FORM10-Q
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) | ||||
March 31, 2022
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) | ||||
| Delaware | 20-1164345 | |||||
(State or other jurisdiction of
| (I.R.S. Employer
| |||||
1886
230-1985
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
| Class A Common Stock, $0.01 par value | CHCI | NASDAQ Capital Market | ||||||||||||
| Large accelerated filer | ☐ | Accelerated filer | ☐ | ||||||||||||
| Non-accelerated filer | Smaller reporting company | ☒ | |||||||||||||
| Emerging growth company | ☐ | ||||||||||||||
FORM
Item 1. | |||||||||||||
Consolidated Balance Sheets | |||||||||||||
Consolidated Statements of Operations | |||||||||||||
Consolidated Statements of | |||||||||||||
Consolidated Statements of Cash Flows............................................................................................................. | |||||||||||||
Notes to Condensed Consolidated Financial Statements.................................................................................... | |||||||||||||
Management's Discussion and Analysis of Financial Condition............................................................................. | |||||||||||||
Quantitative and Qualitative Disclosures About Market Risk ............................................................................... | |||||||||||||
Controls and Procedures ......................................................................................................................................... | |||||||||||||
Legal Proceedings.................................................................................................................................................... | |||||||||||||
Exhibits.................................................................................................................................................................... | |||||||||||||
SIGNATURES.......................................................................................................................................................................... | |||||||||||||
Condensed Consolidated 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 Notes to Consolidated Financial Statements. 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 Notes to Consolidated Financial Statements. indicated) 3. Pronouncements - Adopted Land and land development costs Cost of construction (including capitalized interest and real estate taxes) 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 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 investments, see Note 4. 2017 2018 Total applicable tenant’s lease, which fee is generally 1% to 4% of the total costs (or total hard costs) of construction of the tenant’s improvements in its premises, or as otherwise agreed to by the parties. 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 Carrying amount Fair value Real estate inventories - Assets General and administrative - Expenses ASSETS Net Working Capital Net Fixed Assets Intangible Assets(1) Goodwill(2) Total Purchase Price FINANCIAL 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 The accompanying notes are an integral part of these consolidated financial statements.COMSTOCK HOLDING COMPANIES, INC. AND SUBSIDIARIESUNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS(AmountsUnaudited; 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 TheMarch 31, December 31, 2022 2021 Assets Current assets: Cash and cash equivalents $ 11,560 $ 15,823 Accounts receivable 802 46 Accounts receivable - related parties 2,505 1,697 Prepaid expenses and other current assets 415 197 Current assets held for sale — 2,313 Total current assets 15,282 20,076 Fixed assets, net 389 264 Leasehold improvements, net 119 — Investments in real estate ventures 7,490 4,702 Operating lease assets 7,161 7,245 Deferred income taxes, net 11,766 11,300 Other assets 90 15 Total assets $ 42,297 $ 43,602 Liabilities and Stockholders' Equity Current liabilities: Accrued personnel costs $ 1,394 $ 3,468 Accounts payable and accrued liabilities 1,104 783 Current operating lease liabilities 667 616 Current liabilities held for sale — 1,194 Total current liabilities 3,165 6,061 Credit facility - due to affiliates 5,500 5,500 Operating lease liabilities 6,744 6,745 Total liabilities 15,409 18,306 Commitments and contingencies (Note 7) 0 0 Stockholders' equity: Series C preferred stock; $0.01 par value; aggregate liquidation preference of $17,203; 20,000 shares authorized; 3,441 issued and outstanding as of March 31, 2022 and December 31, 2021 6,765 6,765 Class A common stock; $0.01 par value; 59,780 shares authorized; 8,232 issued and 8,146 outstanding as of March 31, 2022; 8,102 issued and 8,017 outstanding as of December 31, 2021 82 81 Class B common stock; $0.01 par value; 220 shares authorized, issued, and outstanding as of March 31, 2022 and December 31, 2021 2 2 Additional paid-in capital 200,461 200,617 Treasury stock, at cost (86 shares of Class A common stock) (2,662) (2,662) Accumulated deficit (177,760) (179,507) Total stockholders' equity 26,888 25,296 Total liabilities and stockholders' equity $ 42,297 $ 43,602 notes are an integral part of these consolidated financial statements.AmountsUnaudited; 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 $ — TheThree Months Ended March 31, 2022 2021 Revenue $ 8,731 $ 6,840 Operating costs and expenses: Cost of revenue 6,935 6,078 Selling, general, and administrative 387 299 Depreciation and amortization 44 20 Total operating costs and expenses 7,366 6,397 Income (loss) from operations 1,365 443 Other income (expense) Interest expense (59) (58) Gain (loss) on real estate ventures 252 6 Other income (expense), net — 1 Income (loss) from continuing operations before income tax 1,558 392 Provision for (benefit from) income tax (456) 2 Net income (loss) from continuing operations 2,014 390 Net income (loss) from discontinued operations, net of tax (267) (143) Net income (loss) $ 1,747 $ 247 Weighted-average common stock outstanding: Basic 8,340 8,166 Diluted 8,974 8,997 Net income (loss) per share: Basic - Continuing operations $ 0.24 $ 0.05 Basic - Discontinued operations (0.03) (0.02) Basic net income (loss) per share $ 0.21 $ 0.03 Diluted - Continuing operations $ 0.22 $ 0.05 Diluted - Discontinued operations (0.03) (0.02) Diluted net income (loss) per share $ 0.19 $ 0.03 