What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-03-31 compared with 2020-04-15 · 443 added, 402 removed, 653 unchanged (56% of the section changed)

2 unchanged sentences

Management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of December 31, 2020.

Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2019 due to the material weakness described below.

Notwithstanding the material weakness in our internal controls over financial reporting as of December 31, 2019, management has concluded that the consolidated financial statements and notes to the consolidated financial statements included in this Form 10-K present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.

appropriate, to allow timely decisions regarding required disclosure.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2020.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act.

We conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2020 based on the Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2020.

Our management determined that, as of December 31, 2020, our internal control over financial reporting is effective.

Limitations on the Effectiveness of Controls

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Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2019, based on criteria set forth in the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation.

Based on this assessment, and in light of the material weakness in the operation of our internal control over financial reporting disclosed below, management has concluded that our internal control over financial reporting was not effective as of December 31, 2019.

Material Weakness

In the fourth quarter of 2019, we identified a material weakness in our internal controls over financial reporting involving the review and reconciliation of debt balances and amortization of related debt discounts.

In an effort to remediate the weakness described above we are in the process of (i) expanding our technical accounting resources and (ii) implementing more detailed reviews of debt reconciliations including the amortization of related debt discounts.

This remediation is expected to result in more thorough accuracy in evaluating and concluding on the accounting and periodic reporting and disclosure requirements for debt instruments and related debt discounts.

Changes in Internal Control Over Financial Reporting

No other changes, other than those identified above relating to on-going remediation efforts, have occurred in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended December 31, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

No change has occurred in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during our last fiscal quarter ended December 31, 2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The certifications of our principal executive officer and principal financial officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) are filed with this Annual Report on Form 10-K as Exhibits 31.1 and 31.2.

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10.23 2019 Master Asset Management Agreement, dated January 2, 2019, between CDS Asset Management, L.C.

and Comstock Development Services, LC

Form of Time-Based Restricted Stock Unit Agreement under the 2019 Omnibus Incentive Plan

Form of Performance Based Restricted Stock Unit Agreement under the 2019 Omnibus Incentive Plan

Comstock 3101 Wilson, L.C.

(“the Hartford”) Operating Agreement

and Comstock Development Services, LC (incorporated by reference to an exhibit to the Registrant’s Annual Report on Form 10-K filed with the Commission on April 15, 2020).

10.24 Form of Time-Based Restricted Stock Unit Agreement under the 2019 Omnibus Incentive Plan (incorporated by reference to an exhibit to the Registrant’s Annual Report on Form 10-K filed with the Commission on April 15, 2020).

10.25 Form of Performance Based Restricted Stock Unit Agreement under the 2019 Omnibus Incentive Plan (incorporated by reference to an exhibit to the Registrant’s Annual Report on Form 10-K filed with the Commission on April 15, 2020).

10.26 Amended and Restated Limited Liability Company Agreement of Comstock 3101 Wilson, LC dated February 7, 2020 (incorporated by reference to an exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 14, 2020).

10.27 Ten Million ($10,000,000) Revolving Capital Line of Credit Agreement dated March 19, 2020, between Comstock Development Services, LC and Comstock Holding Companies, Inc.

(incorporated by reference to an exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on May 28, 2020).

10.28 Promissory Note dated March 27, 2020, between Comstock Holding Companies, Inc.

and Comstock Development Services, LC (incorporated by reference to an exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on May 28, 2020).

10.29 Note dated April 16, 2020 between Comstock Holding Companies, Inc.

and MainStreet Bank pursuant to the Paycheck Protection Program authorized under the Coronavirus Aid, Relief and Economic Security Act (incorporated by reference to an exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on May 28, 2020).

10.30 Amended and Restated Employment Agreement dated April 27, 2020, between Comstock Holding Companies, Inc.

and Christopher Clemente (incorporated by reference to an exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 14, 2020).+

10.31 Letter of BDO USA, LLP dated June 24, 2020 (incorporated by reference to an exhibit to the Registrant’s Current Report on Form 8-K filed with the Commission on June 24, 2020).

10.32* Deed of Lease dated November 1, 2020, between CRS Plaza I, LC and Comstock Holding Companies, Inc.

10.33* First Amendment to Amended and Restated Limited Liability Company Agreement of Momentum General Partners LLC dated November 9, 2020, between SCG Development Partners, LLC and Comstock Redland Road III, L.C.

10.34* Assignment of Membership Interest in Momentum General Partners, LLC dated November 9, 2020, between SCG Development Partners, LLC and Comstock Redland Road III, L.C.

14.1 Code of Ethics (incorporated by reference to an exhibit to the Registrant’s Annual Report on Form 10-K filed with the Commission on March 31, 2005).

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Consent of BDO USA, LLP

23.2* Consent of Grant Thornton, LLP

Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002

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COMSTOCK HOLDING COMPANIES, INC.

April 14, 2020

March 31, 2021 By:

/s/ Christopher Clemente

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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

/s/ Christopher Clemente

Chairman of the Board of Directors and

April 14, 2020

Christopher Clemente

Chief Executive Officer (Principal Executive Officer)

/s/ Christopher Guthrie

Chief Financial Officer

April 14, 2020

Christopher Guthrie

(Principal Financial Officer and Principal Accounting Officer)

/s/ David Guernsey

April 14, 2020

/s/ James MacCutcheon

April 14, 2020

/s/ Norman Chirite

April 14, 2020

/s/ Robert Pincus

April 14, 2020

/s/ Socrates Verses

April 14, 2020

Signature Capacity Date

/s/ Christopher Clemente Chairman of the Board of Directors and March 31, 2021

Christopher Clemente Chief Executive Officer (Principal Executive Officer)

/s/ Christopher Guthrie Chief Financial Officer March 31, 2021

Christopher Guthrie (Principal Financial Officer and Principal Accounting Officer)

/s/ David Guernsey Director March 31, 2021

/s/ James MacCutcheon Director March 31, 2021

/s/ Robert Pincus Director March 31, 2021

/s/ Socrates Verses Director March 31, 2021

Socrates Verses

/s/ Joseph Squeri

April 14, 2020

/s/ Joseph Squeri Director March 31, 2021

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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AND SUBSIDIARIES

Report of Independent Registered Public Accounting Firm

Report s of Independent Registered Public Accounting Firm s

Consolidated Balance Sheets at December 31, 20 20 and 2019

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Notes to Consolidated Financial Statements

Report of Independent Regist ered Public Accounting Firm

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

Comstock Holding Companies, Inc.

Opinion on the financial statements

We have audited the accompanying consolidated balance sheet of Comstock Holding Companies, Inc.

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2020, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the year ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates

Consolidation of Variable Interest Entities

As discussed in Notes 4 and 13 to the consolidated financial statements, the Company holds an equity investment in Comstock Investors X, L.C.

(“Investors X”) and accounts for its investment as an unconsolidated variable interest entity (“VIE”) under the equity method.

To reach its accounting conclusion, the Company evaluates whether it holds a controlling financial interest in Investors X.

A controlling financial interest is defined as (a) the power to direct the activities of a VIE that most significantly impact the VIE's economic performance and (b) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

We identified the assessment of the primary beneficiaries of Investors X as a critical audit matter.

The principal consideration that the assessment of the primary beneficiaries of Investors X is a critical audit matter is that auditing the Company’s determination of whether it has power required significant auditor judgment to evaluate both the activities of the investee that most significantly impact the investee’s economics and the distribution of the power among the members of Investors X through governing documents and related service agreements that ultimately determine the outcome of such activities.

The Company’s determination that it does not have the power to direct the significant activities impacting each of the investees’ economic performance (“power”) is key to its determination that it is not the primary beneficiary of Investors X and does not have to consolidate the entity.

Our audit procedures related to the assessment of the primary beneficiary of Investors X included the following, among others:

• We read the Investors X governing documents (including related service agreements) and underlying financial information and made inquiries with management to obtain a detailed understanding of the entity and its operations.

• We compared the key facts included in management's analysis to the governing documents and the Company's interests in Investors X.

• We evaluated whether the Company’s conclusion that Investors X met the criteria of a VIE was appropriate and in accordance with relevant accounting guidance.

• Through consultation with our national office, we evaluated whether the Company's assessment effectively identified the primary beneficiary of Investors X through an analysis of the significant activities of Investors X and which parties hold the power to direct those significant activities and the obligation to absorb losses or the right to receive benefits from Investors X, in accordance with relevant accounting guidance.

• We considered the evidence obtained in other areas of the audit to determine if there were reconsideration events that had not been identified by the Company, including, among others, reading board minutes and confirming the terms of certain agreements, if any.

/ s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2020.

Arlington, Virginia

March 31, 2021

Report of Independent Registered Public Accounting Firm

Stockholders and Board of Directors

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Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Comstock Holding Companies, Inc.

(the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019 , in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheet of Comstock Holding Companies, Inc.

(the “Company”) as of December 31, 2019, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the year then ended and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019, and the results of its operations and its cash flows for the year then ended , in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/ s/ BDO USA, LLP

We have served as the Company’s auditor since 2016.

We served as the Company’s auditor from 2016 to 2019.

Potomac, Maryland

April 14, 2020

COMSTOCK HOLDING COMPANIE S, INC.

COMSTOCK HOLDING COMPANIES, INC.

