconsolidated statement of our homes. Our sources of capital include, and we believe will continue to include, private equity and debt placements (which has included significant participation from Company insiders), funds derived from various secured and unsecured borrowings to finance acquisition, development and construction on acquired land, cash flow from operations which includes the sale and delivery of constructed homes, finished and raw building lots and the potential sale of public debt and equity securities. The Company is involved in ongoing discussions with lenders and equity sources in an effortaccompanying notes to provide additional growth capital to fund various new business opportunities. See Note 13 in the accompanyingcondensed consolidated financial statements for more detailsstatements. The reclassification had no effect on our credit facilitiesthe previously reported totals (e.g. operating income, income before income tax, and Note 11 in the accompanying consolidated financial statements for details on private placement offerings.We have outstanding borrowings with various financial institutions and other lenders that have been used to finance the acquisition, development and construction of real estate projects. The Company has generally financed its development and construction activities on a single or multiple project basis so it is not uncommon for each of our projects or collection of our projects to have a separate credit facility. Accordingly,net income).typically haswas notified by the Lender that the Lender had numerous credit facilities and lenders.As of September 30, 2017, $22.7 millionreceived payment in full of the Company’s outstanding credit facilitiesPPP Loan from the United States government, and project related loans mature at various periods through the end of 2017. We are in active discussions with our lenders seeking long term extensionsCompany's PPP Loan had been forgiven (See Note 7 – Coronavirus Aid and modifications to these loans. These debt instruments impose certain restrictions on our operations, including speculative unit construction limitations, curtailment obligations,Relief and financial covenant compliance. If we fail to comply with any of these restrictions, an event of default could occur. Additionally, events of default could occur if we fail to make required debt service payments or if we fail to come to agreement on an extension on a certain facility prior to a given loan’s maturity date. Any event of default would likely render the obligations under these instruments due and payable as of that event. Any such event of default would allow certain of our lenders to exercise cross default provisions in our loan agreements with them, such that all debt with that institution could be called into default. We are anticipating that with the successful resolution of the debt extension discussions with our lenders, capital raises from our private placements, current available cash on hand, and additional cash from settlement proceeds at existing and under development communities, the Company will have sufficient financial resources to sustain its operations through the next 12 months, though no assurances can be made that the Company will be successful in its efforts. The Company will also continue to focus on its cost structure in an effort to conserve cash and manage expenses. Such actions may include cost reductions and/or deferral arrangements with respect to current operating expenses.Recent DevelopmentsOn July 17, 2017, JK Environmental Services, LLC, (“JK”) a newly formed, wholly owned entity by CDS Capital Management, L.C., a subsidiary of Comstock, purchased all of the business assets of Monridge Environmental, LLC for $2.3 million. JK has its principal office located in Conshohocken, Pennsylvania, and operates in Maryland, Pennsylvania, New Jersey, and Delaware. JK operates as an environmental services company, providing consulting, remediation, and other environmental services. Refer to Note 16 for further information regarding this transaction.judgementsjudgments on an ongoing basis. Actual results may differ from those estimates under different assumptions or conditions.IssuedAdopted Accounting StandardsMay 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update(“ASU”) 2014-09, “Revenue from Contracts with Customers”(“ASU 2014-09”). ASU 2014-09 provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance.ASU No. 2014-09 will require an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015,December 2019, the FASB issuedASU 2015-14,2019-12, Simplifying the Accounting for Income Taxes, which deferred is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the effective date ofgeneral principles in ASC 740, Income Tax and also clarifies and amends existing guidance to improve consistent application. ASU 2014-09 for one year, which would make the guidance2019-12 will be effective for the Company’s first fiscal year beginning after December 15, 2017. Additionally, the FASB has also decided to permitpublic business entities to early adopt the standard, which allows for either full retrospective or modified retrospective methods of adoption, forannual reporting periods beginning after December 15, 2016.2020, and interim periods within those periods. The Company adopted ASU 2019-12 as of January 1, 2021. The adoption did not have a material impact on our condensed consolidated financial statements.completed its preliminary evaluationbeen incurred. ASU 2016-13 requires companies to use a methodology that reflects current expected credit losses (“CECL”) and requires consideration of a broad range of reasonable and supportable information to record and report credit loss estimates, even when the CECL is remote. Companies will be required to record the allowance for credit losses and deduct that amount from the basis of the impact ofasset. The guidance is effective for the Company for financial statement periods beginning after December 15, 2022, although early adoption of ASU 2014-09 for its homebuilding revenue, and believe that there will likely be no material impact to its consolidated financial statements, except enhanced disclosure regarding revenue recognition, including disclosures of revenue streams, performance obligations, variable consideration and the related judgments and estimates necessary to apply the new standard.is permitted. The Company is still in the process ofcurrently evaluating the impact of the adoption of the standard as it pertains to the revenues from the newly formed entity, JK. The Company continues to evaluate the new standard against its existing accounting policies, including the timing of revenue recognition, and its contracts with customers to determine the effect thethis guidance will have on its consolidated financial statements and what changes to systems and controls may be warranted. The Company expects to adopt the modified retrospective method.In February 2016, the FASB issuedASU 2016-02, “Leases”. The core principle of the standard is that a lessee should recognize the assets and liabilities that arise from leases. A lessee should recognize in its statement of financial position a liability to make lease payments (the lease liability) anda right-of-use asset representing its right to use the underlying asset for the lease term.ASU 2016-02 is effective for public companies for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact this new standard will have on our consolidated financial statements.In January 2017, the FASB issued ASU2017-01, “Business Combinations (Topic 805), Clarifying the Definition of a Business”, which provides a more robust framework to use in determining when a set of assets and activities (collectively referred to as a “set”) is a business. The standard requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This standard reduces the number of transactions that need to be further evaluated. ASU2017-01 is effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those periods. The amendments in ASU2017-01 should be applied prospectively on or after the effective date. We do not expect the adoption of ASU2017-01 to have a material effect on our consolidated financial statements.In May 2017, the FASB issued ASU2017-09, “Compensation—Stock Compensation (Topic 718)—Scope of Modification Accounting.” ASU2017-09 reduces both diversity in practice and cost and complexity when changing the terms or conditions of a share-based payment award. The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. ASU2017-09 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period for which financial statements have not yet been issued. The amendments in this update should be applied prospectively to an award modified on or after the adoption date. We do not expect the adoption of ASU2017-09 to have a material effect on our consolidated financial statements.and nine months ended September 30, 2017March 31, 2021 and deemed they were either not applicable to us andor are not anticipated to have a material effect on our consolidated financial statements.2. REAL ESTATE INVENTORIESAfter impairments Other standards previously issued and write-offs, real estate held for development and sale consists of the following: September 30,
2017 December 31,
2016 $ 27,810 $ 33,355 20,691 16,487 $ 48,501 $ 49,842 3. WARRANTY RESERVEWarranty reserves for units settled are established to cover potential costs for materials and labor with regard to warranty-type claims expected to arise during the typicalone-year warranty period providedadopted by the Company or withinhave been disclosed in previous filings.two-year statutorily mandated structural warranty period for condominiums. Because date of investment, the Company typically subcontracts its homebuilding work, subcontractors are required to providereports the equity method investments in real estate ventures at fair value. For such investments, the Company with an indemnityincreases or decreases the investment each reporting period by the change in the fair value and a certificatethe Company reports the fair value adjustments in the Consolidated Statement of insurance prior to receiving payments for their work. Claims relating to workmanship and materials are generallyOperations in the primary responsibility‘Gain (loss) on equity method investments carried at fair value’ line item. Changes in fair value of the subcontractorsCompany's investment in Investors X (defined below) are impacted by distributions as the fair value is based on finite cash flows from the wind-down of that entity.product manufacturers. The warranty reserve is established at the time of closing, and is calculated based upon historical warranty cost experience and current business factors. This reserve is an estimate and actual warranty costs could vary from these estimates. Variables used in the calculationrealization events of the reserve,underlying asset. Expected future cash flows includes contractually fixed revenues and expenses as well as estimates for future revenues and expenses where contracts do not currently exist. These estimates are based on prior experience as well as comparable, third party data.adequacyfair value of the reserve based onCompany’s investment in Investors X is $3.5 million and $5.1 million, respectively. The Company received distributions of $1.7 million during the numberthree months ended March 31, 2021 and recognized 0 gain or loss in fair value.homes still under warranty,a stabilized commercial office building located at 3101 Wilson Boulevard in the Clarendon area of Arlington County, Virginia (the “Hartford”). The Company owns a 2.5% equity interest in the asset at a cost of approximately $1.2 million. The Company has elected to account for the equity method investment in the Hartford at fair value. Fair value is determined using an income approach and sales comparable approach models. As of March 31, 2021 and December 31, 2020, the fair value of the Company’s investment in the Hartford wasreviewed on a periodic basis. Warranty claims are directly charged to this reserveclassified as they arise.following table is a summarybelow shows the change in the Company’s investments in real estate ventures reported at fair value:Fair value of investments as of December 31, 2020 $ 6,307 Distributions (1,660) Change in fair value 18 Fair value of investments as of March 31, 2021 $ 4,665 warranty reserve activity whichour investments in real estate ventures at fair value.in ‘Accounts payablewithin ‘Prepaid and accrued liabilities’ within the consolidated balance sheets: Three Months Ended