notes are an integral part of these consolidated financial statements. AND SUBSIDIARIESSeries C Class A Class B Preferred Stock Common Stock Common Stock Treasury Accumulated Shares Amount Shares Amount Shares Amount APIC stock deficit Total Three Months Ended March 31, 2022 Balance as of December 31, 2021 3,441 $ 6,765 8,102 $ 81 220 $ 2 $ 200,617 $ (2,662) $ (179,507) $ 25,296 Issuance of common stock, net of shares withheld for taxes — — 130 1 — — (298) — — (297) Stock-based compensation — — — — — — 142 — — 142 Net income (loss) — — — — — — — — 1,747 1,747 Balance as of March 31, 2022 3,441 $ 6,765 8,232 $ 82 220 $ 2 $ 200,461 $ (2,662) $ (177,760) $ 26,888 Three Months Ended March 31, 2021 Balance as of December 31, 2020 3,441 $ 6,765 7,953 $ 79 220 $ 2 $ 200,147 $ (2,662) $ (193,116) $ 11,215 Issuance of common stock, net of shares withheld for taxes — — 105 2 — — (189) — — (187) Stock-based compensation — — — — — — 183 — — 183 Net income (loss) — — — — — — — — 247 247 Balance as of March 31, 2021 3,441 $ 6,765 8,058 $ 81 220 $ 2 $ 200,141 $ (2,662) $ (192,869) $ 11,458 NOTES TO CONSOLIDATED FINANCIAL STATEMENTSAmounts areUnaudited; in thousands)Three Months Ended March 31, 2022 2021 Operating Activities - Continuing Operations Net income (loss) from continuing operations $ 2,014 $ 390 Adjustments to reconcile net income (loss) from continuing operations to net cash provided by (used in) operating activities: Depreciation and amortization 44 20 Stock-based compensation 197 153 (Gain) loss on real estate ventures (252) (6) Deferred income taxes (456) — Changes in operating assets and liabilities: Accounts receivable (1,689) (1,218) Prepaid expenses and other current assets (218) (92) Accrued personnel costs (2,074) (1,455) Accounts payable and accrued liabilities 322 142 Other assets and liabilities 160 26 Net cash provided by (used in) operating activities (1,952) (2,040) Investing Activities - Continuing Operations Investments in real estate ventures (2,656) — Proceeds from sale of CES 1,016 — Distributions from real estate ventures 18 1,660 Purchase of fixed assets (163) (7) Net cash provided by (used in) investing activities (1,785) 1,653 Financing Activities - Continuing Operations Loan proceeds — 121 Loan payments — (30) Payment of taxes related to the net share settlement of equity awards (297) (196) Net cash provided by (used in) financing activities (297) (105) Discontinued Operations Operating cash flows, net (202) 117 Investing cash flows, net — — Financing cash flows, net (27) — Net cash provided by (used in) discontinued operations (229) 117 Net increase (decrease) in cash and cash equivalents (4,263) (375) Cash and cash equivalents, beginning of period 15,823 7,032 Cash and cash equivalents, end of period $ 11,560 $ 6,657 Supplemental Cash Flow Information Cash paid for interest $ 59 $ 58 Supplemental Disclosure of Non-Cash Investing and Financing Activities Accrued liability settled through issuance of common stock $ — $ 7 Right of use assets and lease liabilities at commencement 209 — number of units, or as otherwise noted)ORGANIZATION AND BASIS OF PRESENTATIONThe accompanying unaudited consolidated financial statements of Company Overviewand subsidiaries (“Comstock”("Comstock" or the “Company”"Company"), founded in 1985 and incorporated in the state of Delaware in 2004, is a leading developer and manager of mixed-use and transit-oriented properties in the Washington, D.C. metropolitan area. As a vertically integrated and multi-faceted asset management and real estate services company, Comstock has designed, developed, constructed, acquired, and managed thousands of residential units and millions of square feet of commercial and mixed-use properties. generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructionsrequirements of the U.S. Securities and Exchange Commission (the “SEC”). As permitted, certain information and footnote disclosures have been condensed or omitted. Intercompany balances and transactions have been eliminated and certain prior period amounts have been reclassified to Form10-Q and Article 8 of RegulationS-X. Suchconform to current period presentation.do not include all of the disclosures required by GAAP for complete financial statements. In our opinion, allnormal and recurring adjustments consisting only of normal recurring adjustments,that are considered necessary for athe fair presentation have been includedof the Company’s financial position and operating results. The results of operations presented in the accompanyingthese interim condensed consolidated financial statements. For further informationstatements are unaudited and a discussionare not necessarily indicative of our significant accounting policies, other than discussed below, referthe results to ourbe expected for the full fiscal year.ourthe Company’s fiscal year 2021 Annual Report on Form10-K for the fiscal year ended December 31, 2016.Comstock Holding Companies, Inc., incorporated in 20042021 (the “2021 Annual Report”) filed with the SEC on March 31, 2022. The consolidated balance sheet as a Delaware corporation, is a multi-faceted real estate development and construction services company focusedof December 31, 2021 was derived from the audited financial statements contained in the Washington, D.C. metropolitan area (Washington, D.C., Northern Virginia and Maryland suburbs of Washington, D.C.). 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 statements to “Comstock,” “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.The Company’s Class A common stock is traded on the NASDAQ Capital Market under the symbol “CHCI” and has no public trading history prior to December 17, 2004.Throughout these consolidated financial statements, amounts are in thousands, except per share data, number of units, or as otherwise noted.For the three and nine months ended September 30, 2017 and 2016, comprehensive income (loss) equaled net income (loss); therefore, a separate statement of comprehensive income (loss) is not included in the accompanying consolidated financial statements.Liquidity and Capital ResourcesWe 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. See Note 13 in the accompanying consolidated financial statements for more details on our credit facilities 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. 