AND SUBSIDIARIES

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(Amounts in thousands, except share and per share data)

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Current assets:

Cash and cash equivalents

Trade receivables

$ 7,032 $ 3,511

Trade receivables, net 1,482 1,886

Trade receivables - related parties

Prepaid and other assets, net

Current assets of discontinued operations

Total current assets

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Intangible assets, net

Long term assets of discontinued operations

$ 28,579 $ 19,933

LIABILITIES AND STOCKHOLDERS’ EQUITY

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Accrued personnel costs

$ 2,442 $ 2,916

Accounts payable

Accrued liabilities

Deferred revenue

Short term operating lease liabilities 569 —

Short term notes payable - due to affiliates, net of discount

Short term notes payable

Current liabilities of discontinued operations

Total current liabilities

Long term notes payable - due to affiliates 5,500 —

Long term notes payable, net of deferred financing charges

Long term operating lease liabilities, net of current portion

Long term liabilities of discontinued operations

TOTAL LIABILITIES

$ 17,364 $ 11,576

Commitments and contingencies (Note 10)

STOCKHOLDERS’ EQUITY

Series C preferred stock, $0.01 par value, 20,000,000 and 3,000,000

shares authorized, 3,440,690 and 2,799,848 shares issued and

outstanding with a liquidation preference of $17,203 and $13,999

at December 31, 2019 and 2018, respectively

Class A common stock, $0.01 par value, 59,779,750 and 11,038,071

shares authorized, 7,849,756 and 3,703,513 issued and 7,764,186

and 3,617,943 outstanding at December 31, 2019 and 2018, respectively

Class B common stock, $0.01 par value, 220,250 shares authorized,

issued and outstanding at December 31, 2019 and 2018

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

$ 6,765 $ 6,765

Class A common stock, $ 0.01 par value, 59,779,750 shares authorized, 7,953,729 and 7,849,756 issued and 7,868,159 and 7,764,186 outstanding at December 31, 2020 and 2019, respectively

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

Additional paid-in capital

$ 200,147 $ 199,372

Treasury stock, at cost ( 85,570 shares Class A common stock)

( 2,662 ) ( 2,662 )

Accumulated deficit

TOTAL COMSTOCK HOLDING COMPANIES, INC.

Non-controlling interests

( 193,116 ) ( 195,198 )

$ 11,215 $ 8,357

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$ 28,579 $ 19,933

The accompanying notes are an integral part of these Consolidated Financial Statements.

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For the years ended December 31,

Revenue (See Note 14 - Related Party Transactions)

Asset management

$ 21,923 $ 19,605

Real estate services

Total revenue

28,726 25,317

Operating expenses

Direct costs - asset management

18,445 16,561

Direct costs - real estate services

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Interest expense ( 379 ) ( 474 )

(Loss) on equity method investments carried at fair value

Other income, net

Income before income tax benefit

Income tax (expense) benefit

Income before income tax expense 2,300 2,026

Income tax expense ( 25 ) ( 2 )

Loss on equity method investments carried at fair value ( 193 ) ( 560 )

Net income from continuing operations

Net loss from discontinued operations, net of tax — ( 571 )

Net income (loss)

Net income $ 2,082 $ 893

Income per share from continuing operations

Basic net income per share

$ 0.26 $ 0.22

Diluted net income per share

$ 0.24 $ 0.22

Loss per share from discontinued operations

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Diluted net loss per share $ — $ ( 0.09 )

Income per share

Basic net income per share

$ 0.26 $ 0.13

Diluted net income per share

$ 0.24 $ 0.13

Basic weighted average shares outstanding

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Accrued Liability settled through issuance of stock — — 63 — — — 141 — — — 141

Shares withheld related to net share

settlement of restricted stock awards

Series C preferred stock conversion of CGF I & II

Non-controlling interest distributions

Net (loss) income

Balance at December 31, 2018

Stock compensation and issuances

Accrued Liability settled through issuance of stock

Shares withheld related to net share settlement of

restricted stock awards

Shares withheld related to net share settlement of restricted stock awards — — ( 12 ) — — — — — — — —

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

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

Net (loss) income

Net income — — — — — — — — 893 313 1,206

Balance at December 31, 2019 3,441 $ 6,765 7,849 $ 78 220 $ 2 $ 199,372 $ ( 2,662 ) $ ( 195,198 ) $ — $ 8,357

Stock compensation and issuances — — 107 1 — — 776 — — — 777

Accrued Liability settled through issuance of stock — — 30 — — — 68 — — — 68

Shares withheld related to net share settlement of restricted stock awards — — ( 33 ) — — — ( 69 ) — — — ( 69 )

Net income — — — — — — — — 2,082 — 2,082

Balance at December 31, 2020 3,441 $ 6,765 7,953 $ 79 220 $ 2 $ 200,147 $ ( 2,662 ) $ ( 193,116 ) $ — $ 11,215

The accompanying notes are an integral part of these Consolidated Financial Statements.

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Cash flows from operating activities:

Net income (loss)

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

Net income $ 2,082 $ 893

Adjustment to reconcile net income to net cash provided by operating activities

Amortization of loan discount, loan commitment and deferred financing fees 27 84

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Loss on equity method investments carried at fair value 193 560

Deferred income tax benefit

Distributions from equity method investments carried at fair value 103 —

Changes in operating assets and liabilities:

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Deferred revenue — ( 1,875 )

Accrued personnel

Prepaid and other assets ( 64 ) 11

Lease liabilities 69 —

Accrued personnel costs ( 474 ) 1,520

Accounts payable ( 915 ) 240

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Principal received on note receivable — 27

Net cash used in investing activities of discontinued operations

Net cash provided by investing activities 1,671 145

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Loan financing costs — ( 28 )

Distributions to non-controlling interests

Proceeds from exercise of warrants — 360

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Net cash used in financing activities ( 1,586 ) ( 5,882 )

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents 3,521 2,657

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

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Gain on deconsolidation of Investors X recorded in APIC $ — $ 682

Increase in operating lease right-of-use assets upon adoption of ASC 842

Increase in operating lease right-of-use assets $ 8,023 $ 170

Issuance of stock in lieu of interest due $ — $ 66

Increase in Series C preferred stock upon conversion of CGF I & II

Increase in Additional Paid in Capital upon conversion of CGF I & II

Extinguishment of Notes payable - due to affiliates, net of discount

Gain on early extinguishment of debt $ 50 $ —

PPP Loan proceeds received $ 1,954 $ —

The accompanying notes are an integral part of these Consolidated Financial Statements.

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The Company now operates through five primarily real estate focused subsidiaries – CDS Asset Management, LC (“CAM”), Comstock Residential Management, LC, Comstock Commercial Management, LC, Park X Management, LC and Comstock Environmental Services, LC (“CES”).

See Note 21 - Subsequent Events for entity name changes that occurred on February 18, 2021.

The Company’s homebuilding operations are presented in Discontinued Operations (see Note 19 – Discontinued Operations).

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together in each case with our subsidiaries unless the context suggests otherwise.

Liquidity Developments

We finance our Asset management and Real Estate Services operations, capital expenditures, and business acquisitions with internally generated funds, borrowings from our credit facilities and long-term debt.

Pursuant to the Master Transfer Agreement (“MTA”), the Company transferred to Comstock Development Services, LC (“CDS”), an entity owned and controlled by the Company’s Chief Executive Officer, its Class A membership interests in Investors X, the entity owning the Company’s residual homebuilding operations in exchange for certain residual cash flows over the next three years (“Investors X”).

Refer to Note 13 – Consolidation of Variable Interest Entities for further discussion regarding the accounting related to discontinued operations.

The associated debt obligations were also transferred to CDS.

See Note 9 in the accompanying Consolidated Financial Statements for more details on our debt and credit facilities.

At December 31, 2019, $5.7 million of our notes payable to affiliates were set to mature prior to the end of 2020.

These funds were primarily obtained from entities wholly owned by our Chief Executive Officer, and the Company.

On March 19, 2020, the Company entered into a $10 million revolving line of credit agreement with CDS with an initial term of five years.

See Note 21 – Subsequent Events for additional information about the transaction.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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For VIEs, determination of the "primary beneficiary" dictates the accounting treatment.

We identify the primary beneficiary of a VIE as the enterprise having both (i) the power to direct the activities of the VIE that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses or receive benefits of

the VIE that could potentiall y be significant to the VIE.

We perform the primary beneficiary analysis as of the inception of our investment and upon the occurrence of a reconsideration event.

When we determine we are the primary beneficiary of a VIE, we consolidate the VIE;

when we de termine we are not the primary beneficiary of the VIE, we account for our investment in the VIE at fair value or under the equity method, based upon an election made at the time of investment.

when we determine we are not the primary beneficiary of the VIE, we account for our investment in the VIE at fair value or under the equity method, based upon an election made at the time of investment.

Our determination of the appropriate accounting method to apply for unconsolidated investments is based on the level of influence we have in the underlying entity.

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Actual results could differ from those estimates.

Material estimates are utilized in the valuation of equity method investments, valuation of deferred tax assets, analysis of goodwill impairment, and valuation of equity-based compensation.

Material estimates are utilized, including but not limited to, the valuation of equity method investments, valuation of deferred tax assets, analysis of goodwill impairment, and valuation of equity-based compensation.

