What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-29 compared with 2022-03-31 · 249 added, 223 removed, 525 unchanged (47% of the section changed)

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Consolidated Balance Sheets at December 31, 2022 and 2021 ...........................................................................................

Consolidated Statements of Operations for the Years Ended December 31, 202 1 and 20 20

Consolidated Statements of Operations for the Years Ended December 31, 2022 an d 2021 ..............................................

Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2022 and 2021 ...........

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

(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.

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

During 2021, after weighing all available positive and negative evidence, the Company released $13.0 million of the valuation allowance as management deemed estimated future taxable income to be sufficient to realize certain deferred tax assets related to tax credit carryforwards and net operating losses.

During 2022, after weighing all available positive and negative evidence, the Company released $1.4 million of the valuation allowance as management deemed estimated future taxable income to be sufficient to realize additional deferred tax assets related to tax credit carryforwards and net operating losses.

The principal consideration for our determination that the realizability of deferred tax assets is a critical audit matter is that the estimate of future taxable income is an accounting estimate subject to a high level of estimation uncertainty.

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COMSTOCK HOLDING COMPANIES, INC.

AND SUBSIDIARIES

Consolidated Balance Sheets

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Cash and cash equivalents $ 11,722 $ 15,823

Accounts receivable 46 62

Accounts receivable, net 504 46

Accounts receivable - related parties 3,291 1,697

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Fixed assets, net 421 264

Intangible assets 144 —

Leasehold improvements, net 119 —

Investments in real estate ventures 7,013 4,702

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Other assets 15 15

Non-current assets held for sale — 1,834

Total assets $ 42,473 $ 43,602

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Current operating lease liabilities 791 616

Current loans payable — 5

Current liabilities held for sale — 1,194

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$ 0.01 par value;

aggregate liquidation preference of $ 17,203 ;

20,000 shares authorized;

3,441 issued and outstanding as of December 31, 2021 and 2020

none issued or outstanding as of December 31, 2022;

3,441 issued and outstanding as of December 31, 2021

Class A common stock;

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59,780 shares authorized;

8,102 and 7,953 issued, and 8,017 and 7,868 outstanding as of December 31, 2021 and 2020, respectively

9,337 issued and 9,252 outstanding as of December 31, 2022;

8,102 issued and 8,017 outstanding as of December 31, 2021

Class B common stock;

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COMSTOCK HOLDING COMPANIES, INC.

AND SUBSIDIARIES

Consolidated Statements of Operations

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Net income (loss) $ 7,347 $ 13,609

Impact of Series C preferred stock redemption 2,046 —

Net income (loss) attributable to common stockholders $ 9,393 $ 13,609

Weighted-average common stock outstanding:

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COMSTOCK HOLDING COMPANIES, INC.

AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders' Equity

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Issuance of common stock, net of shares withheld for taxes — — 235 2 — — ( 570 ) — — ( 568 )

Redemption of Series C preferred stock ( 3,441 ) ( 6,765 ) 1,000 10 — — 709 — 2,046 ( 4,000 )

Stock-based compensation — — — — — — 779 — — 779

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COMSTOCK HOLDING COMPANIES, INC.

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

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Investments in real estate ventures ( 2,709 ) ( 2,058 )

Proceeds from sale of CES 1,016 —

Distributions from real estate ventures 220 3,522

Purchase of fixed assets ( 188 ) ( 115 )

Purchase of fixed assets/leasehold improvements/intangibles ( 626 ) ( 188 )

Net cash provided by (used in) investing activities ( 2,099 ) 1,276

Financing Activities - Continuing Operations

Payments under credit facility - due to affiliates ( 5,500 ) —

Loan proceeds — 121

Loan payments — ( 126 )

Redemption of Series C preferred stock ( 4,000 ) —

Payment of taxes related to the net share settlement of equity awards ( 568 ) ( 222 )

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Supplemental Cash Flow Information

Cash paid during the period for:

Interest $ 234 $ 397

Cash paid for interest $ 222 $ 234

Cash paid for income tax, net 92 $ 8

Supplemental Disclosure of Non-Cash Investing and Financing Activities

Accrued liability settled through issuance of common stock $ 28 $ 68

Gain on early extinguishment of debt — 50

PPP loan forgiveness — 1,954

Issuance of Series A common stock to redeem Series C preferred stock $ 4,230 $ —

Right of use assets and lease liabilities at commencement 1,224 —

Accrued liability settled through issuance of common stock — 28

See accompanying Notes to Consolidated Financial Statements.

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Notes to Consolidated Financial Statements

(In thousands, except per share data or otherwise indicated)

Company Overview

Comstock Holding Companies, Inc.

("Comstock" or the "Company") was incorporated in the state of Delaware in 2004 and is a leading developer and manager of mixed-use and transit-oriented properties with operations that are primarily focused in the Washington, D.C.

metropolitan area.

In February 2021, the Company amended the entity names for the five real estate-focused subsidiaries through which it primarily operates as part of operational efficiency enhancements.

The entity names were changed as follows:

• CDS Asset Management, LC is now CHCI Asset Management, LC

• Comstock Commercial Management, LC is now CHCI Commercial Management, LC

• Comstock Residential Management, LC is now CHCI Residential Management, LC, and

• CDS Capital Management, L.C.

is now CHCI Capital Management, LC.

On June 16, 2021, the Company made the strategic decision to pursue the sale of the operations of Comstock Environmental Services, LLC ("CES"), a subsidiary of Comstock, based on the continued growth and future prospects of the asset management business.

Accordingly, the Company has reflected CES as a discontinued operation in its consolidated statements of operations for all periods presented, and have also designated CES assets and liabilities as held for sale in its consolidated balance sheets.

Unless otherwise noted, all amounts and disclosures relate to the Company's continuing operations.

For additional information, see Note 3.

("Comstock" or the "Company"), founded in 1985 and incorporated in the state of Delaware in 2004, is a leading real estate asset manager and developer of mixed-use and transit-oriented properties in the Washington, D.C.

On March 31, 2022, the Company completed the sale of Comstock Environmental Services, LLC ("CES"), a wholly owned subsidiary, to August Mack Environmental, Inc.

("August Mack") for approximately $ 1.4 million of total consideration.

(See Note 3 for additional information).

On June 13, 2022, the Company completed two separate significant transactions to further deleverage its balance sheet and enhance its long-term revenue outlook and growth potential.

The first one with CP Real Estate Services, LC (“CPRES”), an entity owned by Christopher Clemente, Comstock’s Chief Executive Officer, redeemed all outstanding Series C preferred stock at a significant discount to carrying value.

Secondly, the Company executed a new asset management agreement with Comstock Partners, LC ("CP"), an entity controlled by Mr.

Clemente and wholly owned by Mr.

Clemente and certain family members, which covers its Anchor Portfolio of assets (the "2022 AMA").

(See Notes 10 and 14 for additional information).