2021 Annual Report.generally financed its development and construction activities onreflected CES as 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 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 successfuldiscontinued operation in its efforts. The Company will also continueconsolidated statements of operations for all periods presented. Unless otherwise noted, all amounts and disclosures throughout these Notes to focus on its cost structure in an effortConsolidated Financial Statements relate 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 toCompany's continuing operations. For additional information, see Note 16 for further information regarding this transaction.Our consolidated financial statements have been prepared in accordance with GAAP. these consolidated financial statements in conformity with GAAP requires usmanagement to make estimates and judgmentsassumptions that affect the reported amounts forin the reporting periods. We basefinancial statements and accompanying notes. Significant items subject to such estimates, include, but are not limited to, the valuation of equity method investments and the valuation of deferred tax assets. Assumptions made in the development of these estimates contemplate the macroeconomic landscape and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances. We evaluate these estimates and judgements on an ongoing basis. ActualCompany's anticipated results, however actual results may differ materially from those estimates under different assumptions or conditions.Recently Issuedthese estimates.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,June 2016, the FASB issuedASU 2015-14, which deferred2016-13, “Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments.” This guidance is intended to introduce a revised approach to the effective daterecognition and measurement ofASU 2014-09 for one year, which would make the guidance creditCompany’s first fiscal year beginning after December 15, 2017. Additionally, the FASB has also decided to permit entities to early adopt the standard, which allowsCompany for either full retrospective or modified retrospective methods of adoption, for reportingfinancial statement periods beginning after December 15, 2016. The Company has completed its preliminary evaluation of the impact of the2022, and 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 whatrelated disclosures.Three Months Ended March 31, 2022 2021 Revenue $ 1,460 $ 1,477 Cost of revenue (1,173) (1,087) Selling, general, and administrative (714) (504) Depreciation and amortization — (29) Other income (expense) 150 — Pre-tax income (loss) from continuing operations (277) (143) Provision for (benefit from) income tax (10) — Net income (loss) from discontinued operations $ (267) $ (143) systemsthe net working capital and controls may be warranted. transaction costs related to the sale are finalized.Company expects to adoptfollowing table reconciles the modified retrospective method.In February 2016, the FASB issuedASU 2016-02, “Leases”. The core principlecarrying amounts of the standard is that a lessee should recognize themajor classes of assets and liabilities of discontinued operations to total assets and liabilities of discontinued operations that arisewere classified as held for sale in the consolidated balance sheet as of December 31, 2021 (in thousands):Carrying amounts of major classes of assets held for sale: Accounts receivable $ 2,075 Prepaid expenses and other current assets 129 Total current assets 2,204 Fixed assets, net 106 Intangible assets, net 3 Total assets $ 2,313 Carrying amounts of major classes of liabilities held for sale: Accrued personnel costs $ 153 Accounts payable and accrued liabilities 1,015 Loans payable 26 Total liabilities $ 1,194 March 31, December 31, Description 2022 2021 Investors X $ 1,430 $ 1,484 The Hartford 1,199 1,211 BLVD Forty Four 2,252 2,007 BLVD Ansel 2,609 — Total $ 7,490 $ 4,702 leases. A lessee should recognizeits Class B membership interest in Comstock Investors X, L.C. ("Investors X"), an unconsolidated variable interest entity that owns the Company's residual homebuilding operations. As of March 31, 2022, the residual cash flow primarily relates to anticipated returns of cash backing outstanding letters of credit and cash collateral posted for land development work performed by subsidiaries owned by Investors X. The cash will be released as bond release work associated with these projects is completed. In addition, a subsidiary of Investors X is undergoing a re-zoning of land from commercial to residential and the Company will be entitled to 50% of the profit from the anticipated residential lot sales after re-zoning and land development work is completed. Expected future cash flows include 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. See Note 13 for further information.Balance as of December 31, 2021 $ 4,702 Investments 2,656 Distributions (18) Change in fair value 150 Balance as of March 31, 2022 $ 7,490 Three Months Ended March 31, 2022 2021 Operating lease costs Fixed lease costs $ 240 $ 223 Variable lease costs 86 75 Total operating lease costs $ 326 $ 298 Three Months Ended March 31, 2022 2021 Cash paid for amounts included in measurement of lease liabilities: Operating cash flows from operating lease liabilities $ 160 $ 139 Year Ending December 31, Operating Leases 2022 $ 723 2023 985 2024 1,008 2025 1,031 2026 1,054 Thereafter 4,091 Total future lease payments 8,892 Imputed interest (1,481) Total lease liabilities $ 7,411 to make lease payments (the lease liability)has been incurred anda right-of-use asset representing its right to use the underlying asset foramount can be reasonably estimated. The Company expenses legal defense costs as they are incurred.lease term.ASU 2016-02 is effective for public companies for annual reporting periods beginning after December 15, 2018carrying amount of cash and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluatingcash equivalents, accounts receivable, prepaid and other current assets, accounts payable and accrued liabilities approximated fair value because of 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 Definitionshort-term nature of a Business”, which provides a more robust framework to use in determining when a setthese instruments.assets and activities (collectively referred to as a “set”) is a business. The standard requires that when substantially all ofMarch 31, 2022, based upon unobservable market rates (Level 3), the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a groupCompany’s floating rate debt was estimated to approximate carrying value.