Discontinued Operations

On July 23, 2019 the Company completed the transfer of Investors X subject to the Master Transfer Agreement (“MTA”).

For the years ended December 31, 2019 and 2018, we classified revenues, expenses, assets and liabilities related to Investors X into discontinued operations on the Consolidated Balance Sheets, the Consolidated Statement of Operations, and the Consolidated Statements of Cash Flows.

For the year ended December 31, 2019, we classified revenues and expenses related to Investors X into discontinued operations on the Consolidated Statement of Operations and the Consolidated Statements of Cash Flows.

See Note 19 – Discontinued Operations.

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The carrying amount of cash equivalents approximates fair value due to the short-term maturity of these investments.

The Company maintains cash and cash equivalents in financial institutions that at times exceeds federally insured limits.

Management believes that the Company’s credit risk exposure is mitigated by the financial strength of the banking institution in which the deposits are held.

As of December 31, 2020, the Company had cash and cash equivalents of $ 5.3 million in U.S.

bank accounts which were not fully insured by the Federal Deposit Insurance Corporation

Trade Receivables and Concentration of Credit Risk

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The fair value of these investments as of the balance sheet date is generally determined using a Discounted Cash Flow (“DCF”) analysis, based upon unobservable inputs in the fair value hierarchy.

See Note 4, Investments in Real Estate Ventures for additional information on Investments in real estate ventures.

See Note 4 - Equity Method Investments in Real Estate Ventures Carried at Fair Value for additional information on Investments in real estate ventures.

Fixed assets, net

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Capitalized software

Substantially all of our operating leases are related to office space we lease in various buildings for our own use.

Our operating leases are related to office space we lease in various buildings for our own use.

The terms of these non-cancelable operating leases typically require us to pay rent and a share of operating expenses and real estate taxes, generally with an inflation-based rent increase included.

We also lease equipment under both operating and finance lease arrangements.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

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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 circumsta nces 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 periods.

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 periods.

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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ASC 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements over the service period based on their fair values at the date of grant.

For the year ended December 31, 2019, total stock based compensation cost was $479 thousand of which $474 thousand was charged to expenses within ‘general and administrative’ and ‘Direct costs - real estate services’ in the Consolidated Statement of Operations, and $5 thousand was capitalized to ‘Long-term assets of discontinued operations’.

For the year ended December 31, 2018, total stock based compensation cost was $257 thousand of which $234 thousand was charged to expenses within ‘general and administrative’ and ‘Direct costs-real estate services’ in the Consolidated Statement of Operations, and $23 thousand was capitalized to ‘Long-term assets of discontinued operations’.

For the year ended December 31, 2020, total stock based compensation cost was $ 0.8 million which was charged to expenses within ‘general and administrative’ in the Consolidated Statement of Operations.

For the year ended December 31, 2019, total stock based compensation cost was $ 0.5 million which was charged to expenses within ‘general and administrative’ and ‘Direct costs-real estate services’ in the Consolidated Statement of Operations.

Income taxes are accounted for under the asset and liability method in accordance with ASC 740, Accounting for Income Taxes .

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Recently adopted accounting pronouncements

In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment,” which removes Step 2 from the goodwill impairment test and replaces the qualitative assessment.

Impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit.

Under this revised guidance, failing Step 1 will always result in a goodwill impairment.

The amendments in this update should be applied prospectively for annual and interim periods in fiscal years beginning after December 15, 2019.

Early adoption is permitted for goodwill impairment tests with measurement dates after January 1, 2017.

The Company early adopted this guidance during the fourth quarter of 2018 and the early adoption did not have a material impact on the Company’s Consolidated Financial Statements.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updated (“ASU”) 2016-02, “Leases” (“ASU 2016-02”).

The core principle of the standard is that a lessee should recognize the assets and liabilities that arise from leases.

A lessee should recognize in its statement of financial position a liability to make lease payments (the lease liability) and a right-of-use (“ROU”) asset representing its right to use the underlying asset for the lease term.

The FASB subsequently issued ASU 2018-10 and ASU 2018-11 in July 2018, which provide clarifications and improvements to ASU 2016-02.

ASU 2018-11 also provides the optional transition method which will allow companies to apply the new lease standard at the adoption date instead of at the earliest comparative period presented.

ASU 2016-02 is effective for public companies for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years.

The Company adopted this standard using the modified retrospective method effective January 1, 2019.

As permitted by the guidance, the Company elected to retain the original lease classification and historical accounting for initial direct costs for leases existing prior to the adoption date and did not reassess contracts entered into prior to the adoption date for the existence of a lease.

The Company also did not recognize ROU assets and lease liabilities for short-term leases, which are leases in existence as of the adoption date with an original term of twelve months or less.

As a result of the adoption of the standard, the Company recognized ROU assets and liabilities of $170 thousand as of the adoption date on its Consolidated Balance Sheet.

There was no cumulative effect on beginning retained earnings.

The assets and liabilities recognized upon application of the transition provisions were primarily associated with our existing office leases.

Recent A ccounting P ronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments – Credit Losses (Topic 326), which modifies how companies recognize expected credit losses on financial instruments and other commitments to extend credit held by an entity at each reporting date.

Existing GAAP requires an “incurred loss” methodology whereby companies are prohibited from recording an expected loss until it is probable that the loss has been incurred.

ASU 2016-13 requires companies to use a methodology that reflects current expected credit losses (“CECL”) and requires consideration of a broad range of reasonable and supportable information to record and report credit loss estimates, even when the CECL is remote.

Companies will be required to record the allowance for credit losses and deduct that amount from the basis of the asset.

The guidance is effective for the Company for financial statement periods beginning after December 15, 2022, although early adoption is permitted.

The Company is currently evaluating the impact this guidance will have on its financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820) – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”), which removes, adds and modifies certain disclosure requirements for fair value measurements in Topic 820.

In August 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-13, “Fair Value Measurement (Topic 820) – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”), which removes, adds and modifies certain disclosure requirements for fair value measurements in Topic 820.

ASU 2018-13 removes the following disclosure requirements:

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Early adoption is permitted.

We do not expect the adoption of this pronouncement to have a material impact on our Consolidated Financial Statements.

The Company adopted ASU 2018-13 prospectively as of January 1, 2020.

The adoption did not have a material impact on our Consolidated Financial Statements.

Recent Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No.

Existing GAAP requires an “incurred loss” methodology whereby companies are prohibited from recording an expected loss until it is probable that the loss has been incurred.

ASU 2016-13 requires companies to use a methodology that reflects current expected credit losses (“CECL”) and requires consideration of a broad range of reasonable and

supportable information to record and report credit loss estimates, even when the CECL is remote.

Companies will be required to record the allowance for credit losses and deduct that amount from the basis of the asset.

The guidance is effective for the Company for financial statement periods beginning after December 15, 2022, although early adoption is permitted.

The Company is currently evaluating the impact this guidance will have on its financial statements and related disclosures.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes.

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Trade receivables include amounts due from real estate services, asset management and project management.

There is no allowance for doubtful accounts recorded.

As of December 31, 2020 and 2019, the Company had $ 1.5 million and $ 1.9 million, respectively, of trade receivables.

As of December 31, 2019 and 2018, the Company had $3.6 million and $3.0 million, respectively, of receivables from related parties, primarily related to initial AMA and the 2019 AMA.

INVESTMENTS IN REAL ESTATE VENTURE S AT FAIR VALUE

Based upon elections made at the date of investment, the Company reports the investments in real estate ventures at fair value.

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

As of December 31, 2020 and 2019, 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 December 31, 2020 and 2019, the Company had $ 3.6 million and $ 3.6 million, respectively, of receivables from related parties.

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

This is due to the related party nature of the receivables along with the collection history.

EQUITY METHOD INVESTMENTS IN REAL ESTATE VENTURES CARRIED AT FAIR VALUE

Based upon elections made at the date of investment, the Company reports the equity method investments in real estate ventures at fair value.

For such investments, the Company increases or decreases the investment each reporting period by the change in the fair value and the Company reports the fair value adjustments in the Consolidated Statement of Operations in the ‘loss on equity method investments carried at fair value’ line item.

Changes in fair value of the Company's investment in Investors X (defined below) are impacted by distributions as the fair value is based on finite cash flows from the wind-down of that entity.

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

As of December 31, 2019, the Company had Investments in real estate ventures at fair value of $8.4 million.

The Company had no investments in real estate ventures at fair value as of December 31, 2018.

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

Fair value investments as of July 23,

As of December 31, 2020 and 2019, the Company had equity method investments in real estate ventures at fair value of $ 6.3 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.

Fair value of investments as of January 1 $ 8,421 $ —

Investments — 10,506

Distributions ( 1,921 ) ( 1,525 )

Change in fair value ( 193 ) ( 560 )

Fair value investments as of December 31,

See Note 11 for additional discussion of our investments in real estate ventures at fair value.

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

Fair value of investments as of December 31 $ 6,307 $ 8,421

See Note 14 – Related Party Transactions for additional discussion of our investments in real estate ventures at fair value.

The Company has elected to account for the equity method investment in Comstock Investors X, L.C.

(“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.

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.

The fair value of the Company’s investment in Investors X was $9.3 million as of the July 23, 2019 deconsolidation.

As of December 31, 2019, the fair value of the Company’s investment in Investors X is $7.2 million.

