What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-11-16 compared with 2020-08-14 · 172 added, 146 removed, 580 unchanged (35% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

September 30,

2020 December 31,

25 unchanged sentences

STOCKHOLDERS’ EQUITY

Series C preferred stock $ 0.01 par value, 20,000,000 shares authorized, 3,440,690 issued and outstanding and liquidation preference of $ 17,203 at June 30, 2020 and December 31, 2019

Series C preferred stock $ 0.01 par value, 20,000,000 shares authorized, 3,440,690 issued and outstanding and liquidation preference of $ 17,203 at September 30, 2020 and December 31, 2019

$ 6,765 $ 6,765

Class A common stock, $ 0.01 par value, 59,779,750 shares authorized, 7,941,776 and 7,849,756 issued, and 7,856,206 and 7,764,186 outstanding at June 30, 2020 and December 31, 2019, respectively

Class B common stock, $ 0.01 par value, 220,250 shares authorized, issued and outstanding at June 30, 2020 and December 31, 2019

Class A common stock, $ 0.01 par value, 59,779,750 shares authorized, 7,949,152 and 7,849,756 issued, and 7,863,582 and 7,764,186 outstanding at September 30, 2020 and December 31, 2019, respectively

Class B common stock, $ 0.01 par value, 220,250 shares authorized, issued and outstanding at September 30, 2020 and December 31, 2019

Additional paid-in capital 199,953 199,372

9 unchanged sentences

(in thousands, except per share data)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

9 unchanged sentences

Interest expense ( 63 ) ( 170 ) ( 320 ) ( 304 )

Income (loss) before income tax expense 1,234 ( 78 ) 1,270 378

Income before income tax expense 470 45 1,740 423

Income tax expense ( 1 ) — ( 15 ) —

17 unchanged sentences

Preferred Stock

capital Treasury

stock Accumulated

deficit Total

Shares Amount Shares Amount Shares Amount

Balance at December 31, 2019 3,441 $ 6,765 7,850 $ 78 220 $ 2 $ 199,372 $ ( 2,662 ) $ ( 195,198 ) $ 8,357

7 unchanged sentences

Shares withheld related to net share settlement of restricted stock awards — — ( 16 ) — — — ( 30 ) — — ( 30 )

Warrant exercises — — 200 2 — — 358 — — — 360

Class A stock conversion of non-controlling interest — — 3,824 38 — — 16,050 — — ( 16,019 ) 69

Series C conversion of non-controlling interest 641 ( 428 ) — — — — — — — — ( 428 )

Net (loss) income — — — — — — — — ( 237 ) 13 ( 224 )

Balance at June 30, 2019 3,441 $ 6,765 7,815 $ 78 220 $ 2 $ 198,358 $ ( 2,662 ) $ ( 196,243 ) $ — $ 6,298

Net income — — — — — — — — 1,180 1,180

Balance at Balance at June 30, 2020 3,441 $ 6,765 7,942 $ 79 220 $ 2 $ 199,767 $ ( 2,662 ) $ ( 194,030 ) $ 9,921

Stock compensation and issuances — — 3 — — — 179 — — 179

Accrued liability settled through issuance of stock — — 5 — — — 14 — — 14

Shares withheld related to net share settlement of restricted stock awards — — ( 1 ) — — — ( 7 ) — — ( 7 )

Net income — — — — — — — — 423 423

Balance at September 30, 2020 3,441 $ 6,765 7,949 $ 79 220 $ 2 $ 199,953 $ ( 2,662 ) $ ( 193,607 ) $ 10,530

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

3 unchanged sentences

Preferred Stock

capital Treasury

stock Accumulated

deficit Total

Shares Amount Shares Amount Shares Amount

Balance at December 31, 2018 2,800 $ 7,193 3,703 $ 37 220 $ 2 $ 181,632 $ ( 2,662 ) $ ( 196,091 ) $ 15,706 $ 5,817

7 unchanged sentences

Shares withheld related to net share settlement of restricted stock awards — — ( 2 ) — — — — — — — —

Net income — — — — — — — — 1,180 1,180

Warrant exercises — — 200 2 — — 358 — — — 360

Class A stock conversion of non-controlling interest — — 3,824 38 — — 16,050 — — ( 16,019 ) 69

Series C conversion of non-controlling interest 641 ( 428 ) — — — — — — — — ( 428 )

Net (loss) income — — — — — — — — ( 237 ) 13 ( 224 )

Balance at June 30, 2019 3,441 $ 6,765 7,815 $ 78 220 $ 2 $ 198,358 $ ( 2,662 ) $ ( 196,243 ) $ — $ 6,298

Stock compensation and issuances — — — — — — 134 — — — 134

Accrued liability settled through issuance of stock — — 17 — — — 35 — — — 35

Gain on deconsolidation of discontinued operations — — — — — — 682 — — — 682

Net (loss) income — — — — — — — — ( 627 ) — ( 627 )

Balance at September 30, 2019 3,441 $ 6,765 7,832 $ 78 220 $ 2 $ 199,209 $ ( 2,662 ) $ ( 196,870 ) $ — $ 6,522

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

2 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

Net income $ 1,168 $ 378

Adjustment to reconcile net (loss) income from continuing operations to net cash (used in) provided by operating activities

Net income (loss) $ 1,591 $ ( 183 )