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.We assessed other accounting pronouncements issued or effective during the three and nine months ended September 30, 2017 and deemed they were not applicable to us and are not anticipated to have a material effect on our consolidated financial statements.2. REAL ESTATE INVENTORIESAfter impairments 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 provided by the Company or within thetwo-year statutorily mandated structural warranty period for condominiums. Because the Company typically subcontracts its homebuilding work, subcontractors are required to provide the Company with an indemnity and a certificate of insurance prior to receiving payments for their work. Claims relating to workmanship and materials are generally the primary responsibility of the subcontractors and 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 calculation of the reserve, as well as the adequacy of the reserve based on the number of homes still under warranty, are reviewed on a periodic basis. Warranty claims are directly charged to this reserve as they arise.The following table is a summary of warranty reserve activity which is included in ‘Accounts payable 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 estate 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 presented in the accompanying consolidated statements of 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 awards and 15 warrants were included in the computation of dilutive loss per share. As a result of the net loss attributable to common stockholders for the nine months ended September 30, 2017, approximately 29 restricted stock awards and 18 warrants were included in the computation of dilutive loss per share. For the three and nine months ended September 30, 2016, there were no anti-dilutive shares, therefore, no shares were excluded from the computation of dilutive loss per share.6. SEGMENT DISCLOSURESWe operate our business through three segments: Homebuilding, Multi-family, and Real Estate Services. We are currently focused on 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 points 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, we pursue projects in all aspects of real estate management, including strategic planning, land development, entitlement, property management, sales and marketing, workout and turnaround strategies, financing and general construction. We are able to provide a wide range of construction management and general contracting services to other property owners. Our newly formed entity, JK, also provides real estate related environmental services.The following table includes the Company’s three reportable segments of Homebuilding, Multi-family, and Real Estate Services. The Homebuilding and Multi-family segments operate solely within the Company’s single Washington, D.C. area reportable geographic segment, while the Real Estate Services operates in the Washington, D.C., New Jersey, 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 The Company allocates sales, marketing and general and administrative expenses to the individual segments based upon specifically allocable costs.7. INCOME TAXFor 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 the effective tax rate was 2%.The Company has not recorded any accruals related to uncertain tax positions as of September 30, 2017 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 and DecemberMarch 31, 2016, due to the uncertainties surrounding the realization of the deferred tax assets, the Company recorded a full valuation allowance.The Company currently has approximately $139 million in federal and state Net Operating Losses (“NOLs”), which based 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.8. COMMITMENTS AND CONTINGENCIESLitigationCurrently, we are not subject to any material legal proceedings. From time to time, 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; we do not expect 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 2016,2022, the Company had $1.1 million and $1.4 millioncertain equity method investments 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 requiredreal estate ventures that it elected 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 withinrecord at fair value using significant unobservable inputs (Level 3). For further information on 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.9. RELATED PARTY TRANSACTIONSleasesmay also value its corporate headquartersnon-financial assets and liabilities, including items such as long-lived assets, at fair value on a non-recurring basis if it is determined that impairment has occurred. Such fair value measurements typically use significant unobservable inputs (Level 3), unless a quoted market price (Level 1) or quoted prices for similar instruments, quoted prices for identical or similar instruments in inactive markets, or amounts derived from an affiliated entity that is wholly-owned by our Chief Executive Officer. Future minimum lease payments under this leasevaluation models (Level 2) are available.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 managedif, declared 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 andCompany's board of directors, subject to the rights of the holders of all classes of stock outstanding having priority rights to dividends. Holders of Class A common stock are entitled to 1 vote per share and other third-party, accredited investors for an additional principal amountholders of $6.2 million (the “CGF Private Placement”).Simultaneously, on October 17, 2014, the Company enteredClass B common stock are entitled to 15 votes per share. Shares of our Class B common stock are convertible 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 amountequivalent number 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 purchasegenerally convert into shares of our Class A common stock having an aggregate fairupon transfer. As of March 31,2022, the Company had not declared any dividends. $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, non-cumulative, dividend feature as opposed to the mandatory dividend feature in the Series B Preferred Stock.and is redeemable for $5.00 per share. 