The Company received distributions of $1.5 million during the year ended December 31, 2019 and recognized a loss in fair value of $560 thousand due to lower estimated cash flows from a project in the Investors X portfolio.

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

As of December 31, 2020 and 2019, the fair value of the Company’s investment in Investors X is $ 5.1 million and $ 7.2 million, respectively.

The Company received distributions of $ 1.8 million and 1.5 million during the years ended December 31, 2020 and 2019, respectively, and recognized a loss in fair value of $ 0.3 million and $ 0.6 million, respectively.

Summarized Financial Information for Investors X

For the Year Ended December 31,

Statement of Operations:

Total revenue $ 14,515 $ 6,832

Direct costs 12,982 8,196

Net income (loss) $ 1,533 $ ( 1,364 )

Comstock Holding Companies, Inc.

share of net income (loss) $ — $ —

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 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.

The fair value of the Company’s investment in the Hartford was $1.2 million as of the investment date of December 30, 2019.

The $1.2 million is equal to the cash invested into the Hartford.

There were no distributions or changes in fair value as of December 31, 2019.

Summarized Financial Information

The following table summarizes the combined financial information for our unconsolidated real estate ventures accounted for under the fair value option.

Balance Sheets:

Real estate inventories

Investments in real estate, net of depreciation

Accounts receivable

Notes payable

Warranty reserves

Accounts payable

Accrued liabilities

Purchaser deposits

Total liabilties

Statements of Operations:

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

The Company received distributions of $ 0.1 million during the year ended December 31, 2020.

Summarized Financial Information for the Hartford

Year Ended December 31,

Statement of Operations:

Total revenue $ 9,308

Direct costs 2,785

Other costs 8,860

Net loss $ ( 2,337 )

Comstock Holding Companies, Inc.

share of net loss $ ( 58 )

FIXED ASSETS, NET

Fixed assets consist of the following:

2020 December 31,

Computer equipment and capitalized software

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accumulated depreciation ( 1,176 ) ( 1,049 )

Depreciation expense, included in ‘general and administrative’ in the accompanying Consolidated Statements of Operations, amounted to $150 thousand and $118 thousand for the years ended December 31, 2019 and 2018, respectively.

On January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) 2016-02, Leases, later codified as Accounting Standards Codification ("ASC") 842 ("ASC 842"), using the modified retrospective method.

For periods presented prior to the adoption date, the Company continues to follow its previous policy under ASC 840, Leases.

Depreciation expense, included in ‘general and administrative’ in the accompanying Consolidated Statements of Operations, amounted to $ 0.2 million and $ 0.2 million for the years ended December 31, 2020 and 2019, respectively.

The company did not record impairments during the years ended December 31, 2020 and 2019.

The determination of whether an arrangement contains a lease and the classification of a lease, if applicable, is made at lease commencement, at which time the Company also measures and recognizes an ROU asset, representing the Company’s right to use the underlying asset, and a lease liability, representing the Company’s obligation to make lease payments under the terms of the arrangement.

For the purposes of recognizing ROU assets and lease liabilities associated with the Company’s leases, the Company has elected the practical expedient to not recognize a

ROU asset or lease liability for short-term leases, which are leases with a term of twelve months or less.

The lease term is defined as the noncancelable portion of the lease term plus any periods covered by an option to extend the lease if it is reasonably certain that the option will be exercised.

For the purposes of recognizing ROU assets and lease liabilities associated with the Company’s leases, the Company has elected the practical expedient to not recognize a ROU asset or lease liability for short-term leases, which are leases with a term of twelve months or less.

The lease term is defined as the non-cancelable portion of the lease term plus any periods covered by an option to extend the lease if it is reasonably certain that the option will be exercised.

ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

The rates implicit within the Company's leases are generally not determinable;

therefore, the Company's incremental borrowing rate of 6.5% is used to determine the present value of lease payments.

therefore, the Company's incremental borrowing rate is used to determine the present value of lease payments.

The determination of the Company’s incremental borrowing rate requires judgment.

The Company looks to similar corporate credit ratings and bond yields when determining the incremental borrowing rate.

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.

As of November 1, 2020, at the lease commencement of the new corporate office, the Company's incremental borrowing rate was determined to be 4.25 %

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

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

See Note 14 - Related Party Transactions for rent expense paid and recognized for the corporate office to related parties.

Maturities of lease liabilities as of December 31, 2020 are as follows:

2025 and future years 6,083

Total lease payments 9,795

imputed interest 1,865

Present value of lease liabilities

As of December 31, 2019, operating lease payments include $108 thousand related to options to extend lease terms that are reasonably certain of being exercised.

The Company does not have any lease liabilities which have not yet commenced as of December 31, 2019.

Present value of operating lease liabilities $ 7,930

The Company does no t have any lease liabilities which have not yet commenced as of December 31, 2020.

GOODWILL AND INTANGIBLES

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

During the years ended December 31, 2019 and 2018, $67 thousand of intangible asset amortization was recorded in General and Administrative expense on the Consolidated Statement of Operations.

During the years ended December 31, 2020 and 2019, $ 0.1 million of intangible asset amortization was recorded in General and Administrative expense on the Consolidated Statement of Operations.

2020 December 31,

accumulated amortization ( 232 ) ( 165 )

As of December 31, 2020, the future estimated amortization expense related to these intangible assets was:

No impairments of the Company’s goodwill were recognized during the years ended December 31, 2019 and 2018.

CONTRACT LIABILITIES

Progress payment balances in excess of revenue recognized are classified as contract liabilities on the Consolidated Balance Sheet in the financial statement line item titled “Deferred revenue.”

Years ended December 31,

Contract Liabilities:

Asset Management - Deferred revenue

Total Contract Liabilities

There were no contract liabilities as of December 31, 2019.

As of December 31, 2018, the Company recognized a contract liability of $1.9 million related to the AMA executed on March 30, 2018 and effective January 2, 2018.

See Note 14 – Related Party Transactions for details regarding this transaction.

Secured financing

As of December 31, 2019 and 2018, the Company had two secured loans related to Comstock Environmental.

One loan was used to finance the acquisition of Comstock Environmental, and carries a fixed interest rate of 6.5%, and has a maturity date of October 17, 2022.

At December 31, 2019 and 2018, this financing had an outstanding balance of $667 thousand and $874 thousand, respectively.

Comstock Environmental has an additional secured loan with an outstanding balance of $27 thousand as of December 31, 2019 and an outstanding balance of $34 thousand as of December 31, 2018 to fund the purchase of an asset used in the business.

This financing is secured by the assets of Comstock Environmental and is guaranteed by our Chief Executive Officer.

During 2018, the Company opened a secured line of credit with a maximum capacity of $0.2 million, which was paid in full during the three months ended March 31, 2019.

Interest charged on this line of credit was based on the prime rate plus 2.50%.

As of December 31, 2018, there was $13 thousand of principal and interest outstanding on this line of credit, and the interest rate was 6.75%.

Unsecured financing

As of December 31, 2019 and December 31, 2018, 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 December 31, 2019 and 2018, the interest rate was 5.0% and 6.0%, respectively.

Notes payable to affiliate—unsecured

No impairments of the Company’s goodwill and other intangible assets were recognized during the years ended December 31, 2020 and 2019.

Notes payable, due to affiliates

Revolving Capital Line of Credit

On March 19, 2020, the Company entered into a Revolving Capital Line of Credit Agreement (the “Loan Documents”) with CDS, pursuant to which the Company secured a $ 10.0 million capital line of credit (the “Revolver”).

Under the terms of the Loan Documents, the Revolver provides for an initial variable interest rate of the Wall Street Journal Prime Rate plus 1.00 % per annum on advances made under the Revolver, payable monthly in arrears.

The five -year term facility allows for interim draws that carry a maturity date of 12 months from the initial date of the disbursement unless a longer initial term is agreed to by CDS.

This loan carries no covenants or collateral requirements.

On March 27, 2020, the Company borrowed $ 5.5 million under the Revolver.

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

Notes Payable Fully Repaid

Comstock Growth Fund

On October 17, 2014, the Company entered into an unsecured promissory note with Comstock Growth Fund (“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.

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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 CDS.

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

Concurrently, the face amount of the CGF Note was reduced to $5.7 million as of the Effective Date.

The loan bears interest at a fixed rate of 10% per annum.

Interest payments will be made monthly in arrears.

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

Concurrently, the face amount of the CGF promissory note was reduced to $ 5.7 million as of the Effective Date.

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

Interest payments were made monthly in arrears.

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

The Company had approximately $5.7 million of outstanding borrowings and accrued interest under the CGF loan, net of discounts, as of December 31, 2019 and 2018, respectively.

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

On April 13, 2020 the Company retired the CGF Note.

During the years ended December 31, 2019 and 2018, the Company made interest payments of $0.6 million.

During the year ended December 31, 2019 and 2018, the Company did not make principal payments for the CGF loan.

The Company had approximately $ 5.7 million of outstanding borrowings and accrued interest under the CGF loan, net of discounts, as of December 31, 2019.

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

The CGF Note was repaid prior to maturity during the year ended December 31, 2020.

Secured financing

As of December 31, 2019 the Company had retired two secured loans related to Comstock Environmental.

One loan was used to finance the acquisition of Comstock Environmental, and carried a fixed interest rate of 6.5 %, and had a maturity date of October 17, 2022.