The Company operates through four primarily real estate-focused subsidiaries – CHCI Asset Management, LC (“CAM”);

CHCI Residential Management, LC;

CHCI Commercial Management, LC;

and Park X Management, LC.

Summary of Significant Accounting Policies

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Certain prior period amounts have been reclassified to conform to current period presentation.

The Company has reflected CES as a discontinued operation in its consolidated statements of operations for all periods presented.

Unless otherwise noted, all amounts and disclosures throughout these Notes to Consolidated Financial Statements relate to the Company's continuing operations.

(See Note 3 for additional information).

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes.

Significant items subject to such estimates, include, but are not limited to, the analysis of goodwill impairment, the valuation of equity method investments, and the valuation of deferred tax assets.

Assumptions made in the development of these estimates contemplate the macroeconomic landscape and the Company's anticipated results, however actual results may differ materially from these estimates.

Significant items subject to such estimates, include, but are not limited to, the valuation of equity method investments, incentive fee revenue recognition, and the valuation of deferred tax assets.

Assumptions made in the development of these estimates contemplate both the macroeconomic landscape and the Company's anticipated results, however actual results may differ materially from these estimates.

Comstock uses a fiscal reporting calendar which begins on January 1 and ends on December 31.

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Asset Management and Real Estate Services.

Given the classification of CES, which included all material operations of the Company's Real Estate Services segment, as a discontinued operation (see Note 3), the Company now manages its business as one reportable operating segment.

Given the classification of CES as a discontinued operation, the Company now manages its business as one reportable operating segment.

Cash and Cash Equivalents

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Accounts Receivable

Accounts receivables are recorded at the amount invoiced.

Accounts receivable are recorded at the amount invoiced.

The Company records an allowance for doubtful accounts on an as-needed basis to reduce the trade accounts receivables balance by the estimated amounts that may become uncollectible in the future.

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The Company does not record an allowance for doubtful accounts on accounts receivable from related parties due to the nature of the receivables and collection history.

As of December 31, 2022, the Company's allowance for doubtful accounts was $ 0.1 million.

Concentrations of Credit Risk

Financial instruments that subject the Company to concentrations of credit risk are consist primarily of cash, cash equivalents, and accounts receivable from related parties.

Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, and accounts receivable from related parties.

The Company maintains cash and cash equivalents in financial institutions that management believes to be financially sound and with minimal credit risk.

At times the Company's deposits exceed federally insured limits, however management believes that the Company’s credit risk exposure is mitigated by the financial strength of the banking institutions in which the deposits are held.

The Company does a significant amount of business with related parties, demonstrated by related parties accounting for 99.3 % of its consolidated revenue in 2021.

The Company does a significant amount of business with related parties, demonstrated by related parties accounting for 98.5 % of its consolidated revenue and 86.7 % of its accounts receivable in 2022.

The Company generally does not obtain collateral or other security to support financial instruments subject to credit risk, but monitors the credit standing of its related party entities.

Equity Method Investments

The Company invests in certain real estate ventures that qualify for equity method accounting treatment, meaning the Company must adjust its asset carrying value by its proportionate share of earnings, losses, and distributions.

However, based on elections made at the investment date, the Company may elect to record certain equity method investments at fair value.

With this treatment, assets are recorded at fair value on the consolidated balance sheets and subsequently remeasured at each reporting period.

Investments in Real Estate Ventures

The Company invests in certain real estate ventures that qualify for equity method accounting treatment.

Based on elections made at the investment date, the Company has elected to record certain equity method investments at fair value.

With this treatment, investments are recorded at fair value on the consolidated balance sheets and subsequently remeasured at each reporting period.

The fair value of these investments as of the balance sheet date is generally determined using a discounted cash flow analysis, income approach, or sales-comparable approach, depending on the unique characteristics of the real estate venture.

Assumptions about the discount rate are based on a weighted average cost of capital built up from various interest rate components applicable to the Company.

Assumptions about the growth rate and future financial performance of a reporting unit are based on the Company's forecasts, business plans, economic projections and anticipated future cash flows.

Market multiples are derived from recent transactions among comparable real estate properties of similar size, construct, and location.

The net change in the fair value of the investments is recorded on the consolidated statements of operations as other income (expense).

See Note 5 for further information.

In addition, the Company performs an analysis on its investments in real estate ventures to determine if they qualify as a variable interest entity (“VIE”).

For an entity in which we have acquired an interest, the entity will be considered a VIE if either of the following characteristics are met:

(i) the entity lacks sufficient equity to finance its activities without additional subordinated financial support, or (ii) equity holders, as a group, lack the characteristics of a controlling financial interest.

If an entity is determined to be a VIE, the Company then determines if it is the primary beneficiary to determine if the entity needs to be included in its consolidated financial results.

The primary beneficiary has both (i) the power to direct the activities that most significantly impact the VIE’s economic performance, and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the entity.

The Company considers a variety of factors in identifying the entity that holds the power to direct matters that most significantly impact the VIE’s economic performance, including evaluating the nature of relationships and activities of the parties involved and, where necessary, determining which party within a related-party group is most closely associated with the VIE and would therefore be considered the primary beneficiary.

The Company determines primary beneficiary status of a VIE at the time of investment and performs ongoing reassessments to evaluate whether changes in the entity’s capital structure or changes in the nature of its involvement with the entity result in a change to the VIE designation or a change to its consolidation conclusion.

(See Note 5 for additional information)

Fixed assets are carried at cost less accumulated depreciation and are depreciated on a straight-line basis over their estimated useful lives , which are as follows:

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Goodwill and Intangible Assets

On an annual basis as of October 1, and at interim periods when circumstances require, the Company tests the recoverability of any goodwill and intangible assets balances that exist at that time and reviews for indicators of impairment.

Examples of such indicators include a significant change in the business climate, increased competition, loss of key personnel, 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.

On an annual basis, and at interim periods when circumstances require, the Company tests the recoverability of any goodwill and intangible assets balances that exist at that time and reviews for indicators of impairment.

The Company performs impairment assessments at the reporting unit level, which is defined as an operating segment or one level below an operating segment, also known as a component.

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If the carrying value exceeds the fair value, a second step is performed to measure the amount of impairment loss on a relative fair value basis, if any.

The estimate of the fair value of each reporting unit is based on a projected discounted cash flow model that includes significant assumptions and estimates including the Company's discount rate, growth rate and future financial performance as well as a market multiple model based upon similar transactions in the market.

Assumptions about the discount rate are based on a weighted average cost of capital built up from various interest rate components applicable to the Company.

Assumptions about the growth rate and future financial performance of a reporting unit are based on the Company's forecasts, business plans, economic projections and anticipated future cash flows.

Market multiples are derived from recent transactions among businesses of a similar size and industry.

The Company amortizes certain identifiable intangible assets that have finite lives.

Amortizable intangible assets are tested for impairment, when deemed necessary, based on undiscounted cash flows and, if impaired, are written down to fair value based on either discounted cash flows or appraised values.