Adjustment to reconcile net income (loss) from continuing operations to net cash provided by operating activities

Amortization of loan discount, loan commitment and deferred financing fees 27 82

12 unchanged sentences

Accounts payable ( 1,130 ) ( 2,596 )

Lease liabilities 6 —

Net cash provided by operating activities of discontinued operations — 7,429

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Net cash used in financing activities $ ( 1,568 ) $ ( 166 )

Net (decrease) increase in cash and cash equivalents ( 368 ) 781

Net increase in cash and cash equivalents 980 6,648

Cash and cash equivalents, beginning of period 3,511 854

4 unchanged sentences

Accrued liability settled through issuance of stock $ 54 $ 106

Gain on early extinguishment of debt $ 50 $ —

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

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The Consolidated Balance Sheet as of December 31, 2019 was derived from the audited financial statements contained in the 2019 Form 10-K.

For the three and six months ended June 30, 2020 and 2019, comprehensive income (loss) equaled net income (loss);

For the three and nine months ended September 30, 2020 and 2019, comprehensive income (loss) equaled net income (loss);

therefore, a separate statement of comprehensive income (loss) is not included in the accompanying consolidated financial statements.

Certain amounts in the prior period have been reclassified to conform to the current year presentation in connection with the classification of 'General and administrative' expenses on the consolidated statement of operations and the accompanying notes to the consolidated financial statements.

The reclassification had no effect on the previously reported totals (e.g.

operating income, income before income tax, and net income).

Recent Developments

On July 30, 2020, the Company retired an unsecured seller-financed promissory note with an outstanding balance of $ 595 thousand.

The Company received a $ 50 thousand discount to retire the note prior to maturity.

The gain on extinguishment will be reflected in the Company's third quarter results.

See Note 8 - Debt and Note 20 - Subsequent Events for more information.

In March 2020, the Coronoavirus Aid Relief and Economic Security Act ("CARES Act") was signed into law in response to the COVID-19 pandemic, and we opted into the CARES Act payroll tax deferral program in the third quarter of 2020.

See Note 9 - Coronavirus Aid Relief and Economic Security Act' for further discussion.

On October 31, 2020, the Company’s then-current lease for its corporate headquarters in Reston, Virginia expired following a one-month extension of the lease term.

On November 1, 2020, the Company agreed to a new lease to relocate its corporate headquarters to new office space in Reston, Virginia for a ten year term.

See Note 20 - Subsequent Events for further discussion.

Use of Estimates

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The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts for the reporting periods.

We base these estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances.

We base these estimates and judgments on historical experience and on various other factors that we believe to

be reasonable under the circumstances.

We evaluate these estimates and judgments on an ongoing basis.

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We do not expect the adoption of this pronouncement to have a material impact on our consolidated financial statements.

We assessed other accounting pronouncements issued or effective during the three and six months ended June 30, 2020 and deemed they were either not applicable to us or are not anticipated 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, 2020 and deemed they were either not applicable to us or are not anticipated to have a material effect on our consolidated financial statements.

Other standards previously issued and adopted by the Company have been disclosed in previous filings.

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All financial statements and footnotes presented herein have been adjusted to reflect the revisions below.

For the three months ended June 30, 2019 For the six months ended June 30, 2019

For the three months ended September 30, 2019 For the nine months ended September 30, 2019

As previously

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The Company records an allowance for doubtful accounts based on historical collection experience and the aging of receivables.

As of June 30, 2020, the allowance for doubtful accounts was de minimis based on the Company’s historical collection experience for receivables older than 90 days along with an analysis of collections received after the filing date.

As of June 30, 2020 and December 31, 2019, the Company had $ 3.0 million and $ 3.6 million, respectively, of receivables from related parties, primarily related to the 2019 AMA, as defined in Note 15.

As of September 30, 2020, the allowance for doubtful accounts was de minimis based on the Company’s historical collection experience for receivables older than 90 days along with an analysis of collections received as of the filing date.

As of September 30, 2020 and December 31, 2019, the Company had $ 3.0 million and $ 3.6 million, respectively, of receivables from related parties, primarily related to the 2019 AMA, as defined in Note 15.

The Company does not record an allowance for doubtful accounts related to receivables from related parties.

5 unchanged sentences

Fair value of equity method investments are classified as Level 3 of the fair value hierarchy.

As of June 30, 2020 and December 31, 2019, the Company had equity method investments in real estate ventures at fair value of $ 7.6 million and $ 8.4 million, respectively.

As of September 30, 2020 and December 31, 2019, the Company had equity method investments in real estate ventures at fair value of $ 7.0 million and $ 8.4 million, respectively.

The table below shows the change in the Company’s investments in real estate ventures reported at fair value.

Six Months Ended

June 30, 2020

Nine Months Ended

September 30, 2020

Fair value of investments as of December 31, 2019 $ 8,421

1 unchanged sentence

Change in fair value ( 134 )

Fair value of investments as of June 30, 2020 $ 7,616

Fair value of investments as of September 30, 2020 $ 6,965

See Note 15 – Related Party Transactions for additional discussion of our investments in real estate ventures at fair value.

1 unchanged sentence

(“Investors X”), a Variable Interest Entity (“VIE”) that owns the Company’s residual homebuilding operations at fair value.

Fair value is determined using a discounted cash flow model based on expected future cash flows for income and realization events of the underlying asset.