At December 31, 2019, this financing had an outstanding balance of $ 0.7 million.

This loan was retired during 2020.

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

This loan was retired during 2020.

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

Unsecured financing

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 2020, the Company retired this promissory note.

In addition, during the year ended December 31, 2020, the Company financed the Director’s and Officer’s insurance policy with a one year term loan.

As of December 31, 2020, the balance on this loan was $ 5 thousand.

During the years ended December 31, 2020 and 2019, the Company made interest payments of $ 0.4 million and $ 0.6 million, respectively.

During the year ended December 31, 2020 the Company retired the $ 5.7 million of outstanding borrowings for the CGF Note and did not make principal payments for the Revolver.

During the year ended December 31, 2019, the Company did no t make principal payments for the CGF loan.

Notes payable consisted of the following:

2020 December 31,

Secured financing

Notes payable - due to affiliates, unsecured, net of

$27 and $16 thousand

discount and unamortized

deferred financing charges, respectively

Notes payable - due to affiliates, unsecured, net of $ 27 thousand discount and unamortized deferred financing charges as of December 31, 2019

Unsecured financing charges

Total notes payable, net

$ 5,505 $ 6,995

As of December 31, 2020, maturities of our borrowings are as follows:

2024 and thereafter

See Note 21 for further discussion on repayments subsequent to December 31, 2019.

Total $ 5,505

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 CARES Act and administered by the U.S.

Small Business Administration (“SBA”).

Companies who met the eligibility requirements set forth by the PPP could qualify for PPP loans provided by local lenders, which supports payroll, rent and utility expenses (“qualified expenses”).

If the loan proceeds are fully utilized to pay qualified expenses over the covered period, as further defined by the PPP, the full principal amount of the PPP loan may qualify for loan forgiveness, subject to potential reduction based on the level of full-time employees maintained by the organization during the covered period as compared to a baseline period.

In April 2020, the Company received proceeds of $ 1.95 million under the PPP (the "PPP Loan") provided by Mainstreet Bank (the “Lender”).

Based on the term and conditions of the loan agreement, the term of the PPP loan is two years with an annual interest rate of 1% and principal and interest payments will be deferred for the first six-months of the loan term, which has been updated according to the Paycheck Protection Program Flexibility Act of 2020 (“Flexibility Act”).

In June 2020, the Flexibility Act was signed into law, which amended the CARES Act.

The Flexibility Act changed key provisions of the PPP, including, but not limited to, (i) provisions relating to the maturity of PPP loans, (ii) the deferral period covering of PPP loan payments and (iii) the process for measurement of loan forgiveness.

More specifically, the Flexibility Act provides a minimum maturity of five years for all PPP loans made on or after the date of the enactment of the Flexibility Act (“June 5, 2020”) and permits lenders and borrowers to extend the maturity date of earlier PPP loans by mutual agreement.

As of the date of this filing, the Company has not approached the Lender to request an extension of the current maturity date from two years to five years.

The Flexibility Act also provides that if a borrower does not apply for forgiveness of a loan within 10 months after the last day of the measurement period (“covered period”), the PPP loan is no longer deferred and the borrower must begin paying principal and interest.

Therefore, the Company’s deferral period for principal and interest payments was updated from six-months according to the terms and conditions of the loan agreement to ten months.

In addition, the

Flexibility Act extended the length of the covered period from eight weeks to 24 weeks from receipt of proceeds, while allowing borrowers that received PPP loans before June 5, 2020 to determine, at their sole discretion, a covered period of either eight weeks or 24-weeks.

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.

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

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

The contra-expense recognized lowered the reimbursable costs, billed as revenue, to clients under certain contracts where the Company earns revenue from expenses incurred.

The balance and activity related to the PPP loan is as follows as of December 31, 2020.

PPP loan proceeds $ 1,954

Qualified expenses eligible for forgiveness $ ( 1,954 )

PPP loan balance $ —

The Company submitted the PPP loan forgiveness application to the lender in December 2020.

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 statute and applicable regulations, the lender must request payment from the SBA at the time the lender issues its decision to the SBA.

The Lender completed its review and submitted the Company's forgiveness application to the SBA in February 2021.

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.

Pursuant to the Flexibility Act, the Company’s PPP loan agreement will be amended in the event that no amount or less than all of the PPP loan is forgiven.

In addition, starting in August 2021, the Company will be required to make principal and interest payments totaling $ 0.1 million per month or an adjustment amount based on the loan amendment over the remaining term of the PPP loan until such time the loan is fully settled.

The Company may prepay the PPP loan at any time without penalty and the loan agreement evidencing the PPP Loan contains customary events of default relating to, among other things, payment defaults, or breaches of representations and warranties, or other provisions of the loan agreement.

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 ended December 31, 2020.

At December 31, 2020 the total amount of such deferral was $ 0.2 million 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

The Company leases office facilities under various non-cancelable operating leases.

The leases contain various renewal options.

The Company leases its headquarters under a non-cancelable operating lease.

The lease contains various renewal options.

See Note 6 for further discussion of the Company's operating lease commitments.

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In accordance with GAAP, the Company records a provision for a liability when it is both probable that a liability has been incurred and the amount can be reasonably estimated.

While it is reasonably possible that an unfavorable outcome may occur as a result of one or more of the Company’s current litigation matters, at this time management has concluded that the resolutions of these matters are not expected to have a material effect on the Company's consolidated financial position, future results of operations or liquidity.

While it is possible that an unfavorable outcome may occur as a result of one or more of the Company’s current litigation matters, at this time management has concluded that the resolutions of these matters are not expected to have a material effect on the Company's consolidated financial position, future results of operations or liquidity.

Legal defense costs are expensed as incurred.

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The following table summarizes the fair value of fixed and floating rate debt and the corresponding carrying value of fixed and floating rate debt as of:

2020 December 31,

Carrying amount $ 5,505 $ 6,995

Fair value $ 5,485 $ 6,820

Fair value estimates are made at a specific point in time, based on relevant market information about the financial instruments.

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Changes in assumptions, such as an acceleration of amounts due and payable, could significantly affect the estimates.

In connection with the CGF I & II conversions discussed in Note 9 – Debt and Note 14 – Related Party Transactions , we issued 2,220,690 shares of Series C Non-Convertible Preferred Stock with a liquidation preference of $5.00 per share.

The Series C Preferred Stock has a discretionary dividend feature.

The Company recorded these shares based on the fair value calculation on the effective date of the agreement.

The Company used various assumptions and level 3 inputs such as current market condition and financial position in calculating the fair value of the Series C Preferred Stock by back solving from the Company’s equity value using the option pricing and the probability-weighted expected return models, adjusted for marketability of the Series C Preferred Stock.

Investments in Real Estate Ventures at Fair Value

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For such investments, we increase or decrease our investment each reporting period by the change in the fair value and we report these fair value adjustments in the Consolidated Statements of Operations.

Please see note 4 - Equity method Investments in real estate ventures carried at fair value for additional information.

For our investments in real estate ventures at fair value, we estimate the fair value using the level 3 Income Approach or a sales comparable approach to determine a fair value.

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 December 31, 2019, investments in the real estate ventures at fair value was approximately $8.4 million.

As of December 31, 2020 and 2019, investments in the real estate ventures at fair value was approximately $ 6.3 million and $ 8.4 million, respectively.

Non-Recurring Fair Value Measurements

The Company may also value its non-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.

The Company may also value its non-financial assets and liabilities, including items such as long-lived assets, at fair value on a non-recurring basis to determine if impairment has occurred.

Such fair value measurements use significant unobservable inputs and are classified as Level 3.

RESTRICTED STOCK, STOCK OPTIONS AND OTHER STOCK PLANS

STOCKHOLDERS EQUITY

Our certificate of incorporation authorizes the issuance of Class A common stock and Class B common stock.

As of December 31, 2020, we are authorized to issue 59,780 thousand shares of Class A common stock and 220 thousand shares of Class B common stock, each with a par value of $ 0.01 per share.

Holders of our Class A common stock and Class B common stock are entitled to dividends when, as and if, declared by our board of directors, subject to the rights of the holders of all classes of stock outstanding having priority rights to dividends.

As of December 31, 2020, we have not declared any dividends.

The holder of each share of Class A common stock is entitled to one vote, while the holder of each share of Class B common stock is entitled to fifteen votes.

Shares of our Class B common stock are convertible into an equivalent number of shares of our Class A common stock and generally convert into shares of our Class A common stock upon transfer.

Class A common stock and Class B common stock are referred to as common stock throughout the notes to these financial statements, unless otherwise noted.

As of December 31, 2020, there were 8.0 million shares of Class A common stock issued and 7.9 million shares outstanding.

As of December 31, 2020, there were 220 thousand shares of Class B common stock issued and outstanding.

Preferred Stock

The Company's certificate of incorporation authorizes the issuance of Series C non-convertible preferred stock, par value $ 0.01 per share and a stated value of $ 5.00 per share.

As of December 31, 2020, the Company is authorized to issue 20.0 million shares of Series C preferred stock.

As of December 31, 2020, there were 3.4 thousand shares of Series C preferred stock issued and outstanding.

The Series C Preferred Stock has a discretionary, non-cumulative, dividend feature and is redeemable for $ 5.00 per share.