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’redeemable by holders in the accompanying consolidated balance sheets.event of liquidation or change in control of the Company.difference in fair value2019 Plan provides for the issuance of stock options, stock appreciation rights ("SARs"), restricted stock, restricted stock units, dividend equivalents, performance awards, and stock or other stock-based awards. The 2019 Plan mandates that all lapsed, forfeited, expired, terminated, cancelled and withheld shares, including those from the extinguishmentpredecessor plan, be returned to the 2019 Plan and made available for issuance. The 2019 Plan originally authorized 2.5 million shares of the Series B PreferredCompany's Class A common stock for issuance. As of March 31, 2022, there were 1.4 million shares of Class A common stock available for issuance under the 2019 Plan.issuancegenerally vest in 4 annual installments over the four years period following the grant dates. The Company also grants certain RSU awards to management that contain additional vesting conditions tied directly to a defined performance metric for the Company (“PSUs”). The actual number of PSUs that will vest can range from 60% to 120% of the Series C Preferred original grant target amount, depending upon actual Company performance below or above the established performance metric targets. The Company estimates performance in relation to the defined targets when calculating the related stock-based compensation expense.RSUs
OutstandingWeighted-Average Grant Date Fair Value Balance as of December 31, 2021 847 $ 2.28 Granted 219 4.63 Released (173) 2.72 Canceled/Forfeited (125) 2.31 Balance as of March 31, 2022 768 $ 2.95 Options
OutstandingWeighted-
Average
Exercise
PriceWeighted-
Average
Remaining
Contractual
Term (Years)Aggregate
Intrinsic
ValueBalance as of December 31, 2021 397 $ 2.89 5.7 $ 998 Granted — — Exercised (30) 1.71 Canceled/Forfeited (3) 2.24 Expired (46) 4.48 Balance as of March 31, 2022 318 $ 2.78 5.6 $ 1,122 Exercisable as of March 31, 2022 298 $ 2.78 4.7 $ 1,054 $1,011the Company's revenue for the three months ended March 31, 2022 and December 31, 2021 was recorded in ‘Stockholders’ equity’generated in the accompanying consolidated balance sheets. United States. The following tables summarize the Company’s revenue by line of business, customer type, and contract type (in thousands):Three Months Ended March 31, 2022 2021 Revenue by Line of Business Asset management $ 5,997 $ 4,893 Property management 2,131 1,630 Parking management 603 317 Total revenue $ 8,731 $ 6,840 Three Months Ended March 31, 2022 2021 Revenue by Customer Type Related party $ 8,640 $ 6,825 Commercial 91 15 Total revenue $ 8,731 $ 6,840 Three Months Ended March 31, 2022 2021 Revenue by Contract Type Fixed-price $ 1,887 $ 815 Cost-plus 4,770 4,290 Time and material 2,074 1,735 Total revenue $ 8,731 $ 6,840 and nine months ended SeptemberMarch 31, 2022, the Company recognized a $0.5 million tax benefit stemming from the tax impact of a $0.7 million release of a deferred tax asset valuation allowance in the period. This recognized tax benefit was supported by the Company's recent trend of positive net income from continuing operations and expectation that current operations will continue to generate future taxable income.Three Months Ended March 31, 2022 2021 Numerator: Net income (loss) from continuing operations - Basic and Diluted $ 2,014 $ 390 Net income (loss) from discontinued operations - Basic and Diluted (267) (143) Denominator: Weighted-average common shares outstanding - Basic 8,340 8,166 Effect of common share equivalents 634 831 Weighted-average common shares outstanding - Diluted 8,974 8,997 Net income (loss) per share: Basic - Continuing operations $ 0.24 $ 0.05 Basic - Discontinued operations (0.03) (0.02) Basic net income (loss) per share $ 0.21 $ 0.03 Diluted - Continuing operations $ 0.22 $ 0.05 Diluted - Discontinued operations (0.03) (0.02) Diluted net income (loss) per share $ 0.19 $ 0.03 Three Months Ended March 31, 2022 2021 Restricted stock units — — Stock options 27 46 Warrants 76 149 2016, 17,4112019, CHCI Asset Management, LC ("CAM") entered into the 2019 Asset Management Agreement ("2019 AMA") with CP Real Estate Services, LC (“CPRES”), formerly Comstock Development Services, LC, which amended and 51,848 sharesrestated in its entirety the prior asset management agreement between the parties with an effective date as of January 1, 2018. Pursuant to the 2019 AMA, CPRES engages CAM to manage and administer the Anchor Portfolio and the day to-day operations of CPRES and each property-owning subsidiary of CPRES (collectively, the “CPRES Entities”).Series B Preferred Stock, respectively, with a liquidation valueAnchor Portfolio. CPRES pays the Company and its subsidiaries annual fees equal to the greater of $87 and $259, respectively, were paidin-kind as dividends, and areeither (i) an aggregate amount equal to the sum of (a) an asset management fee equal to 2.5% of revenues generated by properties included in ‘Stockholders’ equity’the Anchor Portfolio; (b) a construction management fee equal to 4% of all costs associated with Anchor Portfolio projects in development; (c) a property management fee equal to 1% of the Anchor Portfolio revenues, (d) an acquisition fee equal to up to 0.5% of the purchase price of acquired assets; and (f) a disposition fee equal to 0.5% of the sales price of an asset on disposition; or (ii) an aggregate amount equal to the sum of (x) the employment expenses of personnel dedicated to providing services to the Anchor Portfolio pursuant to the 2019 AMA, (y) the costs and expenses of the Company related to maintaining the public listing of its shares and complying with related regulatory and reporting obligations, and (z) a fixed annual payment of $1.0 million.accompanying consolidated balance sheets. Formanagement and operation of each property.nine months ended September 30, 2017, 15,663 sharesCompany receives fees to provide certain construction management and supervision services, including construction supervision and management of the Series B Preferred Stock withbuildout of certain tenant premises. The Company receives a liquidation value of $78 were paidin-kind as dividends and are included in ‘Stockholders’ equity’flat construction management fee for each engagement under a work authorization based upon the