Fair Value Measurement

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therefore, an incremental borrowing rate is used that is based on information available at the lease commencement date in determining the present value of future minimum lease payments.

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

The Company typically looks to the floating rate of interest charged under the Company's existing credit facility at the time of lease commencement when determining the incremental borrowing rate.

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

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Project and development services represent a series of performance obligations delivered over time, therefore the Company recognizes revenue over time for these services accordingly.

Incentive Fees

Pursuant to the 2022 AMA, incentive compensation fees revenue ("Incentive Fees") may be earned on certain managed real estate assets if defined triggering events, which are differentiated based on the classification of the assets, are achieved.

(See Note 14 for additional information)

Incentive Fees are calculated as a percentage of the imputed profit that would be realized upon the hypothetical sale or recapitalization of the asset (or assets) for which triggering event criteria were met.

The calculation of imputed profit is based on a fair market value assessment that includes highly variable financial inputs and must also consider macro-economic and environmental factors that may affect fair market value.

Due to the subjective and potentially volatile nature of this variable consideration, revenue is only recognized on Incentive Fees for each managed asset when 1) any material uncertainties associated with the valuation of real estate assets that drive Incentive Fees are substantially resolved and 2) it is probable that a significant reversal in the amount of related cumulative Incentive Fee revenue recognized will not occur.

As a result, the Company has only

recognized Incentive Fees at or near each asset's respective triggering event (as detailed in the 2022 AMA) when imputed profit can be reasonably calculated and relied upon to not materially change.

Cost of Revenue

Cost of revenue is composed primarily of employment expenses for personnel dedicated to providing services to the Anchor Portfolio as well as the costs and expenses of the Company related to maintaining the public listing of its shares and complying with related regulatory and reporting obligations pursuant to the 2019 Asset Management Agreement ("2019 AMA" - see Note 14 for further details).

It also includes payroll and other reimbursable expenses incurred under the Company's various property management agreements.

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We provide a valuation allowance when we consider it “more likely than not” (greater than 50% probability) that a deferred income tax asset will not be fully recovered.

Adjustments to the valuation allowance are a component of the deferred income tax expense or benefit in the Consolidated Statement of Operations.

Adjustments to the valuation allowance are a component of the deferred income tax expense or benefit in the consolidated statements of operations.

For interim periods, an income tax provision (benefit) is recognized based on the estimated annual effective tax rate expected for the entire fiscal year.

The interim annual estimated effective tax rate is based on the statutory tax rates then in effect, as adjusted for estimated changes in permanent differences, and excludes certain discrete items whose tax effect, when material, is recognized in the interim period in which they occur.

These changes in permanent differences and discrete items result in variances to the effective tax rate from period to period.

Impacts from significant pre-tax, non-recognized subsequent events are excluded from the interim estimated annual effective rate until the period in which they occur.

Net Income (Loss) per Share

Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding during the period.

Diluted net income (loss) per common share is calculated by dividing net income (loss) by the fully diluted weighted-average number of common shares outstanding during the period.

Basic net income (loss) per share is calculated by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for common share equivalents or any impacts from Preferred Stock activity.

Common share equivalents consist of the incremental common shares issuable upon the exercise of stock options and vesting of restricted stock unit awards.

Diluted net income (loss) per common share is calculated by dividing net income (loss) attributable to common stockholders by the fully diluted weighted-average number of common

shares outstanding during the period.

The diluted weighted-average common shares outstanding amount includes the impact of common share equivalents, which are the incremental shares of common stock that would be issuable upon the hypothetical exercise of stock options and vesting of restricted stock unit awards.

The common stock equivalents are calculated using the treasury stock method and average market prices during the periods, and are included in the diluted net income (loss) per share calculation unless their inclusion would be anti-dilutive.

Recent Accounting Pronouncements - Adopted

In December 2019, the FASB issued ASU 2019-12, “Income Taxes – Simplifying the Accounting for Income Taxes.” This guidance is intended to simplify the accounting for income taxes by removing certain exceptions, clarifying existing guidance and improving consistent application of the guidance.

The Company adopted this standard as of January 1, 2021.

The adoption of the standard did not have a material impact on the Company’s financial statements and related disclosures.

Recent Accounting Pronouncements - Not Yet Adopted

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Discontinued Operations

On June 16, 2021, the Company made the strategic decision to pursue the sale of the operations of Comstock Environmental Services, LLC ("CES"), a subsidiary of Comstock, based on the continued growth of the asset management business as well as its future prospects.

On March 31, 2022, the Company completed the sale of CES to August Mack in accordance with the Asset Purchase Agreement for approximately $ 1.4 million of total consideration, composed of $ 1.0 million in cash and $ 0.4 million of cash held in escrow that is subject to net working capital and other adjustments.

The Company executed this divestiture to enhance its focus and pursue continued growth initiatives for its core asset management business.

The following table reconciles major line items constituting pretax income (loss) from discontinued operations to net income (loss) from discontinued operations as presented in the consolidated statements of operations (in thousands):

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Goodwill impairment — ( 1,702 )

Pre-tax income (loss) from continuing operations ( 2,453 ) ( 59 )

Pre-tax income (loss) from discontinued operations ( 418 ) ( 2,453 )

Provision for (benefit from) income tax ( 37 ) ( 23 )

Net income (loss) from discontinued operations $ ( 381 ) $ ( 2,430 )

The following table reconciles the carrying amounts of major classes of assets and liabilities of discontinued operations to total assets and liabilities of discontinued operations that were classified as held for sale in the consolidated balance sheets (in thousands):

The Company recognized a net loss of $ 0.2 million on the divestiture of CES, calculated by comparing the final adjusted purchase price to the carrying value of the net assets sold in the transaction as of March 31, 2022.

These amounts reflect the finalized transaction costs and net working capital adjustments.

The cumulative goodwill impairment charge in 2021 was a result of the Company performing the quantitative two-step impairment test and determining that the carrying value of CES significantly exceeded its fair value at the time of measurement, which was estimated using Level 1 inputs.

Carrying amounts of major classes of assets held for sale:

Accounts receivable $ 2,075

Accounts receivable - related parties — 30

Prepaid expenses and other current assets 129

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Fixed assets, net 106

Goodwill — 1,702

Intangible assets, net 3

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Total liabilities $ 1,194

As part of our annual goodwill assessment, we determined that there were potential indicators of impairment based on facts and circumstances that have arisen surrounding the divestiture of CES (See Note 1).

Upon performing the quantitative two-step impairment test, the Company determined that the carrying value of CES significantly exceeded its current fair value, which was estimated using Level 1 inputs.

As a result, a $ 1.4 million impairment loss was recorded in December 2021 to fully write off the remaining goodwill balance.

This impairment loss, along with the $ 0.3 million goodwill impairment loss recorded in the Company's fiscal second quarter, resulted in a cumulative $ 1.7 million goodwill impairment charge in 2021 that is reflected in net income (loss) from discontinued operations in the consolidated statements of operations.