The Series C Preferred Stock is redeemable by holders in the event of liquidation or change in control of the Company.

Stock-based Compensation Plans

On December 14, 2004, the Company adopted the 2004 Long-Term Compensation Plan (the “2004 Plan”).

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Stock options issued under the plan expire 10 years from the date they are granted.

The 2019 Plan authorized 2.5 million shares of our Class A Common Stock subject to adjustment for forfeitures and tax withholdings.

As of December 31, 2019 and 2018, there were 2.1 million and 0.06 million shares, respectively, available for issuance under the 2019 Plan and 2004 Plan, respectively.

The 2019 Plan authorized 2.5 million shares of our Class A Common Stock subject to adjustment for forfeitures and tax withholding.

As of December 31, 2020 and 2019, there were 2.1 million shares available for issuance under the 2019 Plan.

The fair value of each option award is calculated on the date of grant using the Black-Scholes option pricing model and certain subjective assumptions.

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The expected term of options is based on the Company’s historical experience.

The following table summarizes the assumptions used to calculate the fair value of options during 2019 and 2018.

The following table summarizes the assumptions used to calculate the fair value of options during 2019.

There were no options granted in 2020.

Weighted average fair value of options granted

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82.03%-82.32%

72.21%-83.47%

Weighted average expected volatility

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A summary of the Company’s restricted share activity is presented below:

Restricted nonvested at January 1, 2018

Shares Weighted

Restricted unvested at January 1, 2019 138 $ 2.18

Granted 254 2.33

Vested ( 46 ) 2.18

Forfeited or Expired — —

Outstanding at December 31, 2019 346 $ 2.29

Granted 636 1.96

Vested ( 112 ) 2.27

Forfeited or Expired — —

Nonvested at December 31, 2019

As of December 31, 2019 and 2018, there was $625 thousand and $321 thousand, respectively, of unrecognized compensation cost related to nonvested stock options and restricted stock issuances granted under the 2019 Plan and 2004 Plan, respectively.

Unvested at December 31, 2020 870 $ 2.06

As of December 31, 2020 and 2019, there was $ 1.1 million and $ 0.6 million, respectively, of unrecognized compensation cost related to nonvested stock options and restricted stock issuances granted under the 2019 Plan and 2004 Plan, respectively.

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

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Consolidated Real Estate Inventories in assets of discontinued operations

Included within the Company’s assets of discontinued operations are real estate entities at December 31, 2018 that were determined to be VIEs.

Included within the Company’s net loss from discontinued operations, net of tax 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.

The Company determined that it was the primary beneficiary of these VIEs as a result of the Company’s majority voting rights and complete operational control of these entities.

On January 1, 2019 the Company evaluated Investors 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.

As a result of the MTA, the Company determined that Investors X is considered held for sale effective April 30, 2019 and Investors X activities have been reclassified to discontinued operations in the accompanying Consolidated Financial Statements.

On July 23, 2019, the Investors X operating agreement was amended to clarify certain definitions resulting in Investors X no longer being considered a VIE of the Company.

Prior to July 23, 2019 the Company determined that it was the primary beneficiary of these VIEs as a result of the Company’s majority voting rights and complete operational control of these entities.

Prior to April 30, 2019, the Company evaluated Investors 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.

As a result of the April 30, 2019 Master Transfer Agreement ("MTA") entered into between the Company and CDS, the Company determined that Investors X is considered held for sale effective April 30, 2019 and Investors X activities were reclassified to discontinued operations in the accompanying Consolidated Financial Statements.

On July 23, 2019, the Investors X operating agreement was amended to clarify certain definitions resulting in the Company no longer being the primary beneficiary of Investors X.

Therefore, the assets and liabilities of Investors X were deconsolidated effective July 23, 2019 in the Consolidated Balance Sheets of the Company.

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Lease for Corporate Headquarters

The Company has a lease for its corporate headquarters from an affiliate wholly-owned by our CEO.

Future minimum lease payments under this lease, which expires on September 30, 2020, is $0.4 million.

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

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

Future minimum lease payments under this lease, which expires on October 31, 2030, is $ 9.8 million.

The Company is also responsible for the pro-rata share common area maintenance costs to the landlord.

For each of the years ended December 31, 2020 and 2019, total rental payments made were $ 0.5 million and $ 0.6 million, respectively.

Rent expense for the years ended December 31, 2020 and 2019 was $ 0.6 million and $ 0.6 million, respectively.

This is reflected within 'Direct costs - asset management' as it is a reimbursable costs under the 2019 AMA.

Asset Management Agreement

On March 30, 2018, CDS Asset Management, L.C.

(“CAM”), an entity wholly owned by the Company, entered into a master asset management agreement (the “AMA”) with Comstock Development Services LC (“CDS”), an entity wholly owned by Christopher Clemente, the Chief Executive Officer of the Company.

The effective date of this Agreement is January 2, 2018.

Pursuant to the AMA, CDS has engaged CAM to manage and administer the CDS’ commercial real estate portfolio and the day to-day operations of CDS and each property-owning subsidiary of CDS.

On March 30, 2018, CAM, an entity wholly owned by the Company, entered into that AMA with CDS.

The effective date of the AMA is January 2, 2018.

Pursuant to the AMA, CDS has engaged CAM to manage and administer the CDS’ commercial real estate portfolio and the day to-day operations of CDS and each property-owning subsidiary of CDS (the "CDS Portfolio").

Pursuant to the terms of the AMA, CAM will provide investment advisory, development and asset management services necessary to build out, stabilize and manage certain assets.

Pursuant to the AMA, CDS will pay CAM an annual cost-plus fee (the “Annual Fee”) in an aggregate amount equal to the sum of (i) the employment expenses of personnel dedicated to providing services to the Comstock Real Estate Portfolio pursuant to the AMA, (ii) the costs and expenses of the Company related to maintaining the listing of its shares on a securities exchange and complying with regulatory and reporting obligations as a public company, and (iii) a fixed annual payment of $1,000,000.

During the year ended December 31, 2018, the Company recorded revenue of $12.0 million which is included in ‘Revenue-asset management’ in the Consolidated Statement of Operations).

Pursuant to the AMA, CDS will pay CAM an annual cost-plus fee (the “Annual Fee”) in an aggregate amount equal to the sum of (i) the employment expenses of personnel dedicated to providing services to the CDS Portfolio pursuant to the AMA, (ii) the costs and expenses of the Company related to maintaining the listing of its shares on a securities exchange and complying with regulatory and reporting obligations as a public company, and (iii) a fixed annual payment of $ 1.0 million.

2019 Amended Asset Management Agreement

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(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 disposit ion;

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 list ing of its shares and complying with related regulatory and reporting obligations, and (z) a fixed annual payment of $1,000,000.

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 2020 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.

In addition to the annual payment of the greater of either the Market Rate Fee or the Cost Plus Fee, the Company also is entitled on an annual basis to the following additional fees:

(i) an incentive fee equal to 10% of the free cash flow of each of the real estate assets comprising the Anchor Portfolio after calculating a compounding preferred return of 8% on CDS invested capital (ii) an investment origination fee equal to 1% of raised capital, (iii) a leasing fee equal to $1.00/sf for new leases and $0.50/sf for renewals;

(i) an incentive fee equal to 10 % of the free cash flow of each of the real estate assets comprising the Anchor Portfolio after calculating a compounding preferred return of 8 % on

CDS invested capital (ii) an investment origination fee equal to 1 % of raised capital, (iii) a leasing fee equal to $ 1.00 /sf for new leases and $ 0.50 /sf for renewals;

and (iv) mutually agreeable loan origination fees related to the Anchor Portfolio.

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Residential, Commercial and Parking Property Management Agreements

In December 2017 and January 2018, the Company entered into separate residential property management agreements with two properties owned by CDS Entities under which the Company receives fees to manage and operate the properties including tenant communications, leasing of apartment units, rent collections, building maintenance and day-to-day operations, engagement and supervision of contractors and vendors providing services for the buildings, and budget preparation and oversight.

During the period of May through and including December 2019, the Company entered into separate commercial property and parking management agreements with several properties owned by CDS Entities under which the Company receives fees to manage and operate the office and retail portions of the properties, including tenant communications, rent collections, building maintenance and day-to-day operations, engagement and supervision of contractors and vendors providing services for the buildings, and budget preparation and oversight.

The Company entered into separate residential property management agreements with properties owned by CDS Entities under which the Company receives fees to manage and operate the properties including tenant communications, leasing of apartment units, rent collections, building maintenance and day-to-day operations, engagement and supervision of contractors and vendors providing services for the buildings, and budget preparation and oversight.

The Company entered into separate commercial property and parking management agreements with several properties owned by CDS Entities under which the Company receives fees to manage and operate the office and retail portions of the properties, including tenant communications, rent collections, building maintenance and day-to-day operations, engagement and supervision of contractors and vendors providing services for the buildings, and budget preparation and oversight.

These property management agreements are each for one year initial terms with successive, automatic one year renewal terms, unless sooner terminated.

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Construction Management Agreements

On January 1, 2019, the Company entered into a construction management agreement for two properties owned by CDS Entities under which the Company receives fees to provide certain construction management and supervision services, including construction supervision and management of the buildout of certain tenant premises.

which fee is generally one percent (1%) to four percent (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.