September 30, Nine Months Ended
September 30, 2017 2016 2017 2016 $ 282 $ 294 $ 288 $ 312 48 111 144 197 (58 ) (46 ) (160 ) (150 ) $ 272 $ 359 $ 272 $ 359 4. CAPITALIZED INTEREST AND REAL ESTATE TAXESInterest and real estate taxes incurred relating to the development of lots and parcels are capitalized to real estate inventories during the active development period, which generally commences when borrowings are used to acquire real estateother assets, and ends when the properties are substantially complete or the property becomes inactive. A project becomes inactive when development and construction activities have been suspended indefinitely. Interest is capitalized based on the interest rate applicable to specific borrowings or the weighted average of the rates applicable to other borrowings during the period. Interest and real estate taxes capitalized to real estate inventories are expensed as a component of cost of sales as related units are sold.The following table is a summary of interest and real estate taxes incurred and capitalized and interest and real estate taxes expensed for units settled: Three Months Ended
September 30, Nine Months Ended
September 30, 2017 2016 2017 2016 $ 1,063 $ 811 $ 3,338 $ 2,404 64 53 243 170 $ 1,127 $ 864 $ 3,581 $ 2,574 $ 829 $ 579 $ 1,838 $ 1,285 66 64 183 165 $ 895 $ 643 $ 2,021 $ 1,450 The amount of interest from entity level borrowings that we are able to capitalize in accordance with Accounting Standards Codification (“ASC”) 835 is dependent upon the average accumulated expenditures that exceed project specific borrowings. For the three and nine months ended September 30, 2017, the Company expensed $0 of interest from entity level borrowings. For the three and nine months ended September 30, 2016, the Company expensed $133 and $645, respectively, of interest from entity level borrowings.Additionally, when a project becomes inactive or is not a qualifying entity, its interest, real estate taxes and indirect production overhead costs are no longer capitalized but rather expensed in the period they are incurred. For the three and nine months ended September 30, 2017, the Company expensed $16 of interest and real estate taxes. For the three and nine months ended September 30, 2016, the Company expensed $0 and $10 of interest and real estate taxes.5. LOSS PER SHAREThe weighted average shares and share equivalents used to calculate basic and diluted earnings (loss) per share for the three and nine months ended September 30, 2017 and 2016 are presentednet’ in the accompanying consolidated statementsConsolidated Balance Sheets.operations. Restricted stock awards, stock options and warrants are included in the diluted earnings (loss) per share calculation using the treasury stock method and average market prices during the periods, unless their inclusion would be anti-dilutive.As a result of the net loss attributable to common stockholders for the three months ended September 30, 2017, approximately 23 restricted stock awardsMarch 31, 2021 and 15 warrants were2020 from this unconsolidated joint venture of $12 thousand and $3 thousand, respectively, is included in ‘Other income (loss), net’ in the computationaccompanying Consolidated Statement of dilutive loss per share. AsOperations. During the three months ended March 31, 2021 and 2020 the Company collected and recorded no distributions and $108 thousand, respectively, from this joint venture as a resultreturn on investment.loss attributableassets acquired in a business acquisition. Following an acquisition, we perform an analysis to common stockholders forvalue the nine months ended September 30, 2017, approximately 29 restricted stock awardsacquired company’s tangible and 18 warrants were included inidentifiable intangible assets and liabilities. With respect to identifiable intangible assets, we consider backlog, non-compete agreements, client relationships, trade names, patents and other assets. We amortize our intangible assets based on the computationperiod over which the contractual or economic benefits of dilutive loss per share. For the threeintangible assets are expected to be realized. We assess the recoverability of the unamortized balance of our intangible assets when indicators of impairment are present based on expected future profitability and nine months ended September 30, 2016, there were no anti-dilutive shares, therefore, no shares were excludedundiscounted expected cash flows and their contribution to our overall operations. Should the review indicate that the carrying value is not fully recoverable, the excess of the carrying value over the fair value of the intangible assets would be recognized as an impairment loss. As of the acquisition date, goodwill consisted primarily of synergies resulting from the computationcombination, expected expanded opportunities for growth and production, and savings in corporate overhead costs.dilutive loss per share.6. SEGMENT DISCLOSURESWe operate our business through three segments: Homebuilding, Multi-family,March 31, 2021 and Real Estate Services. We are currently focused onDecember 31, 2020, the Washington, D.C. area market.In our Homebuilding segment, we develop properties with the intent to sell asfee-simple properties or condominiums to individual buyers or to private or institutional investors. Ourfor-sale products are designed to attract first-time, earlymove-up, and secondarymove-up buyers. We focus on products that we are able to offer for sale in the middle price pointsbalance of goodwill was $1.7 million. This goodwill is reflected within the markets where we operate, avoiding the verylow-end andhigh-end products.In our Multi-family segment, we focus on projects ranging from approximately 75 to 200 units in locations that are supply constrained with demonstrated demand for stabilized assets. We seek opportunities in the multi-family rental market where our experience and core capabilities can be leveraged. We will either position the assets for sale when completed or operate the asset within our own portfolio as rental property. Operating the asset for our own account affords us the flexibility of converting the units to condominiums in the future.In our Real Estate Services segment,segment. There were no events indicating a potential change in recoverability of goodwill during the three months ended March 31, 2021.pursue projectscontrol them. This is evidenced by our obligation for their performance and our ability to direct and redirect their work, as well as negotiate the value of such services. In the instances where we do not control third-party services delivered to the client, we report revenues net of the third-party reimbursements. Consistent with the transfer of control for distinct, daily services to the customer, revenue is typically recognized at the end of each period for the fees associated with the services performed.all aspectsthe form of a monthly management fee based upon property-level cash receipts, square footage under management or some other variable metric. Revenues from project management may also include reimbursement of payroll and related costs for personnel providing the services and subcontracted vendor costs. Project management services represent a seriesmanagement, including strategic planning, land development, entitlement, property management, salesin connection with the leasing of office, industrial and marketing, workout and turnaround strategies, financing and general construction.retail space. We are ablecompensated for our services in the form of a commission. Our commission is paid upon signing of the lease by the tenant. We satisfy our performance obligation at a point in time; generally, at the time of the contractual event where there is a present right to payment.a wide range ofproject and construction management services for owners and general contracting services to other property owners. Our newly formed entity, JK, also providesoccupiers of real estate relatedin connection with the management and leasing of office, industrial and retail space. The fees that we earn are typically variable based upon a percentage of project cost. We are compensated for our services in the form of management fees. Project and construction management services represent a series of performance obligations delivered over time and revenue is recognized over time.includespresents the Company’s sales from contracts with customers disaggregated by categories which best represents how the nature, amount and timing and uncertainty of sales are affected by economic factors.Three Months Ended March 31, 2021 2020 Revenue by customer Related party $ 6,939 $ 5,484 Commercial 1,378 1,482 Total Revenue by customer $ 8,317 $ 6,966 Revenue by contract type Fixed-price $ 1,732 $ 1,888 Cost-plus 4,290 3,434 Time and Material 2,295 1,644 Total Revenue by contract type $ 8,317 $ 6,966 reportable segmentsmonths ended March 31, 2021 and 2020, $8.3 million and $6.8 million, respectively, of Homebuilding, Multi-family,our revenues were earned for contracts where revenue is recognized over time. For the three months ended March 31, 2021 and Real Estate Services. 2020, $9 thousand and $187 thousand, respectively, of our revenues were earned for contracts where revenue is recognized at a point in time.March 31,
2021December 31,