Fixed Assets & Intangible Assets

The following table provides a detailed breakout of fixed assets, by type (in thousands):

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Vehicles 83 46

Leasehold improvements 51 50

Total fixed assets 761 1,275

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Depreciation expense for the years ended December 31, 2022 and 2021 was $ 0.2 million and $ 0.1 million, respectively.

On May 6, 2022, the Company purchased the rights to the www.comstock.com domain name for $ 0.1 million.

The Company has recorded the domain name purchase as an indefinite-lived intangible asset on its consolidated balance sheets that will be tested annually for impairment.

Investments in Real Estate Ventures

The Company's material unconsolidated investments in real estate ventures are recorded on the consolidated balance sheets at fair value.

The Company's unconsolidated investments in real estate ventures are recorded on the consolidated balance sheets at fair value.

The following table summarizes these investments (in thousands):

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The Hartford 953 1,211

BLVD 44 2,007 —

BLVD Forty Four 2,135 2,007

BLVD Ansel 2,556 —

Total $ 7,013 $ 4,702

On April 30, 2019, the Company entered into a Master Transfer agreement with CP Real Estate Services, LC (“CPRES”), formerly Comstock Development Services, LC, an entity wholly owned by the Company’s CEO, Christopher Clemente, which entitled the Company to priority distribution of residual cash flow from its Class B membership interest in Comstock Investors X, L.C.

The Company’s maximum loss exposure on each of its unconsolidated investments in real estate ventures is equal to the carrying amount of the investment.

Additional details on each investment are as follows:

On April 30, 2019, the Company entered into a master transfer agreement with CPRES which entitled the Company to priority distribution of residual cash flow from its Class B membership interest in Comstock Investors X, L.C.

("Investors X"), an unconsolidated variable interest entity that owns the Company's residual homebuilding operations.

As of December 31, 2021, the residual cash flow primarily relates to anticipated returns of cash backing outstanding letters of credit and cash collateral posted for land development work performed by subsidiaries owned by Investors X.

As of December 31, 2022, the residual cash flow primarily relates to anticipated proceeds from the sale of rezoned residential lots and returns of cash securing outstanding letters of credit and cash collateral posted for land development bonds covering work performed by subsidiaries owned by Investors X.

The cash will be released as bond release work associated with these projects is completed.

In addition, a subsidiary of Investors X is undergoing a re-zoning from commercial to residential and the Company will be entitled to 50 % of the profit from the anticipated residential lot sales after re-zoning and land development work is completed.

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

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

See Note 14 for further information.

In December 2019, the Company partnered with Comstock Partners, LC (“Partners”), an entity that is controlled by our CEO, and wholly-owned by Mr.

Clemente and certain family members, to acquire a Class-A office building immediately adjacent to Clarendon Station on Metro’s Orange Line in Arlington County’s premier transit-oriented office market, the Rosslyn-Ballston Corridor.

Built in 2003, the 211,000 square foot mixed-use Leadership in Energy and Environmental Design (“LEED”) GOLD building is approximately 76 % leased to multiple high-quality tenants.

(See Note 14 for additional information).

In December 2019, the Company entered into a joint venture with CP to acquire a Class-A office building adjacent to Clarendon Station on Metro’s Orange Line in Arlington County’s premier transit-oriented office market, the Rosslyn-Ballston Corridor.

Built in 2003, the 211,000 square foot mixed-use Leadership in Energy and Environmental Design (“LEED”) GOLD building is being leased to multiple high-quality tenants.

In February 2020, the Company arranged for DivcoWest to purchase a majority ownership stake in the Hartford Building and secured a $ 87.0 million loan facility from MetLife.

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As of December 31, 2022, the Company’s ownership interest in the Hartford was 2.5 %.

(See Note 14 for additional information).

BLVD Forty Four

In October 2021, the Company entered into a joint venture with Partners to acquire BLVD Forty Four, a 15-story, luxury high-rise apartment building located one block from the Rockville Metro Station and in the heart of the I-270 Technology and Life Science Corridor in Montgomery County.

Built in 2015, the 263 -unit mixed use property includes approximately 16,000 square feet of

retail and a commercial parking garage.

In connection with the transaction, the Company received an acquisition fee and will also receive investment related income and incentive fees in connection with its equity interest in the asset.

In October 2021, the Company entered into a joint venture with CP to acquire a stabilized 15-story, luxury high-rise apartment building in Rockville, Maryland that was built in 2015, which we rebranded as BLVD Forty Four.

Located one block from the Rockville Station on Metro's Red Line and in the heart of the I-270 Technology and Life Science Corridor, the 263 -unit mixed use property includes approximately 16,000 square feet of retail and a commercial parking garage.

In connection with the transaction, the Company received an acquisition fee and is entitled to receive investment related income and promote distributions in connection with its equity interest in the asset.

The Company also provides asset, residential, retail and parking property management services for the property in exchange for market rate fees.

The Company considers BLVD Forty Four to be a variable interest entity upon which it exercises significant influence;

however, considering key factors such as the Company’s ownership interest and participation in policy-making decisions by majority equity holders, the Company concluded that it does not control the investment.

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

As of December 31, 2022, the Company’s ownership interest in BLVD Forty Four was 5.0 %.

(See Note 14 for additional information).

In March 2022, the Company entered into a joint venture with CP to acquire BLVD Ansel, a newly completed 18-story, luxury high-rise apartment building with 250 units located adjacent to the Rockville Metro Station and BLVD Forty Four in Rockville, Maryland.

BLVD Ansel features approximately 20,000 square feet of retail space, 611 parking spaces, and expansive amenities including multiple private workspaces designed to meet the needs of remote-working residents.

The Company will also provide asset, residential, retail and parking property management services for the property in exchange for market rate fees.

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

As of December 31, 2022, the Company’s ownership interest in BLVD Ansel was 5.0 %.

(See Note 14 for additional information).

The following table below summarizes the activity of the Company’s unconsolidated investments in real estate ventures that are reported at fair value (in thousands):

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Balance as of December 31, 2022 $ 7,013

Other Investments

In addition, the Company has a joint venture with Superior Title Services, Inc.

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The carrying value of the STS investment is recorded in "other assets" on the Company's consolidated statement of balance sheets.

The Company's proportionate share of net income and distributions are recorded in other income (expense) and were $ 0.1 million and immaterial for the years ended December 31, 2021 and 2020, respectively.

The Company's proportionate share of net income and distributions are recorded in gain (loss) on real estate ventures in the consolidated statements of operations, and were $ 0.1 million and $ 0.1 million for the years ended December 31, 2022 and 2021, respectively.

The following tables summarize the combined financial information for our unconsolidated investments in real estate ventures accounted for at fair value or under the equity method (in thousands):

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Net income (loss) $ ( 7,360 ) ( 316 )

The Company has operating leases for office space leased in various buildings for its own use and for office equipment.