construction management or supervision fee set forth in the accompanying consolidated balance sheets.24, 2017,2022, the Company entered into joint ventures with Partners to acquire BLVD Forty Four and BLVD Ansel, respectively, two adjacent mixed-use luxury high-rise apartment buildings located near the Rockville Metro Station in Montgomery County, Md. The Company considers BLVD Forty Four and BLVD Ansel to be variable interest entities upon which it exercises significant influence; however, considering key factors such as the Company’s ownership interest and participation in policy-making decisions by majority equity holders, the Company concluded that it does not have a controlling financial interest in either property. See Note 4 for further information.share repurchasefive-year lease 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 agreementparking operations monitoring center 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 whollyaffiliate controlled and 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 expensesOfficer 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,family, 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 DISCLOSURESThe carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, 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).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 debt: September 30,
2017 December 31,
2016 $ 44,046 $ 43,704 $ 43,579 $ 44,986 Fair value estimates are made at a specific point in time, based on relevant market information about the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.The Company may also value itsnon-financial assets and liabilities, including items such as real estate inventories and long 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. RESTRICTED STOCK, STOCK OPTIONS AND OTHER STOCK PLANSThe Company did not issue restricted stock awards during the three months ended September 30, 2017. During the nine months ended September 30, 2017, the Company issued 192 thousand stock options and 245 thousand restricted stock awards to employees. No stock options or restricted stock awards were issued during the three and nine months ended September 30, 2016.Stock-based compensation expense associated with restricted stock and stock options is recognized based on the grant date fair value of the award over its vesting period. The following table reflects the 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 Under net settlement procedures currently applicable to our outstanding restricted stock awards for employees, upon each settlement date and election by the employees, restricted stock awards are withheld to cover the required withholding tax, which is based on the value of the restricted stock award on the settlement date as determined by the closing price of our Class A common stock on the trading day immediately preceding the applicable settlement date. The remaining amounts are delivered to the recipient as shares of our Class A common stock.As of September 30, 2017, the weighted-average remaining contractual term of unexercised stock options was 7 years. As of September 30, 2017 and December 31, 2016, there was $0.6 million and $0.1 million, respectively, of unrecognized compensation cost related to stock grants.16. BUSINESS ACQUISITIONOn July 17, 2017, JK Environmental Services, LLC, (“JK”) an entity wholly owned by CDS Capital Management, L.C., a subsidiary of Comstock, purchased all of the business assets of Monridge Environmental, LLC for $2.3 million. The acquisition was consummated as part of the Company’s efforts to expand its footprint in the real estate services market. 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. JK’s operations since the date of acquisition are included in the Company’s consolidated statement of 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 assets 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 16, 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.COMSTOCK HOLDING COMPANIES, INC. AND SUBSIDIARIESMANAGEMENT’S DISCUSSION AND ANALYSISlandlord.ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Notes Regarding Forward-looking Statements
This report includes forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by the use of words such as “anticipate,” “believe,” “estimate,” “may,” “likely,” “intend,” “expect,” “will,” “should,” “seeks” or other similar words or expressions. Forward-looking statements are based largely on our expectations and involve inherent risks and uncertainties, many of which are beyond our control. You should not place undue reliance onspecifically disclaim, any forward-looking statement, which speaks only as of the date made. Some factors which may affect the accuracy of the forward-looking statements apply generally to the real estate industry, while other factors apply specifically to us. Any number of important factors could cause actual results to differ materially from those in the forward-looking statements including, without limitation: general economic and market conditions, including interest rate levels; our ability to service our debt; inherent risks in investment in real estate; our ability to compete in the markets in which we operate; economic risks in the markets in which we operate, including actions related to government spending; delays in governmental approvals and/or land development activity at our projects; regulatory actions; our ability to maintain compliance with stock market listing rules and standards; fluctuations in operating results; our anticipated growth strategies; shortages and increased costs of labor or building materials; the availability and cost of land in desirable areas; natural disasters; our ability to raise debt and equity capital and grow our operations on a profitable basis; and our continuing relationships with affiliates. Additional information concerning these and other important risk and uncertainties can be found under the heading “Risk Factors” in our Annual Report on Form10-K for the fiscal year ended December 31, 2016. Our actual results could differ materially from these projected or suggested by the forward-looking statements. The Company undertakes no obligation to update publicly or revise any forward-looking statements in lightto reflect the occurrence of new informationevents or future events,circumstances after the date of such statements except as required by law.