2020Notes payable - due to affiliates, unsecured 5,500 5,500 Unsecured financing 96 5 Total notes payable $ 5,596 $ 5,505 2021 $ 96 2022 0 2023 5,500 Total $ 5,596 HomebuildingCompany finances its professional liability insurance policies that renew on March 1 of each year under a premium finance agreement payable within a one year term. At December 31, 2020, the balance on this loan was $5 thousand and Multi-family segments operate solely within the Company’s single Washington, D.C. area reportable geographic segment, whileinterest rate was 3.3%. As of March 31, 2021, the balance on this loan was $96 thousand and the interest rate was 2.4%.operatesLC (formerly known as Comstock Development Services, LC) (“CDS”), pursuant to which the Company secured a $10.0 million capital line of credit (the “Revolver”). Under the terms of the Loan Documents, the Revolver provides for an initial variable interest rate of the Wall Street Journal Prime Rate plus 1.00% per annum on advances made under the Revolver, payable monthly in arrears. The five-year term facility allows for interim draws that carry a maturity date of 12Washington, D.C.initial principal amount of $10.0 million and a maximum amount available for borrowing of up to $20.0 million with a three year term. On December 18, 2014, the loan agreement was amended and restated to provide for a maximum capacity of $25 million. On May 23, 2018, the Company entered into a Membership Interest Exchange and Subscription Agreement (the “Membership Exchange Agreement”), New Jersey,together with a revised promissory note agreement, in which a note (“CGF Note”) with an outstanding principal and Pennsylvania geographic segments. Homebuilding Multi-family Real
Estate
Services Total $ 13,076 $ — $ 739 $ 13,815 594 — (110 ) 484 (1,000 ) — (201 ) (1,201 ) 15 — 83 98 — — 16 16 53,258 — 2,755 56,013 $ 12,880 $ — $ 223 $ 13,103 895 — 138 1,033 (894 ) — 138 (756 ) 89 — — 89 133 — — 133 56,427 — 148 56,575 $ 33,375 $ — $ 1,228 $ 34,603 2,571 — (138 ) 2,433 (2,168 ) — (232 ) (2,400 ) 125 — 126 251 — — 16 16 53,258 — 2,755 56,013 $ 32,102 $ — $ 685 $ 32,787 2,287 — 356 2,643 (3,861 ) — 356 (3,505 ) 144 — — 144 650 — — 650 56,427 — 148 56,575 allocates sales, marketing and general and administrative expensesexchanged the preferred equity for 91.5% of CDS membership interest in the CGF promissory note. Concurrently, the face amount of the CGF promissory note was reduced to $5.7 million. The CGF Note was repaid prior to maturity during the individual segments based upon specifically allocable costs.7. INCOME TAXand nine months ended September 30, 2017March 31, 2021 and 2020, the Company recognized income tax expensemade interest payments for all debt facilities of $29,$58 thousand and the effective tax rate is 1%. For$143 thousand, respectively.and nine months ended September 30, 2016,March 31, 2021, the Company recognized income tax expensedid 0t make principal payments for the Revolver. During the three months ended March 31, 2020, the Company retired $5.7 million of $0outstanding borrowings for the CGF Note.$57, respectively,administered by the U.S. Small Business Administration (“SBA”). Companies who met the eligibility requirements set forth by the PPP could qualify for PPP loans provided by local lenders, which supports payroll, rent and utility expenses (“qualified expenses”). If the effective taxloan proceeds are fully utilized to pay qualified expenses over the covered period, as further defined by the PPP, the full principal amount of the PPP loan may qualify for loan forgiveness, subject to potential reduction based on the level of full-time employees maintained by the organization during the covered period as compared to a baseline period.was 2%of 1% and principal and interest payments will be deferred for the first six-months of the loan term, which has been updated according to the Paycheck Protection Program Flexibility Act of 2020 (“Flexibility Act”).not recorded any accruals relatedelected to uncertaindefer payments of its share of Social Security tax positions as of September 30, 2017due during the "payroll tax deferral period". The payroll tax deferral period began on August 1, 2020 and 2016. We file U.S. and state income tax returns in jurisdictions with varying statutes of limitations. The 2014 through 2016 tax years remain subject to examination by federal and most state tax authorities.At September 30, 2017 andended December 31, 2016, due to2020. At March 31, 2021 the uncertainties surroundingtotal amount of such deferral was $193 thousand and is reflected within 'Accrued personnel costs' on our consolidated balance sheet. Per the realizationterms of the deferral program, 50% of the deferred tax assets,amount is due on December 31, 2021, and the Company recorded a full valuation allowance.The Company currently has approximately $139 million in federal and state Net Operating Losses (“NOLs”), which basedremaining 50% is due on current statutory tax rates, have potential fair value of approximately $54 million in tax savings. If unused, these NOLs will begin expiring in 2027. Under Code Section 382 (“Section 382”) rules, if a change of ownership is triggered, the Company’s NOL assets and possibly certain other deferred tax assets may be impaired. We estimate that as of September 30, 2017, the cumulative shift in ownership of the Company’s stock would not cause an impairment of our NOL asset. However, if an ownership change were to occur, the Section 382 limitation would not be expected to materially impact the Company’s financial position or results of operations as of September 30, 2017, because of the Company’s full valuation allowance on its net deferred tax assets. however, we are named as a defendant in legal actions arising from our normal business activities. Although we cannot accurately predict the amount of our liability, if any, that could arise with respect to legal actions pending against us;us, we do not expectbelieve it is reasonably possible that any such liability will have a material adverse effect on our financial position, operating results and cash flows. We believe that we have obtained adequate insurance coverage, rights to indemnification, or where appropriate, have established appropriate reserves in connection with any such legal proceedings.Letters of credit, performance bonds and compensating balancesThe Company has commitments as a result of contracts with certain third parties, primarily local governmental authorities, to meet certain performance criteria outlined in such contracts. The Company is required to issue letters of credit and performance bonds to these third parties as a way of ensuring that the commitments entered into are met. These letters of credit and performance bonds issued in favor of the Company and/or its subsidiaries mature on a revolving basis, and if called into default, would be deemed material if assessed against the Company and/or its subsidiaries for the full amounts claimed. In some circumstances, we have negotiated with our lenders in connection with foreclosure agreements for the lender to assume certain liabilities with respect to the letters of credit and performance bonds. We cannot accurately predict the amount of any liability that could be imposed upon the Company with respect to maturing or defaulted letters of credit or performance bonds. At September 30, 2017 and 2016, the Company had $1.1 million and $1.4 million in outstanding letters of credit, respectively. At September 30, 2017 and 2016, the Company had $4.0 million and $4.3 million in outstanding performance bonds, respectively. No amounts have been drawn against the outstanding letters of credit or performance bonds.We are required to maintain compensating balances in escrow accounts as collateral for certain letters of credit, which are funded upon settlement and release of units. The cash contained within these escrow accounts is subject to withdrawal and usage restrictions. As of September 30, 2017 and December 31, 2016, we had approximately $0.9 million and $0.8 million, respectively, in these escrow accounts, which are included in ‘Restricted cash’ in the accompanying consolidated balance sheets. RELATED PARTY TRANSACTIONSThe Company leases its corporate headquarters from an affiliated entity that is wholly-owned by our Chief Executive Officer. Future minimum lease payments under this lease are as follows: $ 54 160 $ 214 For the three months ended September 30, 2017 and 2016, total payments made under this lease agreement were $52 and $84, respectively. For the nine months ended September 30, 2017 and 2016, total payments made under this lease agreement were $156 and $246, respectively.On February 23, 2009, Comstock Homes of Washington, L.C., a wholly-owned subsidiary of the Company, entered into a Services Agreement with Comstock Asset Management, L.C., an entity wholly-owned by our Chief Executive Officer, to provide services related to real estate development and improvements, including legal, accounting, marketing, information technology and other additional support services. For the three months ended September 30, 2017 and 2016, the Company billed Comstock Asset Management, L.C. $269 and $222, respectively, for services andout-of-pocket expenses. For the nine months ended September 30, 2017 and 2016, Comstock Asset Management, L.C. was billed $757 and $684, respectively. Revenues from this arrangement are included within ‘Revenue – other’ in the accompanying consolidated statements of operations. As of September 30, 2017 and December 31, 2016, the Company was owed $91 and $132, respectively, under this contract, which is included in ‘Trade receivables’ in the accompanying consolidated balance sheets.On October 17, 2014, Comstock Growth Fund (“CGF”), an administrative entity managed by the Company, entered into a subscription agreement with Comstock Development Services, LC (“CDS”), an entity wholly-owned by our Chief Executive Officer, pursuant to which CDS purchased membership interests in CGF for a principal amount of $10 million. Other purchasers who purchased interests in the private placement included members of the Company’s management and board of directors and other third-party, accredited investors for an additional principal amount of $6.2 million (the “CGF Private Placement”).Simultaneously, on October 17, 2014, the Company entered into an unsecured promissory note with CGF whereby CGF made a loan to the Company in the initial principal amount of $10 million and a maximum capacity of up to $20 million. On December 18, 2014, the loan agreement was amended and restated to provide for a maximum capacity of $25 million. All of the other terms of the unsecured promissory note remained the same. The Company borrowed an additional principal loan amount of $6.2 million under the amended and restated CGF promissory note bringing the total aggregate principal amount borrowed to $16.2 million. The CGF loan has a three year term carrying a floating interest rate of LIBOR plus 