The Company's leases have remaining terms ranging from less than one year to 10 years.

The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Lease costs related to the Company's operating leases are reflected in "cost of revenue" in the consolidated statements of operations, as they are a reimbursable cost under the 2019 AMA (see Note 14 for further information).

The Company has operating leases for office space leased in various buildings for its own use.

The Company's leases have remaining terms ranging from 5 to 10 years.

The Company's lease agreements do not contain any residual value guarantees or material restrictive covenants.

Lease costs related to the Company's operating leases are primarily reflected in "cost of revenue" in the consolidated statements of operations, as they are a reimbursable cost under the Company's respective asset management agreements.

(See Note 14 for additional information).

The following table summarizes operating lease costs, by type (in thousands):

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Operating lease costs

Fixed leases costs $ 895 $ 623

Fixed lease costs $ 1,045 $ 994

Variable lease costs 361 318

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Year Ended December 31,

Cash paid for amounts included in measurement of lease liabilities:

Operating cash flows from operating lease liabilities $ 569 $ 92

Cash paid for lease liabilities:

Operating cash flows from operating leases $ 1,350 $ 1,213

As of December 31, 2022 the Company's operating leases had a weighted-average remaining lease term of 7.75 years and a weighted-average discount rate of 4.25 %.

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The Company does not have any lease liabilities which have not yet commenced as of December 31, 2022.

The following table summarizes all outstanding debt and other financing arrangements (in thousands):

Loans payable $ — $ 5

Credit Facility - Due to Affiliates

Total debt $ 5,500 $ 5,505

Credit Facility - Due to Affiliates

On March 19, 2020, the Company entered into a Revolving Capital Line of Credit Agreement with CP Real Estate Services, LC (“CPRES”), formerly known as Comstock Development Services, LC, pursuant to which the Company secured a $ 10.0 million capital line of credit (the “Credit Facility”).

On March 19, 2020, the Company entered into a Revolving Capital Line of Credit Agreement with CPRES, pursuant to which the Company secured a $ 10.0 million capital line of credit (the “Credit Facility”), on which it made a $ 5.5 million initial draw with an April 30, 2023 maturity date.

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

The Credit Facility also 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 CPRES.

On March 27, 2020, the Company borrowed $ 5.5 million under the Credit Facility and signed an unsecured promissory note to repay principal and interest on the $ 5.5 million borrowed by the April 30, 2023 maturity date.

Unsecured Promissory Note - Comstock Growth Fund

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

(“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.

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

On May 23, 2018, the Company entered into a Membership Interest Exchange and Subscription Agreement, together with a revised promissory note agreement, in which a promissory 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, with a par value of $ 0.01 per share and a stated liquidation value of $ 5.00 per share, issued by the Company to CPRES.

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

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

The CGF promissory note was repaid in full prior to maturity during the year ended December 31, 2020.

CARES Act - Paycheck Protection Plan Loan

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

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”).

The Company recognized PPP funding as a contra-expense during the three months ended June 30, 2020, when qualified expenses were incurred.

The Lender received notice that the PPP Loan was fully forgiven by the SBA in April 2021.

The following table summarizes future maturity payments due on all outstanding debt and financing arrangements (in thousands):

Year Ending December 31, Total

Total debt $ 5,500

On September 30, 2022, the Company paid down its $ 5.5 million outstanding principal balance on the Credit Facility in full.

As of December 31, 2022, the Credit Facility remained available for use and the Company had no outstanding debt or financing arrangements for which future payments are due .

Commitments and Contingencies

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

The lease contains various renewal options.

See Note 6 for further information on the Company's operating lease commitments.

The Company maintains certain non-cancelable operating leases that contain various renewal options.

(See Note 6 for additional information)

The Company is subject to litigation from time to time in the ordinary course of business;

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The Company records a contingent liability when it is both probable that a liability has been incurred and the amount can be reasonably estimated;

however, the Company is not aware of any reasonably possible losses that would have a material impact on its results of operations, financial position, or liquidity.

The Company expenses legal defense costs as they are incurred.

Fair Value Disclosures

As of December 31, 2021, the carrying amount of cash and cash equivalents, accounts receivable, prepaid and other current assets, accounts payable and accrued liabilities approximated fair value because of the short-term nature of these instruments.

As of December 31, 2022, the carrying amount of cash and cash equivalents, accounts receivable, other current assets, and accounts payable approximated fair value because of the short-term nature of these instruments.

As of December 31, 2022, the Company had certain equity method investments in real estate ventures that it elected to record at fair value using significant unobservable inputs (Level 3).

For further information on these investments, see Note 5.

As of December 31, 2021, based upon unobservable market rates (Level 3), the fair value of the Company’s floating rate debt was estimated to approximate carrying value.

(See Note 5 for additional information)

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.

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Stockholders' Equity

The Company's certificate of incorporation authorizes the issuance of Class A common stock and Class B common stock, each with a part value of $ 0.01 per share.

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

The Company's certificate of incorporation authorizes the issuance of Class A common stock and Class B common stock, each with a par value of $ 0.01 per share.

Holders of Class A common stock and Class B common stock are entitled to dividends when,

as and if, declared by the Company's board of directors, subject to the rights of the holders of all classes of stock outstanding having priority rights to dividends.

Holders of Class A common stock are entitled to one vote per share and holders of Class B common stock are entitled to fifteen votes per share.

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Preferred Stock

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

The Series C Preferred Stock has a discretionary, non-cumulative, dividend feature 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.

likelihood of such an unintended “ownership change”, thus preserving the value of these tax benefits

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

Series C Preferred Stock has a discretionary, non-cumulative, dividend feature and is redeemable by holders in the event of liquidation or change in control of the Company.

On June 13, 2022, the Company entered into a Share Exchange and Purchase Agreement ("SEPA") with CPRES, pursuant to which the Company acquired from CPRES all outstanding shares of its non-convertible and non-redeemable Series C preferred stock for (i) 1.0 million shares of the Company’s Class A common stock, valued at the consolidated closing bid price of the Class A shares on Nasdaq on the business day immediately preceding the entry into the SEPA and (ii) $ 4.0 million in cash.

The SEPA was unanimously approved by the independent directors of the Company.

Upon completion of the transaction, all of the shares of Series C preferred stock were immediately cancelled and fully retired.

At the time of the transaction, the total carrying value of the Series C preferred stock (including the related additional paid-in capital) was $ 10.3 million.

The share exchange was accounted for as a redemption;

therefore, the $ 2.0 million difference between the carrying value and the $ 8.3 million fair value of the consideration paid upon redemption was added to net income to arrive at income attributable to common stockholders and calculate net income (loss) per share.

(See Note 13 for additional information)

Stock-based Compensation

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During the years ended December 31, 2022 and 2021, the Company recorded stock-based compensation expense of $ 0.8 million and $ 0.6 million, respectively.