Fair value is determined using a discounted cash flow model based on expected future cash flows for income and realization events of the

underlying asset.

Expected future cash flows includes contractually fixed revenues and expenses as well as estimates for future revenues and expenses where contracts do not currently exist.

These estimates are based on prior experience as well as comparable, third party data.

As of June 30, 2020 and December 31, 2019, the fair value of the Company’s investment in Investors X is $ 6.4 million and $ 7.2 million, respectively.

The Company received distributions of $ 144 thousand and $ 514 thousand during the three and six months ended June 30, 2020, respectively, and recognized a loss in fair value of $ 73 thousand and $ 42 thousand, respectively.

Summarized Financial Information for Investors X

Three Months Ended June 30, Six Months Ended June 30,

As of September 30, 2020 and December 31, 2019, the fair value of the Company’s investment in Investors X is $ 5.8 million and $ 7.2 million, respectively.

The Company received distributions of $ 581 thousand and $ 1,239 thousand during the three and nine months ended September 30, 2020, respectively, and recognized a loss in fair value of $ 47 thousand and $ 161 thousand, respectively.

Summarized Financial Information for Investors X (unaudited)

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Statement of Operations:

1 unchanged sentence

Direct costs 4,653 3,750 10,915 3,750

Net income $ 458 $ 936

Net income (loss) $ 425 $ ( 678 ) $ 1,361 $ ( 678 )

Comstock Holding Companies, Inc.

share of net income $ 458 $ 936

share of net income (loss) $ 425 $ ( 678 ) $ 1,361 $ ( 678 )

On December 30, 2019, the Company made an investment related to the purchase of a stabilized commercial office building located at 3101 Wilson Boulevard in the Clarendon area of Arlington County, Virginia (the “Hartford”).

The Company will retain a 2.5 % equity interest in the asset at a cost of approximately $ 1.2 million.

The Company owns a 2.5 % equity interest in the asset at a cost of approximately $ 1.2 million.

The Company has elected to account for the equity method investment in the Hartford at fair value.

Fair value is determined using an income approach and sales comparable approach models.

As of June 30, 2020 and December 31, 2019, the fair value of the Company’s investment in the Hartford was $ 1.2 million.

The fair value of the Hartford increased by $ 27 thousand during the three and six months ended June 30, 2020.

The Company received distributions of $ 59 thousand during the three and six months ended June 30, 2020.

Summarized Financial Information for the Hartford

Three Months Ended June 30, Six Months Ended June 30,

As of September 30, 2020 and December 31, 2019, the fair value of the Company’s investment in the Hartford was $ 1.1 million.

The fair value of the Hartford remained at approximately $ 1.2 million during the three and nine months ended September 30, 2020.

The Company received distributions of $ 24 thousand and $ 83 thousand during the three and nine months ended September 30, 2020, respectively.

Summarized Financial Information for the Hartford (unaudited)

Three Months Ended September 30, Nine Months Ended September 30,

Statement of Operations:

2 unchanged sentences

Other costs 2,366 6,257

Net income $ ( 594 ) $ ( 985 )

Net loss $ ( 694 ) $ ( 1,679 )

Comstock Holding Companies, Inc.

share of net income $ ( 15 ) $ ( 25 )

share of net loss $ ( 17 ) $ ( 42 )

GOODWILL & INTANGIBLES

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We assess the recoverability of the unamortized balance of our intangible assets when indicators of impairment are present based on expected future profitability and undiscounted expected cash flows and their contribution to our overall operations.

Should the review indicate that the carrying value is not fully recoverable, the excess of the carrying value over the fair value of the intangible assets would be recognized as an impairment loss.

Should the review indicate that the carrying value is not fully recoverable, the excess of the carrying value over the fair value of the intangible assets would be recognized as

an impairment loss.

As of the acquisition date, goodwill consisted primarily of synergies resulting from the combination, expected expanded opportunities for growth and production, and savings in corporate overhead costs.

1 unchanged sentence

In addition, we regularly evaluate whether events and circumstances have occurred that may indicate a potential change in recoverability of goodwill.

We perform interim goodwill impairment reviews between our annual reviews if certain events and circumstances have occurred, including a deterioration in general economic conditions, an increased competitive environment, a change in management, key personnel, strategy or customers, significant or unusual changes in market capitalization, negative or declining cash flows, or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior

During the three months ended March 31, 2020 we considered the impact of the coronavirus ("COVID-19") pandemic and the resulting economic impact a triggering event and performed a goodwill impairment review.

There were no events indicating a potential change in recoverability of goodwill during the three months ended June 30, 2020.

There were no events indicating a potential change in recoverability of goodwill during the three months ended September 30, 2020.

When assessing goodwill for impairment, the Company may first assess qualitative factors to evaluate whether it is more likely than not that the fair value of a reporting unit is less than it's carrying amount or elect to bypass such assessment.

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For the three months ended March 31, 2020 the Company determined that there was no impairment to goodwill.

As of June 30, 2020 and December 31, 2019, the balance of goodwill was $ 1.7 million.

As of September 30, 2020 and December 31, 2019, the balance of goodwill was $ 1.7 million.

This goodwill is reflected within our Real Estate Services segment.

Intangible assets include customer relationships which have an amortization period of four years .