The Company has construction management agreements with properties owned by CDS Entities under which the Company receives fees to provide certain construction management and supervision services, including construction supervision and management of the buildout of certain tenant premises.

The Company receives a flat construction management fee for each engagement under a work authorization based upon the construction management or supervision fee set forth in the 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.

Business Management Agreements

On April 30, 2019, CAM entered into a Business Management Agreement (the “Management Agreement”) with Investors X, whereby CAM will provide Investors X with asset and professional services related to the wind down of the Company’s divested homebuilding operations and the continuation of services related to the Company’s divested land development activities.

The aggregate fee payable to CAM from Investors X under the Management Agreement is $937,500, payable in fifteen quarterly installments of $62,500 each.

On April 30, 2019, CAM entered into a Business Management Agreement (the “BMA”) with Investors X, whereby CAM will provide Investors X with asset and professional services related to the wind down of the Company’s divested homebuilding operations and the continuation of services related to the Company’s divested land development activities.

The aggregate fee payable to CAM from Investors X under the Management Agreement is $ 937.5 thousand, payable in fifteen quarterly installments of $ 62.5 thousand each.

The Hartford Investment

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Partners is the manager of the Hartford.

At the closing of the acquisition of the Hartford, the Company received an acquisition fee of $500 thousand and is entitled to asset management, property management, construction management and leasing fees for its management of the Property pursuant to separate agreements between the Hartford, or its affiliates, and the Company, or its affiliates.

management of the Property pursuant to separate agreements between the Hartford, or its affiliates, and the Company, or its affiliates.

The Company is also entitled to an incentive fee related to the performance of the investment.

See Note 21 – Subsequent Events for further discussion of the Hartford investment.

On February 7, 2020, the Company, Partners and DWF VI 3101 Wilson Member, LLC (“DWF”), an unaffiliated, third party, equity investor in the Hartford, entered into a limited liability company agreement (the “DWC Operating Agreement”) to form DWC 3101 Wilson Venture, LLC (“DWC”) to, among other things, acquire, own and hold all interests in the Hartford Owner.

In furtherance thereof, on February 7, 2020, the Original Operating Agreement for the Hartford Owner was amended and restated (the “A&R Operating Agreement”) to memorialize the Company’s and Partners’ assignment of 100 % of its membership interests in the Hartford Owner to DWC.

As a result thereof, DWC is the sole member of the Hartford Owner.

The Company and Partners, respectively, hold minority membership interests in, and DWF holds the majority membership interest in, DWC.

The Company’s ownership interest in the Hartford remains at 2.5 %.

Private Placements and Promissory Notes

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”).

Also on 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.

On May 23, 2018, the Company entered into a Note Exchange and Subscription Agreement (the “Note Exchange Agreement”) in which a note (“CGF2 Note”) with an outstanding principal and accrued interest balance of $3.7 million was exchanged for 738,390 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 CGF II, a Company wholly owned by our Chief Executive Officer.

The CGF2 Note was cancelled in its entirety effective as of the Effective Date.

See Note 9 to the Consolidated Financial Statements for further description of the CGF Private Placement.

Under the terms of the Loan Documents, the Revolver provides for an initial variable interest rate of the WSJ Prime Rate plus 1.00 % per annum on advances made under the Revolver, payable monthly in arrears.

The five -year term facility allows for interim draws that carry a maturity date of 12 months from the initial date of the disbursement unless a longer initial term is agreed to by CDS.

On March 27, 2020 the Company borrowed $ 5.5 million under the Revolver.

On April 10, 2020, the capital provided to the Company by the Revolver was utilized to retire all of the Company’s 10 % corporate indebtedness maturing in 2020 owed to CGF.

See Note 8 - Debt for further description of the CGF Private Placement and the Revolver.

Revenues from Related Parties

The following table details the revenue earned from related parties.

Years ended December 31,

Related party revenue

Asset management

$ 21,818 $ 19,370

Real estate services

Total Related Party Revenue

$ 22,763 $ 20,562

UNCONSOLIDATED JOINT VENTURE

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 $125 and $72 as of December 31, 2019 and 2018, respectively, and is included within ‘Prepaid and other assets, net’ in the accompanying Consolidated Balance Sheets.

Earnings for the years ended December 31, 2019 and 2018, from this unconsolidated joint venture of $222 and $137, respectively, is included in ‘Other income, net’ in the accompanying Consolidated Statement of Operations.

During the years ended December 31, 2019 and 2018, the Company collected and recorded a distribution of $172 and $89, respectively, from this joint venture as a return on investment.

The investment in the unconsolidated joint venture was $ 29.0 thousand and $ 125.0 thousand as of December 31, 2020 and 2019, respectively, and is included within ‘Prepaid and other assets, net’ in the accompanying Consolidated Balance Sheets.

Earnings for the years ended December 31, 2020 and 2019, from this unconsolidated joint venture of $ 33 thousand and $ 222 thousand, respectively, is included in ‘Other income, net’ in the accompanying Consolidated Statement of Operations.

During the years ended December 31, 2020 and 2019, the Company collected and recorded a distribution of $ 130 thousand and $ 172 thousand, respectively, from this joint venture as a return on investment.

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

Twelve Months Ended December 31,

Years ended December 31,

Statement of Operations:

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Comstock Holding Companies, Inc.

share of net income

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

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Related party

$ 22,763 $ 20,562

Total Revenue by Customer

$ 28,726 $ 25,317

Years ended December 31,

Revenue by contract type

$ 5,229 $ 4,137

13,702 14,546

Time and Material

Total Revenue by contract type

$ 28,726 $ 25,317

For the years ended December 31, 2020 and 2019, $ 28.0 million and $ 23.3 million of our revenues were earned for contracts where revenue is recognized over time, respectively.

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The weighted average shares and share equivalents used to calculate basic and diluted (loss) income for continuing and discontinued operations per share for the years ended December 31, 2020 and 2019 are presented in the accompanying Consolidated Statements of Operations.

Restricted stock awards, stock options and warrants for the years ended December 31, 2019 and 2018 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.

Restricted stock awards, stock options and warrants for the years ended December 31, 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 years ended December 31, 2020 and 2019 as their inclusion would be anti-dilutive.

Years Ended December 31,

Restricted stock awards

Stock options

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During the year ended December 31, 2020, the Company recognized income tax expense of $ 25 thousand from continuing operations and the effective tax rate was 0.45 %.

During the year ended December 31, 2018, the Company recognized income tax benefit of $1.1 million and the effective tax rate was (21.54)%.

During the year ended December 31, 2019, the Company recognized income tax expense of $ 2 thousand and the effective tax rate was 0.29 %.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

The Company recorded valuation allowances for certain tax attributes and other deferred tax assets.

At this time, sufficient uncertainty exists regarding the future realization of these deferred tax assets through future taxable income.

If, in the future, the Company believes that it is more likely than not that these deferred tax benefits will be realized, the valuation allowances will be reversed.

The Company assesses available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of existing deferred tax assets.

The cumulative loss incurred by the Company over the three-year period ended December 31, 2020 constitutes a significant piece of objective negative evidence.

Such objective negative evidence limits the ability to consider other subjective evidence, such as our projections for future profitability and growth.

Based on this evaluation, as of December 31, 2020, the Company maintained a full valuation allowance against net deferred tax assets as their realization did not meet the more-likely-than-not criterion.

The amount of deferred tax assets considered realizable, however, could be adjusted in the future if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for future profitability and growth.

With a full valuation allowance, any change in the deferred tax asset or liability is fully offset by a corresponding change in the valuation allowance.

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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 December 31, 2019, the three-year cumulative shift in ownership of the Company’s stock has not triggered an impairment of our NOL asset.

We estimate that as of December 31, 2020, the three -year cumulative shift in ownership of the Company’s stock has not triggered a limitation in the use 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 December 31, 2020, because the Company has recorded a full valuation allowance on substantially all of its net deferred tax assets.

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In general, an ownership change occurs whenever there is a shift in ownership by more than 50 percentage points by one or more 5 % stockholders over a specified time period (generally three years).

Given Section 382’s b road definition, an ownership change could be the unintended consequence of otherwise normal market trading in the Company’s stock that is outside of the Company’s control.

Given Section 382’s broad definition, an ownership change could be the unintended consequence of otherwise normal market trading in the Company’s stock that is outside of the Company’s control.

In an effort to preserve the availability of these NOLs, Comstock adopted a Section 382 rights agreement, which expired in May 2014.

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The Rights Agreement was adopted to reduce the likelihood of such an unintended “ownership change”, thus preserving the value of these tax benefits.

Similar plans have been adopted by a number of companies ho lding similar significant tax assets over the past several years.

The Company has not recorded any accruals related to uncertain tax positions as of December 31, 2019 and 2018, respectively.

Similar plans have been adopted by a number of companies holding similar significant tax assets over the past several years.

The Company has no t recorded any accruals related to uncertain tax positions as of December 31, 2020 and 2019, respectively.

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

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The income tax provision for continuing operations consists of the following as of December 31:

Federal $ ( 143 ) $ 178

State ( 26 ) 32

Valuation allowance 194 ( 208 )

Total income tax expense (benefit)

Total income tax expense $ 25 $ 2

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Net operating loss and tax credit carryforwards

Accrued expenses

$ 37,899 $ 37,440

Stock based compensation

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Deferred Revenue - Advance payment

Depreciation and amortization

38,862 38,701

Less - valuation allowance

( 38,780 ) ( 38,601 )

Net deferred tax assets

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Goodwill amortization

( 103 ) ( 56 )

Net deferred tax liabilities

( 103 ) ( 111 )

Net deferred tax assets (liabilities)

$ ( 21 ) $ ( 11 )

A reconciliation of the statutory rate and the effective tax rate after adjustments for non-includable partnership income arising from non-controlling interest follows:

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Current state income tax — % — %

Change in enacted rate

Change in enacted state rates 13.53 % — %

Other, net ( 1.53 ) % — %

Effective tax rate ( 0.45 %) ( 0.29 %)

DISCONTINUED OPERATIONS

On April 30, 2019, the Company entered into the MTA 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.

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 carrying amount of the assets and liabilities from discontinued operations, which were included within the Company’s prior Homebuilding segment, have been moved from their historical balance sheet presentation to assets and liabilities from discontinued operations as follows:

Cash and cash equivalents

Restricted cash

Trade receivables

Real estate inventories

Other assets, net

Accounts payable and accrued liabilities

Notes payable - secured by real estate inventories, net of deferred financing charges

Income taxes payable

TOTAL LIABILITIES

The operating results of the discontinued operations that are reflected on the C onsolidated S tatement of O perations within the net income (loss) from discontinued operations are as follows:

Years Ended December 31,

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

Year Ended December 31, 2019

Revenue—homebuilding

Revenue—real estate services

Total revenue

Cost of sales—homebuilding

Impairment charges

Sales and marketing

General and administrative

Interest and real estate tax expense

Operating (loss)

Other (loss), net

Loss from discontinued operations before income taxes ( 273 )

Income tax (benefit) expense

Income tax benefit ( 15 )

Net loss from discontinued operations ( 258 )

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SEGMENT DISCLOSURES

Subsequent to July 23, 2019 we operate our business through our two segments:

We operate our business through our two segments:

Asset Management, and Real Estate Services.

In our Asset Management segment, we focus on providing management services to a wide range of real estate assets and businesses that include a variety of commercial real estate uses, including apartments, hotels, office buildings, commercial garages, leased lands, retail stores, mixed-use developments, and urban transit-oriented developments.

In our Asset Management segment, we focus on providing management services to a wide range of real estate owners and businesses that include a variety of commercial real estate uses, including apartments, hotels, office buildings, commercial garages, leased lands, retail stores, mixed-use developments, and urban transit-oriented developments.

The properties and businesses we currently manage are located primarily along the Washington, D.C.

Metro Silver Line in Fairfax and Loudoun Counties, but we also manage projects in other jurisdictions within the states of Maryland and Virginia.

In our Real Estate Services segment, our experienced real estate services-based 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, 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.

Metro Silver Line in Fairfax and Loudoun Counties, but we also manage projects in other jurisdictions including Maryland and Virginia.

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 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 Re al Estate Services , excluding discontinued operations, for the year ended December 3 1 , 2019 and 2018 .

The following table includes the Company’s two reportable segments of Asset Management and Real Estate Services, excluding discontinued operations, for the year ended December 31, 2020 and 2019.

Total (from continuing

1 unchanged sentence

Gross revenue

Net (loss) income

Depreciation, amortization, and stock based

$ 21,923 $ 6,803 $ 28,726

3,478 2,706 6,184

Net income 1,542 540 2,082

24,886 3,693 28,579

Depreciation, amortization, and stock based compensation

774 227 1,001

Interest expense

$ 344 $ 35 $ 379

Total (from continuing

1 unchanged sentence

Gross revenue

Net (loss) income

Depreciation, amortization, and stock based

Interest expense

SUBSEQUENT EVENTS

Line of Credit and CGF Note

On March 19, 2020, the Company entered into a Revolving Capital Line of Credit Agreement (the “Loan Documents”) with CDS, pursuant to which the Company secured a capital line of credit (the “Loan”) in the amount of $10 million.

Under the terms of the Loan Documents, the Loan provides for an initial variable interest rate of the WSJ Prime Rate plus 1.00% per annum on advances made under the Loan, payable monthly in arrears.

The five-year term facility allows for interim draws that carry a maturity date of twelve months from the initial date of the disbursement unless a longer initial term is agreed to by the Lender.

On March 27, 2020, the Company drew $5.5 million on the Loan and on April 13, 2020 the Company retired the CGF Note.

In December 2019, COVID-19 surfaced in Wuhan, China.

Through March 2020, the spread of this virus and government responses is causing business disruption and is adversely affecting many, including the travel, leisure and hospitality industries and with respect to companies that have significant operations or supply chains in China.

The spread of COVID-19 has also caused significant volatility in U.S.

and international debt and equity markets, which can negatively impact consumer confidence.

There is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S.

economy and consumer confidence.

The Company is taking all necessary steps to keep our business premises, customer properties, vendors and employees in a safe environment and are constantly monitoring the impact of COVID – 19.

As discussed in Note 2, the Company derives a substantial portion of its revenues from various related party entities associated with real estate properties.

The extent to which COVID-19 impacts our results and the results of the properties we manage will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions taken to contain it or treat its impact.

While we have not seen a significant impact to our results from COVID-19 to date, if the virus continues to cause significant negative impacts to economic conditions or consumer confidence, our revenues including our property

management revenues, recoverability of assets including trade receivables, related party receivables, goodwill and our fair value investment in Investors X, results of operations, financial condition and liquidity could be adversely impacted .

On March 27, 2020, the United States enacted the Coronavirus Aid, Relief and Economic Security Act (CARES Act).

The Cares Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the United States economy and fund a nationwide effort to curtail the effect of COVID-19.

While the CARES Act provides sweeping tax changes in response to the COVID-19 pandemic, some of the more significant provisions which are expected to impact the Company’s financial statements include removal of certain limitations on utilization of net operating losses, increasing the loss carryback period for certain losses to five years, and increasing the ability to deduct interest expense, as well as amending certain provisions of the previously enacted Tax Cuts and Jobs Act.

Due to the recent enactment of the CARES Act, the Company is still evaluating the impact, if any, that the CARES Act will have on its financial position, results of operations or cash flows.

REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS

In connection with the preparation of the Company’s 2019 consolidated financial statements, the Company identified errors in its historical financial statements relating to how the Company accounted for debt discounts and how the Company accounted for reimbursement of salaries and other salary related costs.

Specifically, the Company incorrectly accounted for debt discount that should have been fully amortized at the end of the initial three-year term of the CGF Note in October 2017.

In addition, in 2018 and the interim periods in 2019, the Company previously reported the reimbursement of salary costs from its property management agreements on a net basis, although the Company was required to account for these payroll related reimbursements on a gross basis.

The correction of these non-cash errors had no effect on the reported operating income (loss) or total cash flows from operations, investing, or financing of the Company.

The Company evaluated the errors and, based on an analysis of quantitative and qualitative factors, determined that the related impact was not material to the Company’s consolidated financial statements for any prior period.

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

For the Three Months Ended March 31, 2019

For the Three Months Ended June 30, 2019

For the Six Months Ended June 30, 2019

As previously reported

Revenues - asset management

Direct costs - asset management

Interest (expense)

$ 19,605 $ 5,712 $ 25,317

3,044 1,101 4,145

Net income (loss) 1,737 ( 273 ) 1,464

Notes payable - due to affiliates, net of discount

Additional paid-in capital

Accumulated deficit

For the Three Months Ended September 30, 2019

For the Nine Months Ended September 30, 2019

As previously reported

Revenues - asset management

Direct costs - asset management

Interest (expense)

Notes payable - due to affiliates, net of discount

Additional paid-in capital

Accumulated deficit

For the Three Months Ended March 31, 2018

For the Three Months Ended June 30, 2018

For the Six Months Ended June 30, 2018

As previously reported

Revenues - asset management

Direct costs - asset management

Interest (expense)

Income tax (expense) benefit

Notes payable - due to affiliates, net of discount

Additional paid-in capital

Accumulated deficit

For the Three Months Ended September 30, 2018

For the Nine Months Ended September 30, 2018

For the Twelve Months Ended December 31, 2018

As previously reported

Revenues - asset management

Direct costs - asset management

15,270 4,663 19,933

Depreciation, amortization, and stock based compensation

Interest expense

Income tax (expense) benefit

Notes payable - due to affiliates, net of discount

Additional paid-in capital

Accumulated deficit

$ 390 $ 84 $ 474

SUBSEQUENT EVENTS

Legal entity names changes

On February 18, 2021, the Company amended the entity names for several subsidiaries as part of operational efficiency enhancements initiated in the first quarter of 2021.

The entity names were changed for the following Company subsidiaries:

(a) CDS Asset Management, LC is now CHCI Asset Management, LC, (b) Comstock Commercial Management, LC is now CHCI Commercial Management, LC, (c) Comstock Residential Management, LC is now CHCI Residential Management, LC, CDS Capital Management, L.C.

is now CHCI Capital Management, LC and Comstock Real Estate Services, LC is now CHCI Real Estate Services, L.C.

Momentum at Shady Grove Metro final payment

In connection with the Momentum at Shady Grover Metro Station project, a subsidiary of the Company received the final payment for real estate development management services from the Comstock Stratford JV on February 23, 2021.

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-K

Item 9A. Controls and Procedures