| Anchor Portfolio | |||||
| Reston Station | Mixed-use development on Metro's Silver Line (Phase I); strategically located between Tyson's Corner, Va. and Dulles International Airport | ||||
| Loudoun Station | Mixed-use development on Metro's Silver Line (Phase II); first Metro-connected development in Loudoun County, Va. | ||||
| Herndon Station | Mixed-use development in the historic downtown portion of Herndon, Va.; focus of public-private partnership with Town of Herndon | ||||
| Investments/Assets Under Management | |||||
| The Hartford Building | Joint venture; 211,000 square foot mixed-use building on Metro's Orange Line in Arlington, Va. | ||||
| BLVD Forty Four | Joint venture; 15-story, luxury high-rise apartment building near Rockville Metro Station in Montgomery County, Md.; adjacent to BLVD Ansel | ||||
| BLVD Ansel | Joint venture; 18-story, luxury high-rise apartment building near Rockville Metro Station in Montgomery County, Md.; adjacent to BLVD Forty Four | ||||
| International Gateway | Various real-estate services provided for two privately-owned mixed-use buildings located in Tyson's Corner, Va. | ||||
| Investors X | Investment in company that owns residual homebuilding operations | ||||
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Revenue | $ | 8,731 | $ | 6,840 | |||||||
| Operating costs and expenses: | |||||||||||
| Cost of revenue | 6,935 | 6,078 | |||||||||
| Selling, general, and administrative | 387 | 299 | |||||||||
| Depreciation and amortization | 44 | 20 | |||||||||
| Total operating costs and expenses | 7,366 | 6,397 | |||||||||
| Income (loss) from operations | 1,365 | 443 | |||||||||
| Other income (expense) | |||||||||||
| Interest expense | (59) | (58) | |||||||||
| Gain (loss) on equity method investments | 252 | 6 | |||||||||
| Other income | — | 1 | |||||||||
| Income (loss) from continuing operations before income tax | 1,558 | 392 | |||||||||
| Provision for (benefit from) income tax | (456) | 2 | |||||||||
| Net income (loss) from continuing operations | 2,014 | 390 | |||||||||
| Net income (loss) from discontinued operations, net of tax | (267) | (143) | |||||||||
| Net income (loss) | $ | 1,747 | $ | 247 | |||||||
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||
| 2022 | 2021 | Change | |||||||||||||||||||||||||||||||||
| Net Sales | % | Net Sales | % | $ | % | ||||||||||||||||||||||||||||||
| Asset management | $ | 5,997 | 68.7 | % | $ | 4,893 | 71.5 | % | $ | 1,104 | 22.6 | % | |||||||||||||||||||||||
| Property management | 2,131 | 24.4 | % | 1,630 | 23.8 | % | 501 | 30.7 | % | ||||||||||||||||||||||||||
| Parking | 603 | 6.9 | % | 317 | 4.7 | % | 286 | 90.2 | % | ||||||||||||||||||||||||||
| Total revenue | $ | 8,731 | 100.0 | % | $ | 6,840 | 100.0 | % | $ | 1,891 | 27.6 | % | |||||||||||||||||||||||
| Three Months Ended March 31, | Change | ||||||||||||||||||||||
| 2022 | 2021 | $ | % | ||||||||||||||||||||
| Cost of revenue | $ | 6,935 | $ | 6,078 | $ | 857 | 14.1 | % | |||||||||||||||
| Selling, general, and administrative | 387 | 299 | 88 | 29.4 | % | ||||||||||||||||||
| Depreciation and amortization | 44 | 20 | 24 | 120.0 | % | ||||||||||||||||||
| Total operating costs and expenses | $ | 7,366 | $ | 6,397 | $ | 969 | 15.1 | % | |||||||||||||||
| Three Months Ended March 31, | Change | ||||||||||||||||||||||
| 2022 | 2021 | $ | % | ||||||||||||||||||||
| Interest expense | $ | (59) | $ | (58) | $ | (1) | 1.7 | % | |||||||||||||||
| Gain (loss) on equity method investments | 252 | 6 | 246 | 4100.0 | % | ||||||||||||||||||
| Other income | — | 1 | (1) | (100.0) | % | ||||||||||||||||||
| Total other income (expense) | $ | 193 | $ | (51) | $ | 244 | (478.4) | % | |||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| Net income (loss) from continuing operations | $ | 2,014 | $ | 390 | |||||||||||||||||||
| Interest expense, net | 59 | 58 | |||||||||||||||||||||
| Income taxes | (456) | 2 | |||||||||||||||||||||
| Depreciation and amortization | 44 | 20 | |||||||||||||||||||||
| Stock-based compensation | 197 | 153 | |||||||||||||||||||||
| (Gain) loss on equity method investments | (252) | (6) | |||||||||||||||||||||
| Adjusted EBITDA | $ | 1,606 | $ | 617 | |||||||||||||||||||
We are currently operating, or developing in multiple counties throughout the Washington, D.C. area market. availability of capital to fund our present operations and meet our commitments on our existing debt.