During the three and six months ended June 30, 2020, $ 17 thousand and $ 33 thousand of intangible asset amortization was recorded in ‘ General and administrative’ expense on the Consolidated Statements of Operations, respectively.

During the three and nine months ended September 30, 2020, $ 17 thousand and $ 50 thousand of intangible asset amortization was recorded in ‘ General and administrative’ expense on the Consolidated Statements of Operations, respectively.

September 30,

2020 December 31,

1 unchanged sentence

( 215 ) ( 165 )

As of June 30, 2020, the future estimated amortization expense related to these intangible assets was:

As of September 30, 2020, the future estimated amortization expense related to these intangible assets was:

2020 (3 months ended December 31, 2020) $ 13

8 unchanged sentences

The incremental borrowing rate is determined at lease commencement, or as of January 1, 2019 for operating leases in existence upon adoption of ASC 842.

The Company has operating leases for its office facilities as well as for office equipment.

The Company's leases have remaining terms of less than one year to 3 years.

The leases can contain various renewal and termination options.

which is subject to an option to extend the lease is included in the lease term if it is reasonably certain that the option will be exercised.

The period which is subject to an option to extend the lease is included in the lease term if it is reasonably certain that the option will be exercised.

The period which is subject to an option to terminate the lease is included if it is reasonably certain that the option will not be exercised.

Lease costs related to the Company's operating leases are generally recognized as a single ratable lease cost over the lease term.

Maturities of lease liabilities as of June 30, 2020 are as follows:

2020 (6 months ended December 31) $ 27

Total lease payments

imputed interest

Present value of lease liabilities $ 85

As of June 30, 2020, operating lease payments include $ 54 thousand related to options to extend lease terms that are reasonably certain of being exercised.

The Company does no t have any lease liabilities which have not yet commenced as of June 30, 2020.

On August 1, 2020 the Company terminated an office lease which it had previously determined would be reasonably certain to continue until 2022.

The Company subsequently executed a month-to-month lease agreement for the office space.

The Company does not expect the new month-to-month lease to continue for more than twelve months.

As such, the Company has elected the practical expedient to not follow the recognition requirements of Topic 842 for this agreement and instead to recognize the lease payments as lease cost on a straight-line basis over the lease term.

The Company does no t have any lease liabilities which have not yet commenced as of September 30, 2020.

On October 31, 2020, the Company’s then-current lease for its corporate headquarters in Reston, Virginia expired following a one-month extension of the lease term.

On November 1, 2020, the Company executed a new lease to relocate its corporate headquarters to new office space in Reston, Virginia for a ten year term.

See Note 20 - Subsequent Events for further discussion.

The Company’s revenues consist primarily of

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Consistent with the transfer of control for distinct, daily services to the customer, revenue is typically recognized at the end of each period for the fees associated with the services performed.

The amount of revenue recognized is presented on a gross basis for any services provided by our employees, as we control the services provided by the employees.

This is evidenced by our obligation for their performance and our ability to direct and redirect their work and negotiate the value of

such services.

The amount of revenue recognized is

presented on a gross basis for any services provided by our employees, as we control the services provided by the employees.

This is evidenced by our obligation for their performance and our ability to direct and redirect their work and negotiate the value of such services.

In the instances where we do not control third-party services delivered to the client, we report revenues net of the third-party reimbursements.

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The following table presents the Company’s sales from contracts with customers disaggregated by categories which best represents how the nature, amount and timing and uncertainty of sales are affected by economic factors.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

12 unchanged sentences

$ 7,330 $ 5,680 $ 20,760 $ 15,899

For the three and six months ended June 30, 2020, $ 6.1 million and $ 12.9 million, respectively, of our revenues were earned for contracts where revenue is recognized over time.

For the three and six months ended June 30, 2019, $ 5.1 million and $ 10.0 million, respectively, of our revenues were earned for contracts where revenue is recognized over time.

For the three and six months ended June 30, 2020, $ 0.4 million and $ 0.6 million, respectively, of our revenues were earned for contracts where revenue is recognized at a point in time.

For the three and six months ended June 30, 2019, $ 0.2 million in revenues were earned for contracts where revenue is recognized at a point in time.

As of June 30, 2020, notes payable consisted of the following:

For the three and nine months ended September 30, 2020, $ 7.3 million and $ 20.2 million, respectively, of our revenues were earned for contracts where revenue is recognized over time.

For the three and nine months ended September 30, 2019, $ 5.6 million and $ 15.6 million, respectively, of our revenues were earned for contracts where revenue is recognized over time.

For the nine months ended September 30, 2020, $ 0.6 million of our revenues were earned for contracts where revenue is recognized at a point in time.

For the three and nine months ended September 30, 2019, $ 0.1 million and $ 0.3 million, respectively, in revenues were earned for contracts where revenue is recognized at a point in time.

As of September 30, 2020, notes payable consisted of the following:

September 30,

2020 December 31,

4 unchanged sentences

$ 5,522 $ 6,995

As of June 30, 2020, net maturities and/or curtailment obligations of all borrowings are as follows:

As of September 30, 2020, net maturities and/or curtailment obligations of all borrowings are as follows:

Secured financing

4 unchanged sentences

Comstock Environmental had an additional secured loan with an outstanding balance of $ 27 thousand as of December 31, 2019 that was used to fund the purchase of an asset used in the business.