As of December 31, 2021, there was $ 0.9 million of total unrecognized stock-based compensation.

Stock-based compensation costs are included in selling, general, and administrative expense on the Company's consolidated statements of operations.

As of December 31, 2022, there was $ 0.7 million of total unrecognized stock-based compensation, which is expected to be recognized over a weighted-average period of 2.84 years.

Restricted Stock Units

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Non-qualified stock options generally expire 10 years after the grant date and, except under certain conditions, the options are subject to continued employment and vest in four annual installments over the four-year period following the grant dates.

The following table summarizes all stock option activity for the periods presented (in thousands, except per share data and time periods):

The following table summarizes all stock option activity (in thousands, except per share data and time periods):

Outstanding Weighted-

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Canceled/Forfeited ( 3 ) 2.24

Expired ( 60 ) 3.97

Balance as of December 31, 2022 131 $ 4.08 4.4 $ 172

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The total grant date fair value of stock options vested and total intrinsic value of stock options exercised for the years ended December 31, 2022 and 2021 were immaterial.

Share Repurchase Program

In November 2014, our board of directors approved a share repurchase program authorizing the Company to repurchase up to 429,000 shares of our Class A common stock in one or more open market or privately negotiated transactions depending on market price and other factors.

As of December 31, 2021 and 2020, 404,000 shares of our Class A common stock remain available for repurchase pursuant to our share repurchase program.

All the Company's revenue was for the years ended December 31, 2022 and 2021 was generated in the United States.

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Property management 9,398 6,939

Parking 1,615 1,020

Parking management 3,235 1,615

Total revenue $ 39,313 $ 31,093

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Cost-plus 22,652 16,729

Time and material 6,738 4,804

Variable 9,613 6,738

Total revenue $ 39,313 $ 31,093

1 Certain contracts contain multiple revenue streams with characteristics that lend to classification in more than one category

For the year ended December 31, 2022, the Company recognized revenue from Incentive Fees of $ 3.9 million, stemming from an operating asset triggering event on October 1, 2022.

This operating asset triggering event was the first in series of annual operating asset triggering events that are scheduled each October 1 through 2024.

All Incentive Fees recognized in the current period are related to services performed in prior periods for which revenue recognition criteria were previously constrained.

There was no Incentive Fee revenue recognized for the year ended December 31, 2021.

The following table summarizes the components of the provision for (benefit from) income tax (in thousands):

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Federal $ — $ —

State 180 104

Total current taxes 180 104

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Prior to 2021, the Company had recorded valuation allowances for certain tax attributes and deferred tax assets due the existence of sufficient uncertainty regarding the future realization of those deferred tax assets through future taxable income.

In June 2021, based on its recent financial performance and current forecasts of future operating results, the Company determined that it was more likely than not that a portion of the deferred tax assets related to its net operating loss ("NOL") carryforwards would be utilized in future periods.

In June 2021, based on financial performance trends and forecasts of future operating results, the Company determined that it was more likely than not that a portion of the deferred tax assets related to its net operating loss ("NOL") carryforwards would be utilized in future periods.

As a result, the Company recorded an $ 11.3 million income tax benefit in the second quarter of 2021 that represented a partial release of its valuation allowance.

For the years ended December 31, 2022 and 2021, the Company recorded net decreases to its valuation allowance of $ 1.4 million and $ 13.0 million, respectively.

If, in the future, the Company believes that it is more likely than not that the rest of the deferred tax benefits will be realized, the full valuation allowance will be reversed.

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Stock-based compensation 481 485

Investment in affiliates 1,335 1,192

Investments in affiliates 1,237 1,335

Right of use lease liability 2,017 1,935

Bonus accrual 1,246 917

Depreciation and amortization — 37

Goodwill amortization ( 1 ) 362

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Depreciation and amortization — ( 4 )

Goodwill amortization — ( 103 )

Total deferred tax liabilities ( 1,943 ) ( 1,908 )

Net deferred income tax assets (liabilities) $ 11,355 $ 11,300

$ 11,300 $ ( 21 )

1 2020 amount is included in accounts payable and accrued liabilities on the consolidated balance sheet

As of December 31, 2021, the Company has approximately $ 139 million of net operating loss (“NOL") carryforwards.

As of December 31, 2022, the Company had $ 131.7 million of net operating loss (“NOL") carryforwards.

These NOLs, if unused, will begin expiring in 2028.

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The Section 382 rights agreement helps to reduce the likelihood of an unintended “ownership change”, thus preserving the value of these future tax benefits.

We estimate that as of December 31, 2021, 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, 2021.

We estimate that as of December 31, 2022, the three-year cumulative shift in ownership of the Company’s stock had not triggered a limitation in the use of our NOL asset.

As of December 31, 2022, there were no uncertain tax positions that, if recognized, would affect the Company's effective tax rate.

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Net income (loss) from continuing operations - Basic and Diluted $ 7,728 $ 16,039

Impact of Series C preferred stock redemption 2,046 —

Net income (loss) from continuing operations attributable to common stockholders - Basic and Diluted 9,774 16,039

Net income (loss) from discontinued operations - Basic and Diluted ( 381 ) ( 2,430 )

Net income (loss) attributable to common shareholders - Basic and Diluted $ 9,393 $ 13,609

Weighted-average common shares outstanding - Basic 8,974 8,213

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Related Party Transactions

Lease for Corporate Headquarters

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.

2019 Amended Asset Management Agreement

On April 30, 2019, CHCI Asset Management, LC ("CAM") entered into the 2019 Asset Management Agreement ("2019 AMA") with CP Real Estate Services, LC (“CPRES”), formerly Comstock Development Services, LC, which amends and restates in its entirety the prior asset management agreement between the parties with an effective date as of January 1, 2018.

Pursuant to the 2019 AMA, CPRES will engage CAM to manage and administer the Anchor Portfolio and the day to-day operations of CPRES and each property-owning subsidiary of CPRES (collectively, the “CPRES Entities”).

Pursuant to the 2019 AMA, the Company provides asset management services related to the build out, lease-up and stabilization, and management of the Anchor Portfolio.

CPRES pays the Company and its subsidiaries annual fees equal to the greater of either (i) an aggregate amount equal to the sum of (a) an asset management fee equal to 2.5 % of revenues generated by properties included in the Anchor Portfolio;

(b) a construction management fee equal to 4 % of all costs associated with Anchor Portfolio projects in development;

(c) a property management fee equal to 1 % of the Anchor Portfolio revenues, (d) an acquisition fee equal to up to 0.5 % of the purchase price of acquired assets;

and (f) a disposition fee equal to 0.5 % of the sales price of an asset on disposition;

or (ii) an aggregate amount equal to the sum of (x) the employment expenses of personnel dedicated to providing services to the Anchor Portfolio pursuant to the 2019 AMA, (y) the costs and expenses of the Company related to maintaining the public listing of its shares and complying with related regulatory and reporting obligations, and (z) a fixed annual payment of $ 1.0 million.