| 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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Results of Operations
Three and nine months ended September 30, 2017 compared to three and nine months ended September 30, 2016
Settlements, orders, cancellations and backlog
The following table summarizes certain information related to new orders, settlements, and backlogcash flows 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 | ||||||||
Revenue – homebuilding
Revenue from homebuilding increased by $0.2 million to $13.1 million for the three months ended September 30, 2017 as compared to $12.9 million revenue for the three months ended September 30, 2016. For the three months ended September 30, 2017, the Company settled 24 units (8 units at Marrwood, 1 unit at Emerald Farm, 1 unit at Leeland, 1 unit at The Towns at 1333, 7 units at Falls Grove, 1 unit at The Woods at Spring Ridge, and 5 units at Totten Mews), as compared to 33 units (19 units at Falls Grove, 4 units at Maxwell Square, 1 unit at Two Rivers, and 9 units at Hallcrest) for the three months ended September 30, 2016. Our homebuilding gross margin percentage for the three months ended September 30, 2017 decreased by 2.4% to 4.5%, as compared to 6.9% for the three months ended September 30, 2016.
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 our real estate services segment to expand our footprint in the real estate consulting and 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.
General and administrative
General and administrative expenses for the three months ended September 30, 2017 increased by $0.1 million to $1.3 million, as compared to $1.2 million for the three months ended September 30, 2016. General and administrative expenses for the nine months ended September 30, 2017 decreased by $0.5 million to $3.7 million, as compared to $4.2 million for the nine months ended September 30, 2016. The year-over-year decrease is attributable to attrition in employee head count and general overhead cost saving measures.
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 rate 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 the acquisition of three properties during the three months ended September 30, 2016, coupled with a net operating loss of $3.5 million. These were offset by the amortization of loan discounts and other financing fees of $0.8 million, increases in prepaid projects costs of $0.5 million, increases in accrued interest of $0.4 million, and increases in accounts payable and other accrued liabilities of $4.6 million.
indicated (in thousands):
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Continuing operations | |||||||||||
| Net cash provided by (used in) operating activities | $ | (1,952) | $ | (2,040) | |||||||
| Net cash provided by (used in) investing activities | (1,785) | 1,653 | |||||||||
| Net cash provided by (used in) financing activities | (297) | (105) | |||||||||
| Total net increase (decrease) in cash - continuing operations | (4,034) | (492) | |||||||||
| Discontinued operations, net | (229) | 117 | |||||||||
| Net increase (decrease) in cash and cash equivalents | $ | (4,263) | $ | (375) | |||||||
CES divestiture.
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.
Recently Issued Accounting Standards
See Note 1 to the accompanying consolidated financial statements included in this Quarterly Report on Form10-Q.
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.
Off Balance Sheet Arrangements
None.
Quantitative and Qualitative Disclosures About Market RiskITEMQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Controls and Procedures internal control over financial reporting that is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States.ITEMCONTROLS AND PROCEDURESWe have evaluated, withparticipationCEO and CFO, performed an evaluation of our Chief Executive Officerthe effectiveness of the design and our Chief Financial Officer, the effectivenessoperation of our disclosure controls and procedures (as defined in Rules13a-15(e) and15d-15(e) of the Securities Exchange Act)Act of 1934 (the “Exchange Act”)).September 30, 2017. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded thatMarch 31, 2022, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. We maintain a system of September 30, 2017.met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of its inherent limitations,met, therefore internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, a control may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.Changes in Internal ControlNo changes have occurred in our internal control over financial reporting (as defined in Rules13a-15(f) and15d-15(f) of the Exchange Act) during the quarter ended September 30, 2017, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Legal Proceedings ITEMLEGAL PROCEEDINGS87 in the Notes to the accompanying consolidated financial statementsCondensed Consolidated Financial Statements included in Part I of this Quarterly Report on Form10-Q.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 SALESTABLE 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.
/ /ITEMEXHIBITSExhibitsExhibit
NumberIncorporated by Reference Description Form Exhibit Filing Date 3.1 10-Q 3.1 November 16, 2015 3.2 10-K 3.2 March 31, 2005 3.3 8-K 3.1 March 27, 2015 3.4 8-K 3.2 March 27, 2015 3.5 8-K 3.1 January 4, 2016 3.6 8-K 3.1 March 28, 2017 3.7 8-K 3.2 February 19, 2019 3.8 8-K 3.1 February 19, 2019 4.1 S-1 4.1 August 13, 2004 10.1* 10.2* 10.3* 31.1* 31.2* 32.1‡ 101.INS* Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Filed herewith ‡ Furnished herewith *Filed herewith.COMSTOCK HOLDING COMPANIES, INC. Date: NovemberMay 16, 20172022 By: S/ CHRISTOPHER CLEMENTEChristopher Clemente
Chairman and Chief Executive Officer(Principal Executive Officer)Date: NovemberMay 16, 20172022 By: S/ CHRISTOPHER L. CONOVERChristopher L. ConoverGuthrie
Chief Financial Officer(Principal Financial Officer and Principal Accounting Officer)