This loan was retired during the six months ended June 30, 2020.

This loan was retired during the three months ended March 31, 2020.

These financings were secured by the assets of Comstock Environmental and guaranteed by our Chief Executive Officer.

Unsecured financing

As of June 30, 2020 and December 31, 2019, the Company had one unsecured seller-financed promissory note with an outstanding balance of $ 595 thousand.

This financing carries an annual interest rate of LIBOR plus 3 % and has a maturity date of July 17, 2022.

This loan has $ 50 thousand due on the third and fourth loan anniversary dates with the remainder due at maturity.

At June 30, 2020 and December 31, 2019, the interest rate was 3.6 % and 5.0 %, respectively.

On July 30, 2020 the Company retired this promissory note.

See Note 20 - Subsequent Events for more details.

In addition, during the six months ended June 30, 2020, the Company financed the Director’s and Officer’s insurance policy with a one year term loan.

As of June 30, 2020, the balance on this loan was $ 37 thousand.

As of December 31, 2019, the Company had one unsecured seller-financed promissory note with an outstanding balance of $ 595 thousand.

This financing carried an annual interest rate of LIBOR plus 3 % and had a maturity date of July 17, 2022.

This loan had $ 50 thousand due on the third and fourth loan anniversary dates with the remainder due at maturity.

At December 31, 2019, the interest rate was 5.0 %.

During the three months ended September 30, 2020 the Company retired this promissory note.

In addition, during the nine months ended September 30, 2020, the Company financed the Director’s and Officer’s insurance policy with a one year term loan.

As of September 30, 2020, the balance on this loan was $ 22 thousand.

Notes payable, due to affiliates – unsecured

2 unchanged sentences

On December 18, 2014, the loan agreement was amended and restated to provide for a maximum capacity of $ 25 million.

On May 23, 2018, the Company entered into a Membership Interest Exchange and Subscription Agreement (the “Membership Exchange Agreement”), together with a revised promissory note agreement, in which a note (“CGF Note”) with an outstanding principal and accrued interest balance of $ 7.7 million was exchanged for

1,482,300 shares of the Company’s Series C Non-Convertible Preferred Stock, par value $ 0.01 per share and a stated liquidation value of $ 5.00 per share (the “Series C Preferred Stock”), issued by the Company to Comstock Development Services, LC ("CDS").

value of $ 5.00 per share (the “Series C Preferred Stock”), issued by the Company to Comstock Development Services, LC ("CDS").

The Company exchanged the preferred equity for 91.5 % of CDS membership interest in the CGF promissory note.

1 unchanged sentence

The CGF Note bore interest at a fixed rate of 10 % per annum.

Interest payments are made monthly in arrears.

Interest payments were made monthly in arrears.

The Company is the administrative manager of CGF but does not own any membership interests.

1 unchanged sentence

The maturity date for the CGF Note was April 16, 2020.

The CGF Note was repaid prior to maturity during the six months ended June 30, 2020.

The CGF Note was repaid prior to maturity during the nine months ended September 30, 2020.

Revolving Capital Line of Credit

4 unchanged sentences

The $ 5.5 million borrowed has a maturity date of April 30, 2023.

For the three and six months ended June 30, 2020, the Company made interest payments for all debt facilities of $ 0.1 million and $ 0.3 million, respectively.

For the three and six months ended June 30, 2019, the Company made interest payments for all debt facilities of $ 0.1 million and $ 0.2 million, respectively.

During the three months ended June 30, 2020, the Company retired the $ 5.7 million of outstanding borrowings for the CGF Note and did no t make principal payments for the Revolver.

During the three and six months ended June 30, 2019, the Company did no t make principal payments for the CGF Note.

For the three and nine months ended September 30, 2020, the Company made interest payments for all debt facilities of $ 0.1 million and $ 0.3 million, respectively.

For the three and nine months ended September 30, 2019, the Company made interest payments for all debt facilities of $ 0.2 million and $ 0.4 million, respectively.

During the nine months ended September 30, 2020, the Company retired the $ 5.7 million of outstanding borrowings for the CGF Note and did no t make principal payments for the Revolver.

During the three and nine months ended September 30, 2019, the Company did no t make principal payments for the CGF Note.

CORONAVIRUS AID RELIEF AND ECONOMIC SECURITY ACT

Paycheck Protection Plan Loan

In response to the COVID-19 pandemic, the Paycheck Protection Program (the “PPP”) was established under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and administered by the U.S.

In response to the COVID-19 pandemic, the Paycheck Protection Program (the “PPP”) was established under the CARES Act and administered by the U.S.

Small Business Administration (“SBA”).

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After reviewing the applicable terms and conditions of the Flexibility Act, the Company has elected to extend the length of the covered period from the lesser of (i) period whereby qualified expenses equal loan proceeds or (ii) 24 weeks.

The Company has performed initial calculations for the PPP loan forgiveness according to the terms and conditions of the SBA’s Loan Forgiveness Application (Revised June 16, 2020) and, based on such calculations, expects that the PPP loan will be forgiven in full over a period less than 24 weeks.

In addition, the Company has determined that it is probable the Company will meet all the

conditions of the PPP loan forgiveness.

The Company has performed initial calculations for the PPP loan forgiveness according to the terms and conditions of the SBA’s Loan

Forgiveness Application (Revised June 16, 2020) and, based on such calculations, expects that the PPP loan will be forgiven in full over a period less than 24 weeks.