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 CPRES 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.

The 2019 AMA is currently scheduled to terminate on December 31, 2027 (“Initial Term”) and will automatically renew for successive additional one -year terms (each an “Extension Term”) unless CPRES delivers written notice of non-renewal at least 180 days prior to the termination date.

twenty-four months after the effective date of the 2019 AMA, CPRES is entitled to terminate the 2019 AMA without cause provided 180 days advance written notice is delivered to CAM.

In the event of such a termination, and in addition to the payment of any accrued annual fees due and payable as of the termination date under the 2019 AMA, CPRES is required to pay a termination fee equal to (i) the Market Rate Fee or the Cost Plus Fee paid to CAM for the calendar year immediately preceding the termination , and (ii) a one-time payment of the Incentive Fee as if the CRE Portfolio were liquidated for fair market value as of the termination date;

or the continued payment of the Incentive Fee as if a termination had not occurred.

On June 13, 2022, CHCI Asset Management, L.C.

(“CAM”), an entity wholly owned by the Company, entered into a new master asset management agreement with CP to manage and administer CP’s commercial real estate portfolio (the "Anchor Portfolio") and the day to-day operations of CP and its subsidiaries (the “2022 AMA”).

This agreement superseded in its entirety the previous asset management agreement between CAM and CPRES dated April 30, 2019 (the “2019 AMA”).

The 2022 AMA increased the base fees collected, expanded the services that qualify for additional supplemental fees, extended the term through 2035, and most notably introduced a mark-to-market incentive fee based on the imputed profit of Anchor Portfolio assets, generally as each is stabilized and as further specified in the agreement.

Entry into the 2022 AMA was unanimously approved by the independent directors of the Company.

Consistent with the structure of the 2019 AMA, the 2022 AMA engages CAM to provide investment advisory, development, and asset management services necessary to build out, stabilize, and manage assets in the Anchor Portfolio, which currently consists

primarily of two of the larger transit-oriented, mixed-use developments in the Washington D.C.

area (Reston Station and Loudoun Station) that are owned by CP Entities and ultimately controlled by Mr.

Pursuant to the fee structures set forth in both the 2022 AMA and 2019 AMA, CAM is entitled to receive an annual payment equal to the greater of the "Cost-Plus Fee" or the "Market Rate Fee".

The Cost-Plus Fee is equal to the sum of (i) the comprehensive costs incurred by or for providing services to the Anchor Portfolio, (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 of a public company, and (iii) a fixed annual payment of $ 1.0 million.

The Market Rate Fee calculation is defined in the respective asset management agreements as the sum of the fees detailed in the following table:

Description 2022 AMA 2019 AMA

Asset Management Fee 2.5 % of Anchor Portfolio revenue

2.5 % of Anchor Portfolio revenue

Entitlement Fee 15 % of total re-zoning costs

Encompassed in Development and Construction Fee

Development and Construction Fee 5 % of development costs (excluding previously charged Entitlement Fees)

4 % of development costs

Property Management Fee 1 % of Anchor Portfolio revenue

1 % of Anchor Portfolio revenue

Acquisition Fee 1 % on first $ 50 million of purchase price;

0.5 % above $ 50 million

0.5 % of purchase price

Disposition Fee 1 % on first $ 50 million of sale price;

0.5 % above $ 50 million

0.5 % of sale price

In addition to the annual payment of either the Market Rate Fee or the Cost-Plus Fee, CAM is also entitled on an annual basis to receive certain supplemental fees, as detailed for the respective asset management agreements in the following table:

Description 2022 AMA 2019 AMA

Incentive Fee When receiving Market Rate Fee:

On a mark-to-market basis, equal to 20 % of the imputed profit of certain real estate assets comprising the Anchor Portfolio for which a Triggering Event 1 has occurred, after calculating a compounding preferred return of 8 % on CP invested capital (the “Market Incentive Fee”)

When receiving the Cost-Plus Fee:

On a mark-to-market basis, an incentive fee equal to 10 % of the imputed profit of certain real estate assets comprising the Anchor Portfolio for which a Triggering Event 1 has occurred, after calculating a compounding preferred return of 8 % on CP invested capital (the “Base Incentive Fee”)

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 CPRES invested capital

Investment Origination Fee 1 % of raised capital

1 % of raised capital

Leasing Fee $ 1 /per sqft.

for new leases and $ 0.50 / per sqft.

for lease renewals

$ 1 / per sqft.

for new leases and $ 0.50 / per sqft.

for lease renewals

Loan Origination Fee 1 % of any Financing Transaction or other commercially reasonable and mutually agreed upon fee

1 % of any Financing Transaction or other commercially reasonable and mutually agreed upon fee

Triggering events are differentiated between operating assets (i.e.

those already in service) and assets under development.

Operating asset triggering events are scheduled for specific dates, whereas triggering events for assets under development are tied to various metrics that indicate stabilization, such as occupancy and leasing rates.

The 2022 AMA will terminate on January 1, 2035 (“Initial Term”), and will automatically renew for successive additional one year terms (each an “Extension Term”) unless CP delivers written notice of non-renewal of the 2022 AMA at least 180 days prior to the termination date of the Initial Term or any Extension Term.

Twenty-four months after the effective date of the 2022 AMA, CP is entitled to terminate the 2022 AMA without cause upon 180 days advance written notice to CAM.

In the event of such a termination and in addition to the payment of any accrued annual fees due and payable as of the termination date under the 2022 AMA, CP is required to pay a termination fee equal to two times the Cost-Plus Fee or Market Rate Fee paid to CAM for the calendar year immediately preceding the termination.

Residential, Commercial, and Parking Property Management Agreements

The Company entered into separate residential property management agreements with properties owned by CPRES 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 CPRES 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 CP 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 CP 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 each have initial terms of one year with successive, automatic one-year renewal terms.

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Construction Management Agreements

The Company has construction management agreements with properties owned by CPRES 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 has construction management agreements with properties owned by CP 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.

Lease Procurement Agreements

The Company has lease procurement agreements with properties owned by CP Entities under which the Company receives certain finders fees in connection with the procurement of new leases for such properties where an external broker is not engaged on behalf of the CP Entities.

Such leasing fees are supplemental to the fees generated from the Company's management agreements referenced above and are generally 1 - 2 % of the future lease payments to be received by the CP Entity from the executed lease.

Business Management Agreements

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 $ 937,500 payable in 15 quarterly installments of $ 62,500 each.

On April 30, 2019, CAM entered into a Business Management Agreement with Investors X, whereby CAM provides 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 Business Management Agreement is $ 0.9 million payable in 15 quarterly installments of $ 0.1 million each and ending on December 31, 2022.

The Company considers Investors X to be a variable interest entity over which it does not have the power to direct activities that most significantly impact economic performance, therefore it is not the primary beneficiary of Investors X and does not have to consolidate the entity into its financial results.

(See Note 5 for additional information).