9.75% with a 10% floor. The loan requires an annual principal repayment in the amount of 10% of the average outstanding balance and a monthly interest payment that will be made in arrears. Purchasers other than CDS who purchased membership interests in CGF received warrants that represent the right to purchase an amount of shares of our Class A common stock, depending upon the investment amount. As of September 30, 2017, and December 31, 2016, there were 76 warrants issued in connection with the CGF Private Placement outstanding, representing the right to purchase shares of our Class A common stock having an aggregate fair value of $433, which was considered as a debt discount. The Company amortizes the debt discount over the three year term of the loan to interest expense. As of September 30, 2017, $11.6 million was outstanding in principal and accrued interest, net of discounts, on the CGF loan. For the three months ended September 30, 2017 and 2016, the Company made interest payments of $0.1 million and $0.4 million, respectively, on the CGF loan. For the nine months ended September 30, 2017 and 2016, the Company made interest payments on the CGF loan of $0.9 million and $1.2 million, respectively.On December 18, 2014, CGF entered into amended and restated subscription agreements with CDS, members of the Company’s management and board of directors and the other third party accredited investors who participated in the CGF Private Placement (the “Amended CGF Private Placement”). Under the Amended CGF Private Placement, in addition to the warrants described above, the Company entered into a commitment to grant 226,857 shares of our Class A common stock to the purchasers in the Amended CGF Private Placement. On May 12, 2015, the Company issued 226,857un-registered shares of its Class A common stock to the purchasers in the Amended CGF Private Placement. The Amended CGF Private Placement was closed for additional investments on May 15, 2015.On December 29, 2015, the Company and Stonehenge Funding, L.C. (“Stonehenge”), an entity wholly owned by our Chief Executive Officer, entered into a Note Exchange and Subscription Agreement pursuant to which the note in the original principal amount of $4.5 million issued to the Company by Stonehenge was cancelled in its entirety and exchanged for 772,210 shares of the Company’s Series BNon-Convertible Preferred Stock, par value $0.01 per share and a stated value of $5.00 per share (the “Series B Preferred Stock”). The number of shares of Series B Preferred Stock received by Stonehenge in exchange for the note represented the principal amount outstanding plus accrued interest under the note as of December 29, 2015, which was $3.9 million. The holders of Series B Preferred Stock earn dividends at a rate of 8.75% per annum accruing from the effective date of the Note Exchange and Subscription Agreement.On March 22, 2017, the Company entered into a Share Exchange Agreement with the holders of the Company’s Series B Preferred Stock pursuant to which the Company exchanged 772,210 shares of the Company’s Series B Preferred Stock for 772,210 shares of the Company’s newly created Series CNon-Convertible Preferred Stock, par value $0.01 per share and a stated value of $5.00 per share. The Series C Preferred Stock has a discretionary dividend feature, as opposed to the mandatory dividend feature in the Series B Preferred Stock. The Series B Preferred Stock, together with all accrued dividends earned through the conversion date, was retired uponre-acquisition and the fair value of the Series C Preferred Stock is recorded in ‘Stockholders’ equity’ in the accompanying consolidated balance sheets. The difference in fair value from the extinguishment of the Series B Preferred Stock and issuance of the Series C Preferred Stock of $1,011 was recorded in ‘Stockholders’ equity’ in the accompanying consolidated balance sheets. For the three and nine months ended September 30, 2016, 17,411 and 51,848 shares of the Series B Preferred Stock, respectively, with a liquidation value of $87 and $259, respectively, were paidin-kind as dividends, and are included in ‘Stockholders’ equity’ in the accompanying consolidated balance sheets. For the nine months ended September 30, 2017, 15,663 shares of the Series B Preferred Stock with a liquidation value of $78 were paidin-kind as dividends and are included in ‘Stockholders’ equity’ in the accompanying consolidated balance sheets.On March 24, 2017, the Company entered into a share repurchase agreement with Investor Management, L.C., an entity owned by Gregory V. Benson, the former Chief Operating Officer of the Company, whereby the Company agreed to repurchase 193,052 shares of the Series C Preferred Stock held by Investor Management, L.C. for $89. The Series C Preferred Stock acquisition closed on April 4, 2017, and the Series C Preferred Stock was retired.On December 29, 2015, Comstock Growth Fund II, L.C. (“CGF II”), an administrative entity managed by the Company was created for the purpose of extending loans to the Company. CGF II entered into a subscription agreement with CDS pursuant to which CDS purchased membership interests in CGF II for an initial aggregate principal amount of $5.0 million (the “CGF II Private Placement”).Simultaneously, on December 29, 2015, the Company and CGF II entered into an unsecured revolving line of credit promissory note in the initial principal amount of $5.0 million and a maximum amount available for borrowing of up to $10.0 million with a two year term, which may be extended an additional year. The interest rate is 10% per annum, and interest payments will be accrued and paidin-kind monthly for the first year, and then paid current monthly in arrears beginning December 31, 2016. As of September 30, 2017 and December 31, 2016, $3.5 million and $3.3 million, respectively, was outstanding in principal and accrued interest on the CGF II loan.See Note 11 to the consolidated financial statements for a description of the Comstock VIII and Comstock X Private Placements and Note 13 to the consolidated financial statements for a description of the CGF Private Placement and the CGF II Private Placement.10. NOTE RECEIVABLEThe Company originated a note receivable to a third party in the amount of $180 in September 2014. This note has a maturity date of September 2, 2019 and is payable in monthly installments of principal and interest of $3. This note bears a fixed interest rate of 6% per annum. As of September 30, 2017 and December 31, 2016, the outstanding balance of the note was $75 and $103, respectively, and is included within ‘Other assets’ in the accompanying consolidated balance sheets. The interest income of $1 and $2 for the three months ended September 30, 2017 and 2016, respectively, is included in ‘Other income, net’ in the consolidated statements of operations. The interest income of $4 and $6 for the nine months ended September 30, 2017 and 2016, respectively, is included in ‘Other income, net’ in the consolidated statement of operations.11. VARIABLE INTEREST ENTITYIncluded within the Company’s real estate inventories at September 30, 2017 and December 31, 2016 are several projects that are determined to be variable interest entities (“VIEs”). These entities have been established to own and operate real estate property and were deemed VIEs primarily based on the fact that the equity investment at risk is not sufficient to permit the entities to finance their activities without additional financial support. The Company determined that it was the primary beneficiary of these VIEs as a result of its majority voting and complete operational control of the entities.On August 23, 2012, the Company formed New Hampshire Ave. Ventures, LLC, a joint venture of its subsidiary, Comstock Ventures XVI, L.C., and 6000 New Hampshire Avenue, LLC, for the purpose of acquiring, developing and constructing a111-unit project (the “NHA Project”) in Washington, D.C. The Company evaluated the joint venture and determined that the equity investment at risk is not sufficient to permit the entity to finance its activities without additional financial support. The Company determined that it was the primary beneficiary of the VIE as a result of its complete operational control of the activities that most significantly impact the economic performance and obligation to absorb losses, or receive benefits. The Company contributed its ownership interest in Comstock Ventures XVI, L.C. to Comstock Investors VII, L.C. (“Comstock VII”) on March 13, 2013. During the nine months ended September 30, 2016, New Hampshire Ave. Ventures, LLC distributed $1.9 million to itsnon-controlling interest member, 6000 New Hampshire Avenue, LLC. No such distributions were made during the three and nine months ended September 30, 2017.In December 2013, Comstock Investors VIII, L.C. (“Comstock VIII”) entered into subscription agreements with certain accredited investors (“Comstock VIII Class B Members”), pursuant to which Comstock VIII Class B Members purchased membership interests in Comstock VIII for an aggregate amount of $4.0 million (the “Comstock VIII Private Placement”). In connection with the Comstock VIII Private Placement, the Company issued 15 warrants for the purchase of shares of the Company’s Class A common stock tothe non-affiliated accredited investors, having an aggregate fair value of $131. Comstock VIII Class B Members included unrelated third-party accredited investors along with members of the Company’s board of directors and the Company’s former Chief Operating Officer and the former Chief Financial Officer. The Comstock VIII Class B Members are entitled to a cumulative, preferred return of 20% per annum, compounded annually on their capital account balances. The Company has the right to repurchase the interests of the Comstock VIII Class B Members at any time, provided that (i) all of the Comstock VIII Class B Members’ interests are acquired, (ii) the purchase is made in cash and (iii) the purchase price equals the Comstock VIII Class B Members’ capital accounts plus an amount necessary to cause the preferred return to equal a cumulative cash on cash return equal to 20% per annum. The proceeds from the Comstock VIII Private Placement have been used for the construction of the following projects: The Townes at HallCrest in Sterling, Virginia consisting of 42 townhome units, and Townes at Maxwell Square Condominium in Frederick, Maryland consisting of 45 townhome condominium units (collectively, the “Investor VIII Projects”). Proceeds of the Comstock VIII Private Placement were utilized to provide capital needed to complete the Investor VIII Projects in conjunction with project financing for the Investor VIII Projects, to reimburse the Company for prior expenditures incurred on behalf of the Investor VIII Projects, and for general corporate purposes of the Company. The Company evaluated Comstock VIII and determined that the equity investment at risk is not