In addition, the Company has determined that it is probable the Company will meet all the conditions of the PPP loan forgiveness.

As such, the Company has determined that the PPP loan should be accounted for as a government grant which analogizes with International Accounting Standards (“IAS”) 20, Accounting for Government Grants and Disclosure of Government Assistance.

Under the provisions of IAS 20, “a forgivable loan from government is treated as a government grant when there is reasonable assurance that the entity will meet the terms for forgiveness of the loan.” IAS 20 does not define “reasonable assurance”, however, based on certain interpretations, it is analogous to “probable” under GAAP under FASB ASC 450-20-20, which is the definition the Company has applied to its expectations of the PPP loan forgiveness.

however, based on certain interpretations, it is analogous to “probable” under GAAP under FASB ASC 450-20-20, which is the definition the Company has applied to its expectations of the PPP loan forgiveness.

In addition, in accordance with the provisions of IAS 20, government grants shall be recognized in profit or loss on a systematic basis over the periods in which the Company recognizes costs for which the grant is intended to compensate (i.e.

1 unchanged sentence

Therefore, the Company recognized PPP funding as a contra-expense during the periods when qualified expenses were incurred.

The balance and activity related to the PPP loan is as follows as of June 30, 2020.

June 30, 2020

The balance and activity related to the PPP loan is as follows as of September 30, 2020.

September 30, 2020

PPP loan proceeds $ 1,954

3 unchanged sentences

In accordance with the terms and conditions under the Flexibility Act, the lender has 60 days from receipt of the completed application to issue a decision to the SBA.

If the lender determines that the borrower is entitled to forgiveness of some or all of the amount applied for under the statue and applicable regulations, the lender must request payment from the SBA at the time the lender issues its decision to the SBA.

If the lender determines that the borrower is entitled to forgiveness of some or all of the amount applied for under the statute and applicable regulations, the lender must request payment from the SBA at the time the lender issues its decision to the SBA.

The SBA will, subject to any SBA review of the loan or loan application, remit the appropriate forgiveness amount to the lender, plus any interest accrued through the date of payment, not later than 90 days after the lender issues its decision to the SBA.

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The occurrence of an event of default may trigger the immediate repayment of all amounts outstanding, collection of all amounts owing from the Company, and/or the Lender filing suit and obtaining a judgment against the Company.

Deferral of Social Security Tax Payments

Pursuant to sections 2302(a)(1) and (a)(2) of the CARES Act, the Company has elected to defer payments of its share of Social Security tax due during the "payroll tax deferral period".

The payroll tax deferral period began on August 1, 2020 and ends December 31, 2020.

At September 30, 2020 the total amount of such deferral was $ 66 thousand and is reflected within 'Accrued personnel costs' on our consolidated balance sheet.

Per the terms of the deferral program, 50% of the deferred amount is due on December 31, 2021, and the remaining 50% is due on December 31, 2022 at 0% interest.

COMMITMENTS AND CONTINGENCIES

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The following table summarizes the carrying amount and the corresponding fair value of fixed and floating rate debt.

September 30,

2020 December 31,

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Critical inputs to fair value estimates include various level 3 inputs such as valuations of the underlying real estate assets and borrowings, which incorporate investment-specific assumptions such as discount rates, capitalization rates, rental and expense growth rates, and asset-specific market borrowing rates.

As of June 30, 2020 and December 31, 2019, investments in the real estate ventures at fair value were approximately $ 7.6 million and $ 8.4 million, respectively.

As of September 30, 2020 and December 31, 2019, investments in the real estate ventures at fair value were approximately $ 7.0 million and $ 8.4 million, respectively.

Non-Recurring Fair Value Measurements

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RESTRICTED STOCK, STOCK OPTIONS AND OTHER STOCK PLANS

During the three and six months ended June 30, 2020, the Company issued no stock options.

During the six months ended June 30, 2020, the Company issued 630,352 restricted stock awards to employees.

During the three and six months ended June 30, 2019, the Company issued 20,000 and 114,431 stock options and 184,463 and 242,251 restricted stock awards to employees, respectively.

During the three and nine months ended September 30, 2020, the Company issued no stock options.

During the three and nine months ended September 30, 2020, the Company issued 14,500 and 644,852 restricted stock awards to employees, respectively.

During the three and nine months ended September 30, 2019, the Company issued 114,431 stock options and 12,085 and 254,336 restricted stock awards to employees, respectively.

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 statements of operations line items for stock-based compensation for the periods presented:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

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The remaining amounts are delivered to the recipient as shares of our Class A common stock.

As of June 30, 2020, the weighted-average remaining contractual term of unexercised stock options was 7 years.

As of June 30, 2020 and December 31, 2019, there was $ 1.6 million and $ 0.6 million, respectively, of unrecognized compensation cost related to stock options and restricted stock awards.

As of September 30, 2020, the weighted-average remaining contractual term of unexercised stock options was 7 years.

As of September 30, 2020 and December 31, 2019, there was $ 1.3 million and $ 0.6 million, respectively, of unrecognized compensation cost related to stock options and restricted stock awards.

The Company intends to issue new shares of its Class A common stock upon vesting of restricted stock grants or the exercise of stock options.