On July 1, 2019, CAM entered into a Business Management Agreement (the “BC Management Agreement”) with CPRES, whereby CAM provides CPRES with professional management and consultation services, including, without limitation, consultation on land development and real estate transactions, for a residential community located in Monteverde, Florida.

The initial term of the BC Management Agreement expired on December 31, 2020, subject to automatic, successive one ( 1 ) year extensions, unless sooner terminated in accordance with the terms of the BC Management Agreement.

The current term of the BC Management Agreement expires on December 31, 2022.

The BC Management Agreement provides that CPRES will pay CAM an annual management fee equal to $ 337,500 , payable in equal monthly installments during the term commencing on July 1, 2019, and will reimburse CAM for certain expenses.

The Hartford Investment

The BC Management Agreement is structured in successive renewable one-year terms.

The BC Management Agreement provides that CPRES will pay CAM an annual management fee equal to $ 0.3 million, payable in equal monthly installments during the term commencing on July 1, 2019, and will reimburse CAM for certain expenses.

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

In conjunction with the

investment, the Company entered into an operating agreement with Partners to form Comstock 3101 Wilson, LC, to purchase the Hartford.

Pursuant to the Operating Agreement, the Company holds a minority membership interest of the Hartford and the remaining membership interests of the Hartford are held by Partners.

Partners is the manager of the Hartford.

In connection with the transaction, the Company received an acquisition fee 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.

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

In February 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.

In conjunction with the investment, the Company entered into an operating agreement with CP to form Comstock 3101 Wilson, LC, to purchase the Hartford.

Pursuant to the Operating Agreement, the Company held a minority membership interest of the Hartford and the remaining membership interests of the Hartford are held by CP.

In February 2020, the Company, CP 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.

In furtherance thereof, on February 7, 2020, the Original Operating Agreement was amended and restated (the “A&R Operating Agreement”) to

memorialize the Company’s and CP’s assignment of 100 % of its membership interests in the Hartford 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.

As of December 31, 2021, the Company’s ownership interest in the Hartford was 2.5 %.

BLVD Forty Four Investment

Built in 2015, the 263 -unit mixed use property includes approximately 16,000 square feet of retail and a commercial parking garage.

In connection with the transaction, the Company received an acquisition fee and will also receive investment related income and incentive fees in connection with its equity interest in the asset.

The Company will also provide asset, residential, retail and parking property management services for the property in exchange for market rate fees.

The Company considers BLVD Forty Four to be a variable interest entity upon which it exercises significant influence;

As of December 31, 2021, the Company’s ownership interest in BLVD Forty Four was 5 %.

Credit Facility and Unsecured Promissory Note

Under the terms, the Credit Facility provides for an initial variable interest rate of the WSJ Prime Rate plus 1.00 % per annum on advances made under the Credit Facility, 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 CPRES.

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

On April 10, 2020, the capital provided to the Company by the Credit Facility was utilized to retire all of the Company’s corporate indebtedness owed to CGF.

See Note 7 for further description of the Credit Facility and CGF unsecured promissory note.

Revenues from Related Parties

See Note 11 for details surrounding revenue earned from related parties.

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

( See Note 5 for additional information).

BLVD Forty Four/BLVD Ansel

In October 2021 and March 2022, the Company entered into joint ventures with CP to acquire BLVD Forty Four and BLVD Ansel, respectively, two adjacent mixed-use luxury high-rise apartment buildings located near the Rockville Metro Station in Montgomery County, Md.

The Company considers BLVD Forty Four and BLVD Ansel to be variable interest entities upon which it exercises significant influence;

however, considering key factors such as the Company’s ownership interest, participation in policy-making decisions, and oversight of management services by majority equity holders, the Company concluded that the power to direct activities that most significantly impact economic performance is shared.

Given that the Company is not the entity most closely associated with the properties, it concluded that it is not the primary beneficiary and does not have a controlling financial interest in either property .

(See Note 5 for additional information).

Corporate Leases

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 Christopher Clemente, its Chief Executive Officer, and his family as landlords.

On November 1, 2022 the Company executed a 3,778 square foot lease expansion agreement with terms that align with the original agreement.

( See Note 6 for additional information).

On January 1, 2022, ParkX Management, LC, a subsidiary of the Company, entered into a five-year lease agreement for its parking operations monitoring center with an affiliate controlled and owned by Christopher Clemente, its Chief Executive Officer, and his family as landlords.

( See Note 6 for additional information).

Series C Preferred Stock Redemption

On June 13, 2022, the Company entered into the SEPA with CPRES, pursuant to which the Company acquired from CPRES all outstanding shares of its non-convertible and non-redeemable Series C preferred stock.

( See Note 10 for additional information)

Employee Benefit Plans

3 unchanged sentences

The combined total expense for this plan was $ 0.5 million and $ 0.4 million for the years ended December 31, 2022 and 2021, respectively.

Subsequent Events

Ansel Acquisition

On March 21, 2022, the Company made an initial investment of approximately $ 2.7 million in a newly constructed, 250 -unit, 18-story luxury high-rise apartment building located at 33 Monroe Street in the City of Rockville, which is within the I-270

Technology and Life Science Corridor in Montgomery County, Maryland (the “Property”) pursuant to a purchase and sale agreement dated January 27, 2022 (as amended, the “Agreement”).

The Company will begin leasing, managing and rebranding the mixed-use property, which is the sister building to the Company's recently acquired BLVD Forty Four, as "BLVD Ansel".

In conjunction with the investment, the Company entered into an operating agreement (the “Ansel Operating Agreement”) with Comstock Partners, LC (“Partners”) to form Comstock 33 Monroe Holding, LC (the “Ansel Holding Company”), as the sole member of Comstock 33 Monroe, LC (the “Ansel Owner”), to purchase BLVD Ansel.

Pursuant to the Ansel Operating Agreement, the Company holds a minority membership interest of the Ansel Holding Company ( 5 %).

The remaining membership interests of the Ansel Holding Company are held by Partners, an entity that is controlled by Christopher D.

Clemente, the Chairman and Chief Executive Officer of the Company.

CP Management Services, LC is the manager of the Ansel Holding Company.

In addition to investment income and incentive fees related to its investment, CHCI Asset Management, LC, a subsidiary of the Company, received an acquisition fee of $ 500,000 .

The Company, or its affiliates, are further entitled to market rate asset management, property management, parking management, construction management and leasing fees for their management of the Property pursuant to separate agreements between the Ansel Owner, or its affiliates, and the Company, or its affiliates.

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

CES Divestiture

On March 31, 2022, the Company completed the sale of CES to August Mack Environmental, Inc.

("August Mack") for approximately $ 1.4 million of total consideration, composed of $ 1.0 million in cash and $ 0.4 million held in escrow that is subject to net working capital and other adjustments, as set forth in the executed Asset Purchase Agreement with August Mack.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

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What changed 10-K

Item 8. Financial Statements and Supplementary Data