sufficient to permit the entity to finance its activities without additional financial support and the Company was the primary beneficiary as a result of its complete operational control of the activities that most significantly impact the economic performance and its obligation to absorb losses, or receive benefits accordingly, the Company consolidates this entity. In January 2017, the Company fully redeemed the remaining equity interest of Class B Members in Comstock VIII after paying $1.9 million in distributions. During the nine months ended September 30, 2016, the Company paid distributions in the amount of $2.5 million to itsnon-controlling interest member.In June 2015, Comstock Investors IX, L.C. (“Comstock IX”) entered into subscription agreements with third-party accredited investors (“Comstock IX Class B Members”), pursuant to which Comstock IX Class B Members purchased membership interests in Comstock IX for an aggregate amount of $2.5 million (the “Comstock IX Private Placement”). The Comstock IX Class B Members are entitled to a cumulative, preferred return of 20% per annum, compounded annually on their capital account balances. The Company has the right to repurchase the interests of the Comstock IX Class B Members at any time, provided that (i) all of the Comstock IX Class B Members’ interests are acquired, (ii) the purchase is made in cash and (iii) the purchase price equals the Comstock IX Class B Members’ capital accounts plus any amount necessary to cause the preferred return to equal a cumulative cash on cash return equal to 20% per annum. The proceeds from the Comstock IX Private Placement have been utilized (A) for the current construction of the Marrwood East project of 35 single family homes in Loudoun County Virginia, (B) to reimburse the Company for prior expenditures incurred on behalf of the Marrwood East project and (C) for general corporate purposes of the Company. The Company evaluated Comstock IX and determined that the equity investment at risk is not sufficient to permit the entity to finance its activities without additional financial support and the Company was the primary beneficiary as a result of its complete operational control of the activities that most significantly impact the economic performance and its obligation to absorb losses or receive benefits. Accordingly, the Company consolidates this entity. During the three and nine months ended September 30, 2017, the Company paid distributions in the amount of $0.2 million to itsnon-controlling interest member. No distributions were made in 2016. Subsequent to quarter end, in October 2017, the Company paid $3.3 million, fully redeeming the remaining equity interest of the Comstock IX Class B Member. Refer to Note 17 for further discussion of this subsequent event.In August 2016, Comstock Investors X, L.C. (“Comstock X”) entered into a subscription agreement with an accredited investor (“Comstock X Class B Member”), pursuant to which the Comstock X Class B Member purchased membership interests in Comstock X for an initial amount of $5.0 million, which is part of an aggregate capital raise of $14.5 million (the “Comstock X Private Placement”). The Comstock X Class B Member is Comstock Development Services, LC (“CDS”), an entity wholly owned by Christopher Clemente, our Chief Executive Officer. In October 2016, the Comstock X Class B Member purchased additional interests in the Comstock X Private Placement in an amount of $9.5 million resulting in an aggregate subscription amount of $14.5 million. In connection with the Comstock X Private Placement, the Company issued a total of 150 warrants for the purchase of shares of the Company’s Class A common stock, having an aggregate fair value of $258. The Comstock X Member is entitled to a cumulative, preferred return of 6% per annum, compounded annually on the capital account balance. The Company has the right to repurchase the interest of the Comstock X Class B Member at any time, provided that (i) all of the Comstock X Class B Members’ interest is acquired, (ii) the purchase is made in cash and (iii) the purchase price equals the Comstock X Class B Members’ capital account plus accrued priority return. Proceeds of the Comstock X Private Placement are being utilized (A) to provide capital needed to complete the projects known as The Townes at Totten Mews, consisting of 40 townhomes in Washington, D.C., and The Towns at 1333, consisting of 18 townhomes in the City of Alexandria, Virginia (collectively, the “Investor X Projects”), (B) to reimburse the Company for prior expenditures incurred on behalf of the Investor X Projects, and (C) for general corporate purposes of the Company. The Company evaluated Comstock X and determined that the equity investment at risk is not sufficient to permit the entity to finance its activities without additional financial support and the Company was the primary beneficiary of the VIE as a result of its complete operational control of the activities that most significantly impact the economic performance and its obligation to absorb losses, or receive benefits. Accordingly, the Company consolidates this entity. On June 14, 2017, the Comstock X Private Placement was amended to provide for the first $1.0 million of profit earned to be allocated first to the Company. During the nine months ended September 30, 2017, the Company paid distributions of $1.0 million to itsnon-controlling interest member. No distributions were made in 2016. Subsequent to quarter end, in October 2017, the Operating Agreement for Investor X was amended to increase the maximum capital raise to $19.5 million. The Company raised an additional $5.0 million through the Investor X entity. Refer to Note 17 for further discussion of this subsequent event.The distributions to and contributions from the VIEs discussed above are included within the‘Non-controlling interest’ in the consolidated balance sheets for the periods presented.At September 30, 2017 and December 31, 2016, total assets of these VIEs were approximately $31.5 million and $38.1 million, respectively, and total liabilities were approximately $17.3 million and $18.5 million, respectively. The classification of these assets is primarily within ‘Real estate inventories’ and the classification of liabilities are primarily within ‘Accounts payable and accrued liabilities’ and ‘Notes payable – secured by real estate inventories’ in the accompanying consolidated balance sheets.12. UNCONSOLIDATED JOINT VENTUREThe Company accounts for its interest in its title insurance joint venture using the equity method of accounting and periodically adjusts the carrying value for its proportionate share of earnings, losses and distributions. The carrying value of the investment is included within ‘Other assets’ in the accompanying consolidated balance sheets and our proportionate share of the earnings from the investment are included in ‘Other income, net’ in the accompanying consolidated statements of operations for the periods presented. Our share of the earnings for the three and nine months ended September 30, 2017, are $23 and $47, respectively. During the three and nine months ended September 30, 2016, our share of earnings from this joint venture was $34 and $50, respectively. During the nine months ended September 30, 2017 and 2016, the Company collected total distributions of $62 and $75, respectively, as a return on investment.Summarized financial information for the unconsolidated joint venture is as follows: Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 $ 73 $ 96 $ 180 $ 186 27 28 87 86 $ 46 $ 68 $ 93 $ 100 $ 23 $ 34 $ 47 $ 50 13. CREDIT FACILITIESNotes payable consisted of the following: September 30,
2017 December 31,
2016 $ 8,305 $ 6,429 14,719 16,278 1,472 1,424 2,132 2,929 1,100 — 27,728 27,060 (156 ) (133 ) 27,572 26,927 1,396 911 15,078 15,866 $ 44,046 $ 43,704 As of September 30, 2017, maturities and/or curtailment obligations of all borrowings are as follows: $ 22,713 13,958 5,543 122 1,710 $ 44,046 As of September 30, 2017, the Company had $22.7 million of its credit facilities and project related loans scheduled to mature during the remainder of 2017, and we are in active discussions with our lenders seeking long-term extensions.Construction, development and mezzanine debt – securedThe Company enters into secured acquisition and development loan agreements from time to time to purchase and develop land parcels. In addition, the Company enters into secured construction loan agreements for the construction of its real estate inventories. The loans are repaid with proceeds from home closings based upon a specific release price, as defined in each respective loan agreement.As of September 30, 2017, and December 31, 2016, the Company had secured construction revolving credit facilities with a maximum loan commitment of $24.8 million and $26.6 million, respectively. The Company may borrow under these facilities to fund its home building activities. The amount the Company may borrow is subject to applicable borrowing base provisions and the number of units under construction, which may also limit the amount available or outstanding under the facilities. The facilities are secured by deeds of trust on the real property and improvements thereon, and the borrowings are repaid with the net proceeds from the closings of homes sold, subject to a minimum release price. As of September 30, 2017, and December 31, 2016, the Company had approximately $16.5 million and $20.2 million, respectively, of unused construction loan commitments. The Company had $8.3 million and $6.4 million of outstanding construction borrowings as of September 30, 2017 and December 31, 2016, respectively. Interest rates charged under these facilities include the London Interbank Offered Rate (“LIBOR”) and prime rate pricing options, subject to minimum interest rate floors. At September 30, 2017 and December 31, 2016, the weighted average interest rate on the Company’s outstanding construction revolving facilities was 4.8% and 4.6% per annum, respectively. The construction credit facilities have maturity dates ranging from October 2017 to March 2019, including extensions subject to the Company meeting certain conditions. Subsequent to September 30, 2017, $0.5 million of the outstanding construction revolving credit facilities matured. We are in active discussions with the lender to secure an extension on this borrowing.As of September 30, 2017, and December 31, 2016, the Company had approximately $28.5 million and $27.8 million, respectively, of aggregate acquisition and development maximum loan commitments of which $14.7 million and $16.3 million, respectively, were outstanding. These loans have maturity dates ranging from November 2017 to March 2019, including extensions subject to certain conditions, and bear interest at a rate based on LIBOR and prime rate pricing options, with interest rate floors ranging from 4.75% to 12.0% per annum. As of September 30, 2017, and December 31, 2016, the weighted average interest rate was 6.5% and 5.2% per annum, respectively.As of September 30, 2017, the Company had one mezzanine loan that is being used to finance the development of the Momentum | Shady Grove project. The maximum principal commitment amount of this loan was $1.1 million, of which $1.2 million and $1.4 million of principal and accrued interest was outstanding at September 30, 2017 and December 31, 2016, respectively. This financing carries an annual interest rate of 12% of which 6% is paid on a monthly basis with the remaining 6% being accrued and paid at maturity. This financing has a maturity date of December 31, 2017 and is guaranteed by the Company and our Chief Executive Officer.Line of credit – securedAt September 30, 2017 and December 31, 2016, the Company had a secured revolving line of credit with a maximum capacity of $3.0 million, of which $2.1 million and $2.9 million, respectively, were outstanding at September 30, 2017 and December 31, 2016. This line of credit is secured by the first priority security interest in the Company’s wholly owned subsidiaries’ in the Washington, D.C. metropolitan area and guaranteed by our Chief Executive Officer. The Company uses this line of credit to finance the predevelopment related expenses and deposits for current and future projects and bears a variable interest rate tied to aone-month LIBOR plus 3.25% per annum, with an interest rate floor of 5.0%. This line of credit calls for the Company to adhere to financial covenants, as defined in the loan agreement such as, minimum net worth and minimum liquidity, measured quarterly and minimum EBITDA measured on an annual basis and matures on December 31, 2017. The Company obtained a waiver from the financial institution for not meeting the minimum liquidity measure as of September 30, 2017, but it was in compliance with the minimum net worth requirement as dictated by the line of credit agreement as of September 30, 2017.Secured – otherAs of September 30, 2017, the Company had one secured loan related to the newly created entity, JK, with an outstanding balance of $1.1 million. This financing carries a fixed interest rate of 6.0%, and has a maturity date of October 17, 2022. This financing is secured by the assets of JK and is guaranteed by our Chief Executive Officer.Unsecured financingAs of September 30, 2017, and December 31, 2016, the Company had $0.7 million and $1.0 million, respectively, in outstanding balances under a10-year unsecured note with a bank. Interest is charged on this financing on an annual basis at the Overnight LIBOR rate plus 2.2%. At September 30, 2017 and December 31, 2016, the interest rate was 3.4% and 2.9% per annum, respectively. The maturity date of this financing is December 28, 2018. The Company is required to make monthly principal and interest payments through maturity.As of September 30, 2017, the Company had two unsecured seller-financed promissory notes with outstanding balances totaling $0.7 million. The first note, in the amount of $0.1 million, carries an annual interest rate of the prime rate plus 5%. This financing has a maturity date of February 27, 2020, and is guaranteed by our Chief Executive Officer. As of September 30, 2017, the interest rate was 9.3%. The second note, resulting from the newly created entity, JK, on July 17, 2017, has an outstanding balance of $0.6 million as of September 30, 2017. This financing carries an annual interest rate of LIBOR plus 3% and has a maturity date of July 17, 2022. See Note 16 for further discussion of the business acquisition.Notes payable to affiliate – unsecuredComstock Growth FundOn October 17, 2014, CGF entered into a subscription agreement with CDS, pursuant to which CDS purchased membership interests in CGF for a principal amount of $10.0 million (the “CGF Private Placement”). Other investors who subsequently purchased interests in the CGF Private Placement included members of the Company’s management and board of directors and other third party accredited investors for an additional principal amount of $6.2 million.On October 17, 2014, the Company entered into an unsecured promissory note with CGF whereby CGF made a loan to the Company in the initial principal amount of $10.0 million and a maximum amount available for borrowing of up to $20.0 million with a three year term (the “Original Promissory Note”). On December 18, 2014, the loan agreement was amended and restated to provide for a maximum capacity of $25 million. The loan bears interest at a floating rate based on the 30 day LIBOR plus 9.75% per annum with a 10% floor per annum. Interest payments will be made monthly in arrears. There is a principal curtailment requirement of 10% annually based on the average outstanding balance for the prior year. The loan will be used by the Company (i) to finance the Company’s current and future development pipeline, (ii) to repay all or a portion of the Company’s prior private placements, (iii) to repay all or a portion of the Company’s project mezzanine loans, and (iv) for general corporate purposes. The Company is the administrative manager of CGF but does not own any membership interests. The Company had approximately $11.6 million and $11.3 million of outstanding borrowings under the CGF loan, net of discounts, as of September 30, 2017 and December 31, 2016, respectively. As of September 30, 2017 and December 31, 2016, the interest rate was 11.0% and 10.4% per annum, respectively. For the three months ended September 30, 2017 and 2016, the Company made interest payments of $0.1 million and $0.4 million, respectively. For the nine months ended September 30, 2017 and 2016, the Company made interest payments of $0.9 million and $1.2 million, respectively. During the nine months ended September 30, 2017 and 2016, the Company made principal payments to CGF of $1.5 million and $1.6 million, respectively. Subsequent to the September 30, 2017 quarter end, the Company extended the CGF loan to April 16, 2018.Comstock Growth Fund IIOn December 29, 2015, the Company entered into a revolving line of credit promissory note with CGF II whereby CGF II made a loan to the Company in the initial principal amount of $5.0 million and a maximum amount available for borrowing of up to $10.0 million with a two year term, which may be extended an additional year. The interest rate is 10% per annum, and interest payments will be accrued and paid in kind monthly for the first year, and then paid current monthly in arrears beginning December 31, 2016. The funds obtained from the loan are being used by the Company (i) to capitalize the Company’s current and future development pipeline, (ii) to repay all or a portion of the Company’s prior private placements, and (iii) for general corporate purposes. As of September 30, 2017 and December 31, 2016, $3.5 million and $3.3 million, respectively, was outstanding in principal and accrued interest under the CGF II loan.14. FAIR VALUE DISCLOSURESand cash equivalents, accounts receivable, and accounts payable and accrued liabilities are reasonable estimates of their fair values based on their short maturities. The fair value of fixed and floating rate debt is based on unobservable market rates (Level 3 inputs).debt: September 30,
2017 December 31,
2016 $ 44,046 $ 43,704 $ 43,579 $ 44,986 March 31,
2021December 31,
2020Carrying amount $ 5,596 $ 5,505 Fair value $ 5,579 $ 5,485 real estate inventories and long livedlong-lived assets, at fair value on anon-recurring basis if it is determined that impairment has occurred. Such fair value measurements use significant unobservable inputs and are classified as Level 3.15.The Company did not issue restricted stock awards duringSeptember 30, 2017. During the nine months ended September 30, 2017,March 31, 2021, the Company issued 192 thousand0 stock options and 245 thousand165,809 restricted stock awards to employees. NoDuring the three months ended March 31, 2020, the Company issued 0 stock options orand 630,352 restricted stock awards were issued during the three and nine months ended September 30, 2016.consolidated balance sheets and statements of operations line items for stock-based compensation for the periods presented: Three Months Ended
September 30, Nine Months Ended
September 30, 2017 2016 2017 2016 $ 17 $ 4 $ 41 $ 13 116 15 238 56 $ 133 $ 19 $ 279 $ 69 Three Months Ended March 31, 2021 2020 General and administrative - real estate services $ 31 $ 22 General and administrative - asset management 153 191 $ 184 $ 213 September 30, 2017,March 31, 2021, the weighted-average remaining contractual term of unexercised stock options was 75 years. As of September 30, 2017March 31, 2021 and December 31, 2016,2020, there was $0.6$1.4 million and $0.1$1.1 million, respectively, of unrecognized compensation cost related to stock grants.16. BUSINESS ACQUISITIONThree Months Ended March 31, 2021 2020 Restricted stock awards 0 174 Stock options 46 255 Warrants 149 726 195 1,155 July 17, 2017, JK Environmental Services, LLC, (“JK”November 1, 2020, the Company relocated its corporate headquarters to a new office space pursuant to a ten year lease agreement with an affiliate controlled and owned by our Chief Executive Officer and family, as landlord. Future minimum lease payments under this lease, which expires on October 31, 2030, is $9.6 million. The Company is also responsible for the pro-rata share of common area maintenance costs to the landlord.Capital Management, L.C., ahas engaged CAM to manage and administer the CDS’ commercial real estate portfolio and the day to-day operations of CDS and each property-owning subsidiary of CDS (the "CDS Portfolio"). Pursuant to the terms of the AMA, CAM will provide investment advisory, development and asset management services necessary to build out, stabilize and manage certain assets.purchasedPartners, LC ("Partners") to form Comstock 3101 Wilson, LC (the “Hartford Owner”), to purchase the Hartford. Pursuant to the Original Operating Agreement, the Company holds a minority membership interest in the Hartford Owner and the remaining membership interests of the Hartford Owner is held by Partners, who is further the Manager of the Hartford Owner. At the closing of the acquisition of the Hartford, the Company received an acquisition fee of $500 thousand and is entitled to asset management, property management, construction management and leasing fees for its management of the Property pursuant to separate agreements between the Hartford Owner, or its affiliates, and the Company, or its affiliates. The Company is also entitled to an incentive fee related to the performance of the investment.business assets of Monridge Environmental, LLCCompany’s 10% corporate indebtedness owed to CGF.$2.3 million. The acquisition was consummated as partfurther description of the CGF Private Placement and the Revolver.Three Months Ended March 31, 2021 2020 Revenue by customer Related party $ 6,939 $ 5,484 Commercial 1,378 1,482 Total revenue $ 8,317 $ 6,966 effortsNOL assets and possibly certain other deferred tax assets may be impaired.expand its footprintuncertain tax positions as of March 31, 2021 and 2020. We file U.S. and state income tax returns in jurisdictions with varying statutes of limitations. The 2017 through 2020 tax years remain subject to examination by federal and most state tax authorities.market. JK has its principal office located in Conshohocken, Pennsylvania,the areas of strategic corporate planning, capital markets, brokerage services, and environmental and design-based services. Our environmental services group provides consulting and engineering services, environmental studies, remediation services and provides site specific solutions for any project that may have an environmental impact, from environmental due diligence to site-specific assessments and remediation. The Real Estate Services segment operates in Maryland, Pennsylvania, New Jersey, and Delaware. JK operates as an environmental services company, providing consulting, remediation, and other environmental services. JK’s operations since the date of acquisition are included inMid-Atlantic Region.consolidated statement2 reportable segments of Asset Management and Real Estate Services, excluding discontinued operations, for the three and nine months ended September 30, 2017.Based on an evaluation of the provisions of Accounting Standards Codification Topic 805,Business Combinations, (“ASC 805”), JK Environmental Services, LLC was determined to be the acquirer for accounting purposes. The table below summarizes the provisional purchase price allocation based on the estimated fair value of net assets acquired assumed at the date of acquisition. The purchase price allocation is provisional pending completion of the fair value analysis of the acquired assetsMarch 31, 2021 and liabilities assumed: $ 141 180 268 1,702 $ 2,291 (1)Intangible assets include a non-compete agreement and customer relationships. The amortization period for these intangible assets is one year for the noncompete agreement; and four years for the customer relationships.(2)Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed, and it is not deductible for income tax purposes. As of the acquisition date, goodwill consisted primarily of synergies resulting from the combination, expected expanded opportunities for growth and production, and savings in corporate overhead costs.17. SUBSEQUENT EVENTSOn October 10, 2017, the Company extended its note payable with Comstock Growth Fund I. This loan had an initial maturity date of October 17, 2017 and the extension provides for a maturity date of April 2020.Total Three Months Ended March 31, 2021 Gross revenue $ 6,840 $ 1,477 $ 8,317 Gross profit 762 390 1,152 Net income 403 (156) 247 Total assets 23,778 3,942 27,720 Three Months Ended March 31, 2020 Gross revenue $ 5,435 $ 1,531 $ 6,966 Gross profit 803 315 1,118 Net loss 284 (296) (12) Total assets 19,661 3,129 22,790 2018. As of September 30, 2017, the Company had $11.6 million of outstanding principal and interest, net of discounts under this facility.On October 13, 2017, Comstock Investors X, L.C. amended its Operating Agreement to increase the amount of the aggregate capital raise to $19.5 million. On October 19, 2017, Comstock Investors X received proceeds of $5.0 million under the amended Operating Agreement to be used for the planned construction of the Company’s Totten Mews, Towns at 1333, Richmond Station, and Marrwood East projects. As part of this private placement, 50,000 warrants were issued for the purchase of Class A Common Stock at a strike price of $1.73 per share.On October 16, 2017, the Company redeemed the remaining equity interest of the Comstock IX Class B Members by paying $3.3 million, representing final priority returns and capital return. AND SUBSIDIARIESMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONSITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We are currently operating, or developing in multiple counties throughoutsecured a $87 million loan facility from MetLife. As part of the Washington, D.C. area market. The following table summarizes certain information for our owned or controlled communities as of September 30, 2017:
| Pipeline Report as of September 30, 2017 | ||||||||||||||||||||||||||||||||
Project | State | Product Type (1) | Estimated Units at Completion | Units Settled | Backlog (8) | Units Owned Unsold | Units Under Control (2) | Total Units Owned, Unsettled and Under Control | Average New Order Revenue Per Unit to Date | |||||||||||||||||||||||
City Homes at the Hampshires | DC | SF | 38 | 38 | — | — | — | — | $ | 747 | ||||||||||||||||||||||
Townes at the Hampshires (3) | DC | TH | 73 | 73 | — | — | — | — | $ | 551 | ||||||||||||||||||||||
Estates at Falls Grove | VA | SF | 19 | 19 | — | — | — | — | $ | 545 | ||||||||||||||||||||||
Townes at Falls Grove | VA | TH | 110 | 110 | — | — | — | — | $ | 304 | ||||||||||||||||||||||
Townes at Shady Grove Metro | MD | TH | 36 | 27 | — | 9 | — | 9 | $ | 583 | ||||||||||||||||||||||
Townes at Shady Grove Metro (4) | MD | SF | 3 | 3 | — | — | — | — | $ | — | ||||||||||||||||||||||
Momentum | Shady Grove Metro (5) | MD | Condo | 110 | — | — | 110 | — | 110 | $ | — | ||||||||||||||||||||||
Estates at Emerald Farms | MD | SF | 84 | 84 | — | — | — | — | $ | 426 | ||||||||||||||||||||||
Townes at Maxwell Square | MD | TH | 45 | 45 | — | — | — | — | $ | 421 | ||||||||||||||||||||||
Townes at Hallcrest | VA | TH | 42 | 42 | — | — | — | — | $ | 465 | ||||||||||||||||||||||
Estates at Leeland | VA | SF | 24 | 11 | 2 | 11 | — | 13 | $ | 451 | ||||||||||||||||||||||
Villas | Preserve at Two Rivers 28’ | MD | TH | 6 | 6 | — | — | — | — | $ | 458 | ||||||||||||||||||||||
Villas | Preserve at Two Rivers 32’ | MD | TH | 10 | 10 | — | — | — | — | $ | 504 | ||||||||||||||||||||||
Marrwood East (7) | VA | SF | 35 | 13 | 16 | 6 | — | 22 | $ | 638 | ||||||||||||||||||||||
Townes at Totten Mews (6) | DC | TH | 40 | 5 | 3 | 32 | — | 35 | $ | 540 | ||||||||||||||||||||||
The Towns at 1333 | VA | TH | 18 | 2 | — | 16 | — | 16 | $ | 948 | ||||||||||||||||||||||
The Woods at Spring Ridge | MD | SF | 21 | 1 | 6 | 14 | — | 20 | $ | 674 | ||||||||||||||||||||||
Solomons Choice | MD | SF | 56 | — | — | 56 | — | 56 | $ | — | ||||||||||||||||||||||
Townes at Richmond Station | VA | TH | 104 | — | — | 104 | — | 104 | $ | — | ||||||||||||||||||||||
Condominiums at Richmond Station | VA | MF | 54 | — | — | 54 | — | 54 | $ | — | ||||||||||||||||||||||
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Total | 928 | 489 | 27 | 412 | — | 439 | ||||||||||||||||||||||||||
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transaction, the Company entered into asset management and property management agreements to manage the property.
Settlements, orders, cancellations and backlog
The following table summarizes certain information related to new orders, settlements, and backlog for the three and nine month periods ended September 30, 2017 and 2016:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
Gross new orders | 14 | 21 | 76 | 93 | ||||||||||||
Cancellations | 2 | 3 | 12 | 7 | ||||||||||||
Net new orders | 12 | 18 | 64 | 86 | ||||||||||||
Gross new order revenue | $ | 8,075 | $ | 9,249 | $ | 38,612 | $ | 40,690 | ||||||||
Cancellation revenue | $ | 752 | $ | 1,462 | $ | 5,820 | $ | 3,025 | ||||||||
Net new order revenue | $ | 7,323 | $ | 7,787 | $ | 32,792 | $ | 37,665 | ||||||||
Average gross new order price | $ | 577 | $ | 440 | $ | 508 | $ | 438 | ||||||||
Settlements | 24 | 33 | 72 | 76 | ||||||||||||
Revenue - homebuilding | $ | 13,076 | $ | 12,880 | $ | 33,375 | $ | 32,102 | ||||||||
Gross margin - homebuilding | 4.5 | % | 7.0 | % | 7.7 | % | 7.0 | % | ||||||||
Average settlement price | $ | 545 | $ | 390 | $ | 464 | $ | 422 | ||||||||
Backlog units | 27 | 35 | 27 | 35 | ||||||||||||
Backlog revenue | $ | 16,369 | $ | 16,421 | $ | 16,369 | $ | 16,421 | ||||||||
Average backlog price | $ | 606 | $ | 469 | $ | 606 | $ | 469 | ||||||||
March 31, 2020
asset management
Revenue from homebuilding increased by $1.3 million to $33.4 million for the nine months ended September 30, 2017 as compared to $32.1 million for the nine months ended September 30, 2016. For the nine months ended September 30, 2017, the Company settled 72 units (31 units at Falls Grove, 12 units at Marrwood, 6 units at Emerald Farm, 6 units at Hallcrest, 6 units at Leeland, 1 unit at Shady Grove, 2 units at Two Rivers, 5 units at Totten Mews, 2 units at The Towns at 1333, and 1 unit at The Woods at Spring Ridge), as compared to 76 units (4 units at The Hampshires, 29 units at Falls Grove, 13 units at Maxwell Square, 8 units at Two Rivers, 20 units at Hallcrest, and 2 units at the Estates at Leeland), for the nine months ended September 30, 2016. Our homebuilding gross margin percentage for the nine months ended September 30, 2017 was 7.7%, an increase of 0.6% as compared to 7.1% for the nine months ended September 30, 2016. The overall increase noted in gross margins was mainly the result of the continued effort by the Company to reduce construction and other related costs.
Gross new order revenue, consisting of revenue from all units sold, for the three months ended September 30, 2017 was $8.1 million on 14 units as compared to $9.2 million on 21 units for the three months ended September 30, 2016. Gross new order revenue, consisting of revenue from all units sold, for the nine months ended September 30, 2017 was $38.6 million on 76 units as compared to $40.7 million on 93 units for the nine months ended September 30, 2016. Net new order revenue, representing revenue for all units sold less cancellations, for the three months ended September 30, 2017 was $7.3 million on 12 units as compared to $7.8 million on 18 units for the three months ended September 30, 2016. Net new order revenue, representing revenue for all units sold less cancellations, for the nine months ended September 30, 2017 was $32.8 million on 64 units as compared to $37.7 million on 86 units for the nine months ended September 30, 2016. The decreases are attributable to the number and mix of homes sold.
Revenue – other
Revenue – other increased $0.5 million to $1.2 million for the nine months ended September 30, 2017 as compared to $0.7 million for the nine months ended September 30, 2016. Revenue – other increased $0.5 million to $0.7 million for the three months ended September 30, 2017 as compared to $0.2 million for the three months ended September 30, 2016. The increase in both periods was directly attributable to the acquisition of Monridge Environmental, LLC, by the newly created entity, JK Environmental, LLC (“JK”) in July 2017. The revenues generated from this entity were approximately $0.5 million for the three and nine months ended September 30, 2017. There were no similar acquisitions or revenue components during the three and nine months ended September 30, 2016.
Cost of sales – homebuilding
Cost of sales – homebuilding increased by $0.5 million to $12.5 million during the three months ended September 30, 2017, as compared to $12.0 million during the three months ended September 30, 2016. Cost of sales – homebuilding increased by $1.0 million to $30.8 million during the nine months ended September 30, 2017, as compared to $29.8 million during the nine months ended September 30, 2016. The increase noted was primarily attributable to the number of units settled and the mix of homes settled during the three and nine months ended September 30, 2017.
Cost of sales – other
Cost of sales – other increased by $0.7 million to $0.8 million during the three months ended September 30, 2017, as compared to $0.1 million during the three months ended September 30, 2016. Cost of sales – other increased by $1.1 million to $1.4 million during the nine months ended September 30, 2017, as compared to $0.3 million during the nine months ended September 30, 2016. The increase primarily relates to our new initiatives within ourMarch 31, 2021 direct costs - real estate services segmentdecreased $0.1 million or 10.6% primarily due to expand our footprint in the real estate consultingdecreased personnel and subcontractor costs associated with non-recurring COVID-19 environmental study fields which includes the acquisition of Monridge Environmental, LLC by JK during the three months ended September 30, 2017.
Sales and marketing
Selling and marketing expenses for the three months ended September 30, 2017 and the three months ended September 30, 2016 was $0.4 million. Selling and marketing expenses for the nine months ended September 30, 2017 decreased by $0.2 million to $1.1 million, as compared to $1.3 million for the nine months ended September 30, 2016. The decrease is attributable to continued benefit from the cost saving measures.
remediation projects.
Income taxes
For the three and nine months ended September 30, 2017, the Company recognized income tax expense of $29, and the effective tax rate is 1%. For the three and nine months ended September 30, 2016, the Company recognized income tax expense of $0 and $57, respectively; and as of September 30, 2016 the effective tax rateMarch 31, 2020 which was 2%.
Liquidity and Capital Resources
We require capital to operate, to post deposits on new potential acquisitions, to purchase and develop land, to construct homes, to fund related carrying costs and overhead and to fund various advertising and marketing programs to generate sales. These expenditures include payroll, community engineering, entitlement, architecture, advertising, utilities and interest as well as the construction costs of our homes. Our sources of capital include, and we believe will continue to include, private equity and debt placements (which has included significant participation from Company insiders), funds derived from various secured and unsecured borrowings to finance acquisition, development and construction on acquired land, cash flow from operations, which includes the sale and delivery of constructed homes, finished and raw building lots and the potential sale of public debt and equity securities. The Company is involved in ongoing discussions with lenders and equity sources in an effort to provide additional growth capital to fund various new business opportunities.
We have outstanding borrowings with various financial institutions and other lenders that have been used to finance the acquisition, development and construction of real estate projects. The Company has generally financed its development and construction activities on a single or multiple project basis so it is not uncommon for each of our projects or collection of our projects to have a separate credit facility. Accordingly, the Company typically has had numerous credit facilities and lenders.
As of September 30, 2017, $22.7 million of the Company’s outstanding credit facilities and project related loans mature at various periods through the end of 2017. We are in active discussions with our lenders seeking long term extensions and modifications to these loans. These debt instruments impose certain restrictions on our operations, including speculative unit construction limitations, curtailment obligations, and financial covenant compliance. If we fail to comply with any of these restrictions, an event of default could occur. Additionally, events of default could occur if we fail to make required debt service payments or if we fail to come to agreement on an extension on a certain facility prior to a given loan’s maturity date. Any event of default would likely render the obligations under these instruments due and payable as of that event. Any such event of default would allow certain of our lenders to exercise cross default provisions in our loan agreements with them, such that all debt with that institution could be called into default. We are anticipating that with the successful resolution of the debt extension discussions with our lenders, capital raises from our recent private placement, current available cash on hand, and additional cash from settlement proceeds at existing and under development communities, the Company will have sufficient financial resources to sustain its operations through the next 12 months, though no assurances can be made that the Company will be successful in its efforts. The Company will also continue to focus on its cost structure in an effort to conserve cash and manage expenses. Such actions may include cost reductions and/or deferral arrangements with respect to current operating expenses.
See Note 11 and Note 13 to the accompanying consolidated financial statements for details on private placement offerings and for more details on our credit facilities, respectively.
Cash Flow
Net cash provided by operating activities was $3.0 million for the nine months ended September 30, 2017 compared to the net cash provided by operating activities of $0.6 million for the nine months ended September 30, 2016. The $3.3 million net cash provided by operations during the nine months ended September 30, 2017 was primarily attributable to increases in accounts payable of $1.0 million, $1.5 million of releases of inventories associated with units settled, increases in accrued interest of $0.8 million, the amortization of loan discounts and other financing fees of $0.9 million, the issuances of $0.2 million of stock compensation, and the increases of $0.8 million of other assets, mainly attributable to the acquisition of Monridge Environmental, LLC, offset by the net loss of $2.4 million. The $6.2 million net cash used by operations during the nine months ended September 30, 2016 was primarily attributable to $10.0 million of inventory acquired, primarily related to proceeds from the acquisitionRevolver of three properties$5.5 million.
Net cash used in investing activities was $0.8 millionour Annual Report on Form 10-K for the nine monthsyear ended September 30, 2017. This was primarily attributable to the cash paid for the acquisition of Monridge Environmental, LLC of $0.6 million and the decrease in collateral for letters of credit for $0.2 million. Net cash used in investing activities was immaterial for the nine months ended September 30, 2016.
Net cash used in financing activities was $5.9 million for the nine months ended September 30, 2017. This was primarily attributable to the distributions of $1.9 million to the Comstock Investor VIII Class B Members to fully redeem their equity interest and a distribution to the Comstock Investor X Class B Members of $1.0 million, along with the pay downs on notes payable of $22.4 million, offset by borrowings of $19.9 million. Net cash used in financing activities was $3.7 million for the nine months ended September 30, 2016. This was primarily attributable to the distributions of $1.9 million to the New Hampshire Avenuenon-controlling interest member, the distributions of $2.5 million to the Comstock Investors VIII Class B Members, along with the pay downs on notes payable of $28.4 million, offset by borrowings of $34.2 million, and a contribution of $5.0 million from the Comstock Investors X Class B Member.
Seasonality
The homebuilding industry usually experiences seasonal fluctuations in quarterly operating results and capital requirements. We typically experience the highest new home order activity in the Spring and Summer, although this activity is also highly dependent on the number of active selling communities, the timing of new community openings and other market factors. Because it typically takes four to six months to construct a new home, we deliver more homes in the second half of the year as Spring and Summer home orders convert to home deliveries. Because of this seasonality, home starts, construction costs and related cash outflows have historically been highest in the second and third quarters, and the majority of cash receipts from home deliveries occur during the second half of the year. We expect this seasonal pattern to continue over the long-term, although it may be affected by volatility in the homebuilding industry and the general economy.
December 31, 2020.
Critical Accounting Policies and Estimates
There have been no significant changes to our critical accounting policies and estimates during the nine months ended September 30, 2017 from those disclosed in Item 7 included in our Annual Report on Form10-K for the year ended December 31, 2016.
March 31, 2021. over Financial ReportingSeptember 30, 2017.March 31, 2021. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of September 30, 2017.September 30, 2017,March 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
OF ITEM 1A. RISK FACTORSThere have been no material changes to the risk factors disclosed under “Item 1A. Risk Factors” in our Annual Report onForm 10-K for the year ended December 31, 2016.ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSThe descriptions of the offerings related to Comstock Investors VII, L.C., Comstock Investors VIII, L.C. and Comstock Investors X, L.C. in Notes 11 and 17, and the description of the offering related to Comstock Growth Fund in Note 13 to the accompanying consolidated financial statements are hereby incorporated by reference. The shares of our Class A common stock, the membership interests and the warrants, as applicable, were offered and sold to purchasers in such offerings in reliance upon exemptions from registration pursuant to Section 4(a)(2) of the Securities Act of 1933 (the “Securities Act”) and Rule 506 of Regulation D promulgated under the Securities Act and the certificates representing the securities shall bear legends to that effect. The shares of our Class A common stock, the membership interests, the warrants and the shares of our Class A common stock issuable upon the exercise of the warrants have not been registered under the Securities Act, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
/ /3.1 3.13.2 3.3 3.4 3.5 3.53.6 4.13.73.8 4.1 10.61*Asset Purchase Agreement, dated July 14, 2017, between CDS Capital Management, L.C., and Monridge Environmental, LLC.10.62*Amendment to the Operating Agreement, dated October 13, 2017, between Comstock Investors X, L.C. and Comstock Development Services, L.C.10.63*Form of Warrant, dated October 13, 2017, between Comstock Investors X, L.C. and Comstock Development Services, L.C.31.1* 31.2* 32.1* 101*101.INS*Inline XBRL Instance Document 101.SCH* Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101,DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 The following materialscover page from the Company’s QuarterlyCompany's Annual Report on Form10-Q 10-K for the quarteryear ended September 30, 2017,December 31, 2020, formatted in eXtensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheet, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows and (iv) the Notes to the Consolidated Financial Statements.Inline XBRL (included in Exhibit 101)*Filed herewith.COMSTOCK HOLDING COMPANIES, INC. Date: November 16, 2017May 14, 2021 By: S/ CHRISTOPHER CLEMENTEDate: November 16, 2017May 14, 2021 By: S/ CHRISTOPHER L. CONOVERL. ConoverGuthrie