INCOME (LOSS) PER SHARE

The weighted average shares and share equivalents used to calculate basic and diluted (loss) income from continuing operations for the three and six months ended June 30, 2020 and 2019, and discontinued operations per share for the three and six months ended June 30, 2019, are presented in the accompanying consolidated statements of operations.

Restricted stock awards, stock options and warrants for the three and six months ended June 30, 2020 and 2019 are included in the diluted income (loss) per share calculation using the treasury stock method and average market prices during the periods, unless their inclusion would be anti-dilutive.

The following share equivalents have been excluded from the continuing operations dilutive share computation for the three and six months ended June 30, 2020 and 2019 as their inclusion would be anti-dilutive.

Three Months Ended June 30, Six Months Ended June 30,

The weighted average shares and share equivalents used to calculate basic and diluted (loss) income from continuing operations for the three and nine months ended September 30, 2020 and 2019, and discontinued operations per share for the three and nine months ended September 30, 2019, are presented in the accompanying consolidated statements of operations.

Restricted stock awards, stock options and warrants for the three and nine months ended September 30, 2020 and 2019 are included in the diluted income (loss) per share calculation using the treasury stock method and average market prices during the periods, unless their inclusion would be anti-dilutive.

The following share equivalents have been excluded from the continuing operations dilutive share computation for the three and nine months ended September 30, 2020 and 2019 as their inclusion would be anti-dilutive.

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

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567 1,059 751 991

The following share equivalents have been excluded from the discontinued operations dilutive share computation for the three and six months ended June 30, 2019 as their inclusion would be anti-dilutive.

Three Months Ended June 30, Six Months Ended June 30,

The following share equivalents have been excluded from the discontinued operations dilutive share computation for the three and nine months ended September 30, 2019 as their inclusion would be anti-dilutive.

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

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Consolidated loss in statement of operations

Included within the Company’s net loss from discontinued operations, net of tax for the three and six months ended June 30, 2019 are the activities of real estate entities that were determined to be VIEs.

Included within the Company’s net loss from discontinued operations, net of tax for the three and nine months ended September 30, 2019 are the activities of real estate entities that were determined to be 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.

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Lease for Corporate Headquarters

The Company leases its corporate headquarters from an affiliate wholly-owned by our CEO.

Future minimum lease payments under this lease, which expires on September 30, 2020, are $ 149 thousand.

For the three and six months ended June 30, 2020, total rental payments made were $ 156 thousand and $ 298 thousand, respectively.

For the three and six months ended June 30, 2019, total rental payments made were $ 153 thousand and $ 299 thousand, respectively.

The Company previously leased its corporate headquarters from an affiliate controlled and owned by our CEO and family.

Future minimum lease payments under this lease, which expires on October 31, 2020, are $ 52 thousand.

For the three and nine months ended September 30, 2020, total rental payments made were $ 155 thousand and $ 459 thousand, respectively.

For the three and nine months ended September 30, 2019, total rental payments made were $ 153 thousand and $ 452 thousand, respectively.

On November 1, 2020, the Company relocated its corporate headquarters to a new office space pursuant to a lease agreement with an affiliate controlled and owned by our Chief Executive Officer and family, as landlord.

See Note 20 - Subsequent Events for further discussion.

Asset Management Agreement

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The following table details the revenue earned from related parties.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

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The Company accounts for its interest in its title insurance joint venture using the equity method of accounting and adjusts the carrying value for its proportionate share of earnings, losses and distributions.

The investment in the unconsolidated joint venture was $ 32 thousand and $ 125 thousand as of June 30, 2020 and December 31, 2019, respectively, and is included within ‘Prepaid and other assets, net’ in the accompanying Consolidated Balance Sheets.

The Company’s share of earnings for the three and six months ended June 30, 2020 from this unconsolidated joint venture of $ 18 thousand and $ 15 thousand, respectively, is included in ‘Other income, net’ in the accompanying Consolidated Statement of Operations.

During the six months ended June 30, 2020, the Company collected and recorded distributions of $ 108 thousand from this joint venture as a return on investment.

There were no distributions recorded during the three months ended June 30, 2020.

The Company’s share of earnings for the three and six months ended June 30, 2019 from this unconsolidated joint venture of $ 10 thousand and $ 68 thousand, respectively, is included in ‘Other income, net’ in the accompanying Consolidated Statement of Operations.

During the three and six months ended June 30, 2019, the Company collected and recorded distributions of 56 thousand and 114 thousand, respectively, from this joint venture as a return on investment.

The investment in the unconsolidated joint venture was $ 11 thousand and $ 125 thousand as of September 30, 2020 and December 31, 2019, respectively, and is included within ‘Prepaid and other assets, net’ in the accompanying Consolidated Balance Sheets.

The Company’s share of earnings for the three and nine months ended September 30, 2020 from this unconsolidated joint venture of $ 1 thousand and $ 16 thousand, respectively, is included in ‘Other income, net’ in the accompanying Consolidated Statement of Operations.

During the three and nine months ended September 30, 2020, the Company collected and recorded distributions of 22 thousand and $ 130 thousand from this joint venture as a return on investment.

The Company’s share of earnings for the three and nine months ended September 30, 2019 from this unconsolidated joint venture of $ 48 thousand and $ 115 thousand, respectively, is included in ‘Other income, net’ in the accompanying Consolidated Statement of Operations.

During the three and nine months ended September 30, 2019, the Company collected and recorded distributions of 10 thousand and 124 thousand, respectively, from this joint venture as a return on investment.

Summarized financial information for the unconsolidated joint venture is as follows:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

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share of net income $ 1 $ 48 $ 16 $ 115

For the three and six months ended June 30, 2020, the Company recognized deferred income tax expense of $ 1 thousand and $ 13 thousand, respectively.

For the three and six months ended June 30, 2019, the Company recognized no deferred income tax expense from continuing operations due to the valuation allowance and recognized a deferred income tax expense of $ 7 thousand and $ 10 thousand from discontinued operations.

The effective tax rate for the six months ended June 30, 2020 and 2019 is ( 0.85 )% and ( 22.41 )%, respectively.

For the three and nine months ended September 30, 2020, the Company recognized deferred income tax expense of $ 1 thousand and $ 13 thousand, respectively.

For the three and nine months ended September 30, 2019, the Company recognized no deferred income tax expense from continuing operations due to the valuation allowance.

The effective tax rate for the nine months ended September 30, 2020 and 2019 is ( 0.11 )% and 19.99 %, respectively.

The Company currently has approximately $ 144 million in federal and state NOLs.

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The Company assesses uncertain tax positions in accordance with ASC 740-10, Accounting for Uncertainties in Income Taxes .

The Company has no t recorded any accruals related to uncertain tax positions as of June 30, 2020 and 2019.

The Company has no t recorded any accruals related to uncertain tax positions as of September 30, 2020 and 2019.

and state income tax returns in jurisdictions with varying statutes of limitations.

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In our Real Estate Services segment, our experienced management team provides a wide range of real estate services in the areas of strategic corporate planning, capital markets, brokerage services, and environmental and design-based services.

Our environmental services group provides consulting and engineering services, environmental studies, remediation services and provide site specific solutions for any project that may have an environmental impact, from environmental due diligence to site-specific assessments and remediation.

Our environmental services group provides consulting and engineering services, environmental studies, remediation services and provides site specific solutions for any project that may have an environmental impact, from environmental due diligence to site-specific assessments and remediation.

The Real Estate Services segment operates in the Mid-Atlantic Region.

The following table includes the Company’s two reportable segments of Asset Management and Real Estate Services, excluding discontinued operations, for the three and six months ended June 30, 2020 and 2019.

Three Months Ended June 30, 2020

The following table includes the Company’s two reportable segments of Asset Management and Real Estate Services, excluding discontinued operations, for the three and nine months ended September 30, 2020 and 2019.

Three Months Ended September 30, 2020

Gross revenue

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14,687 3,681 18,368

Three Months Ended June 30, 2019

Three Months Ended September 30, 2019

Gross revenue

$ 4,733 $ 947 $ 5,680

Gross profit (loss)

499 ( 11 ) 488

Net income (loss)

275 ( 353 ) ( 78 )

Gross profit 536 85 621

Net loss ( 353 ) ( 208 ) ( 561 )

12,131 3,784 15,915

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Gross revenue $ 15,466 $ 5,294 $ 20,760

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Total assets 14,687 3,681 18,368

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

Gross revenue $ 13,326 $ 2,573 $ 15,899

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DISCONTINUED OPERATIONS

On April 30, 2019, the Company entered into a the MTA with CDS, an entity wholly owned by Christopher Clemente, the Chief Executive Officer of the Company, and FR54, LC (“FR54”), an entity also controlled by Mr.

On April 30, 2019, the Company entered into the MTA with CDS, an entity wholly owned by Christopher Clemente, the Chief Executive Officer of the Company, and FR54, LC (“FR54”), an entity also controlled by Mr.

Clemente, that sets forth certain transactions to complete the Company’s previously announced exit from the homebuilding and land development business in favor of a migration to an asset management model.

Refer to Note 14 – Consolidation of Variable Interest Entities for further discussion regarding the accounting related to discontinued operations.

The Company did no t carry any assets or liabilities from discontinued operations on the consolidated balance sheet as of June 30, 2020 and December 31, 2019.

The Company did no t carry any assets or liabilities from discontinued operations on the consolidated balance sheet as of September 30, 2020 and December 31, 2019.

The operating results of the discontinued operations that are reflected on the consolidated statement of operations within the net income (loss) from discontinued operations are as follows:

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

Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019

Revenue—homebuilding

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SUBSEQUENT EVENTS

On July 30, 2020, the Company retired the unsecured seller-financed promissory note with an outstanding balance of $ 595 thousand.

This financing carried an annual interest rate of LIBOR plus 3 % and had a maturity date of July 17, 2022.

In exchange for early retirement of the seller-financed promissory note, the Company received a discount on debt extinguishment of $ 50 thousand.

On October 31, 2020, the Company’s then-current lease for its corporate headquarters in Reston, Virginia expired following a one-month extension of the lease term.

On November 1, 2020, the Company agreed to a new lease to relocate its corporate headquarters to new office space in Reston, Virginia for a ten year term.

Commencing on November 1, 2020, the Company is responsible for the new monthly base rent payment plus the monthly payment of the Company’s proportionate share of operating expenses, real estate taxes and insurance for the office space, which are reimbursable under the 2019 AMA.

COMSTOCK HOLDING COMPANIES, INC.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements