Comstock Earnings 2020-09-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

chci-20200930

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________________________________________

FORM 10-Q

__________________________________________________________________________


☒			Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2020


☐			Transition Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number 1-32375

__________________________________________________________________________

Comstock Holding Companies, Inc.

(Exact name of registrant as specified in its charter)

__________________________________________________________________________


Delaware			20-1164345
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

1900 Reston Metro Plaza, 10th Floor

Reston, Virginia 20190

(703) 230-1985

(Address, including zip code, and telephone number, including area code, of principal executive offices)

__________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Class A common stock, par value $0.01 per share

CHCI

NASDAQ Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of November 13, 2020, 7,863,582 shares of Class A common stock, par value $0.01 per share, and 220,250 shares of Class B common stock, par value $0.01 per share, of the registrant were outstanding.

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COMSTOCK HOLDING COMPANIES, INC.

FORM 10-Q

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

COMSTOCK HOLDING COMPANIES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(unaudited)


	September 30, 2020		December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	4,491	$	3,511
Trade receivables	1,635		1,886
Trade receivables - related parties	3,016		3,644
Prepaid and other assets, net	240		274
Total current assets	9,382		9,315

Equity method investments at fair value	6,965		8,421
Fixed assets, net	266		278
Goodwill	1,702		1,702
Intangible assets, net	53		103
Operating lease right-of-use assets	—		114
TOTAL ASSETS	$	18,368	$	19,933

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accrued personnel costs	$	1,349	$	2,916
Accounts payable	307		1,438
Accrued liabilities	660		166
Short term notes payable - due to affiliates, net of discount	—		5,706
Short term notes payable	22		77
Total current liabilities	2,338		10,303

Long term notes payable - due to affiliates	5,500		—
Long term notes payable - net of deferred financing charges	—		1,212
Long term operating lease liabilities, net of current portion	—		61
TOTAL LIABILITIES	$	7,838	$	11,576

Commitments and contingencies

STOCKHOLDERS’ EQUITY
Series C preferred stock $0.01 par value, 20,000,000 shares authorized, 3,440,690 issued and outstanding and liquidation preference of $17,203 at September 30, 2020 and December 31, 2019	$	6,765	$	6,765
Class A common stock, $0.01 par value, 59,779,750 shares authorized, 7,949,152 and 7,849,756 issued, and 7,863,582 and 7,764,186 outstanding at September 30, 2020 and December 31, 2019, respectively	79		78
Class B common stock, $0.01 par value, 220,250 shares authorized, issued and outstanding at September 30, 2020 and December 31, 2019	2		2
Additional paid-in capital	199,953		199,372
Treasury stock, at cost (85,570 shares Class A common stock)	(2,662)		(2,662)
Accumulated deficit	(193,607)		(195,198)
TOTAL COMSTOCK HOLDING COMPANIES, INC. EQUITY	$	10,530	$	8,357
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	18,368	$	19,933

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

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COMSTOCK HOLDING COMPANIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenues
Revenue—asset management	$	5,891	$	4,733	$	15,466	$	13,326
Revenue—real estate services	1,439		947		5,294		2,573
Total revenue	7,330		5,680		20,760		15,899
Expenses
Direct costs - asset management	5,066		4,197		12,915		11,804
Direct costs - real estate services	630		862		3,109		2,265
General and administrative	1,029		353		2,261		968
Selling and Marketing	127		100		507		266
Operating income	478		168		1,968		596
Other income, net	55		47		92		131
Interest expense	(63)		(170)		(320)		(304)
Income before income tax expense	470		45		1,740		423
Income tax expense	(1)		—		(15)		—
Loss on equity method investments carried at fair value	(46)		(606)		(134)		(606)
Net income (loss) from continuing operations	423		(561)		1,591		(183)
Net loss from discontinued operations, net of tax	—		(66)		—		(596)
Net income (loss)	$	423	$	(627)	$	1,591	$	(779)

Income (loss) per share from continuing operations
Basic net income (loss) per share	$	0.05	$	(0.07)	$	0.20	$	(0.03)
Diluted net income (loss) per share	$	0.05	$	(0.07)	$	0.19	$	(0.03)
Loss per share from discontinued operations
Basic net loss per share	$	—	$	(0.01)	$	—	$	(0.10)
Diluted net loss per share	$	—	$	(0.01)	$	—	$	(0.10)

Basic weighted average shares outstanding	8,078		7,954		8,046		6,159
Diluted weighted average shares outstanding (continuing operations)	8,579		7,954		8,415		6,159
Diluted weighted average shares outstanding (discontinued operations)	—		7,954		—		6,159

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

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COMSTOCK HOLDING COMPANIES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)


	Series C Preferred Stock			Class A			Class B			Additional paid-in capital		Treasury stock		Accumulated deficit		Total
	Shares	Amount		Shares	Amount		Shares	Amount
Balance at December 31, 2019	3,441	$	6,765	7,850	$	78	220	$	2	$	199,372	$	(2,662)	$	(195,198)	$	8,357
Stock compensation and issuances	—	—		52	1		—	—		212		—		—		213
Accrued liability settled through issuance of stock	—	—		11	—		—	—		20		—		—		20
Shares withheld related to net share settlement of restricted stock awards	—	—		(16)	—		—	—		(31)		—		—		(31)
Net income	—	—		—	—		—	—		—		—		(12)		(12)
Balance at March 31, 2020	3,441	$	6,765	7,897	$	79	220	$	2	$	199,573	$	(2,662)	$	(195,210)	$	8,547
Stock compensation and issuances	—	—		52	—		—	—		204		—		—		204
Accrued liability settled through issuance of stock	—	—		9	—		—	—		20		—		—		20
Shares withheld related to net share settlement of restricted stock awards	—	—		(16)	—		—	—		(30)		—		—		(30)
Net income	—	—		—	—		—	—		—		—		1,180		1,180
Balance at Balance at June 30, 2020	3,441	$	6,765	7,942	$	79	220	$	2	$	199,767	$	(2,662)	$	(194,030)	$	9,921
Stock compensation and issuances	—	—		3	—		—	—		179		—		—		179
Accrued liability settled through issuance of stock	—	—		5	—		—	—		14		—		—		14
Shares withheld related to net share settlement of restricted stock awards	—	—		(1)	—		—	—		(7)		—		—		(7)
Net income	—	—		—	—		—	—		—		—		423		423
Balance at September 30, 2020	3,441	$	6,765	7,949	$	79	220	$	2	$	199,953	$	(2,662)	$	(193,607)	$	10,530

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

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COMSTOCK HOLDING COMPANIES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)


	Series C Preferred Stock			Class A			Class B			Additional paid-in capital		Treasury stock		Accumulated deficit		Non- controlling interest		Total
	Shares	Amount		Shares	Amount		Shares	Amount
Balance at December 31, 2018	2,800	$	7,193	3,703	$	37	220	$	2	$	181,632	$	(2,662)	$	(196,091)	$	15,706	$	5,817
Stock compensation and issuances	—	—		41	—		—	—		61		—		—		—		61
Accrued liability settled through issuance of stock	—	—		15	—		—	—		35		—		—		—		35
Shares withheld related to net share settlement of restricted stock awards	—	—		(10)	—		—	—		—		—		—		—		—
Net income	—	—		—	—		—	—		—		—		85		300		385
Balance at March 31, 2019	2,800	$	7,193	3,749	$	37	220	$	2	$	181,728	$	(2,662)	$	(196,006)	$	16,006	$	6,298
Stock compensation and issuances	—	—		30	1		—	—		186		—		—		—		187
Accrued liability settled through issuance of stock	—	—		14	—		—	—		36		—		—		—		36
Shares withheld related to net share settlement of restricted stock awards	—	—		(2)	—		—	—		—		—		—		—		—
Warrant exercises	—	—		200	2		—	—		358		—		—		—		360
Class A stock conversion of non-controlling interest	—	—		3,824	38		—	—		16,050		—		—		(16,019)		69
Series C conversion of non-controlling interest	641	(428)		—	—		—	—		—		—		—		—		(428)
Net (loss) income	—	—		—	—		—	—		—		—		(237)		13		(224)
Balance at June 30, 2019	3,441	$	6,765	7,815	$	78	220	$	2	$	198,358	$	(2,662)	$	(196,243)	$	—	$	6,298
Stock compensation and issuances	—	—		—	—		—	—		134		—		—		—		134
Accrued liability settled through issuance of stock	—	—		17	—		—	—		35		—		—		—		35
Gain on deconsolidation of discontinued operations	—	—		—	—		—	—		682		—		—		—		682
Net (loss) income	—	—		—	—		—	—		—		—		(627)		—		(627)
Balance at September 30, 2019	3,441	$	6,765	7,832	$	78	220	$	2	$	199,209	$	(2,662)	$	(196,870)	$	—	$	6,522

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

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COMSTOCK HOLDING COMPANIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Nine Months Ended September 30,
	2020		2019
Cash flows from operating activities:
Net income (loss)	$	1,591	$	(183)
Adjustment to reconcile net income (loss) from continuing operations to net cash provided by operating activities
Amortization of loan discount, loan commitment and deferred financing fees	27		82
Amortization and depreciation expense	176		103
Earnings from unconsolidated joint venture, net of distributions	114		9
Stock compensation	595		345
Change in fair value of equity method investment	134		606
Distributions from equity method investments carried at fair value	1,322		100
Changes in operating assets and liabilities:
Trade receivables - related party	628		463
Trade receivables	251		19
Accrued personnel costs	(1,567)		(42)
Prepaid and other assets	(80)		91
Accrued interest	—		(1)
Accrued liabilities	601		488
Accounts payable	(1,130)		(2,596)

Net cash provided by operating activities of discontinued operations	—		7,429
Net cash provided by operating activities	$	2,662	$	6,913
Cash flows from investing activities:
Purchase of fixed assets	(114)		(126)
Principal received on note receivable	—		27
Net cash used in investing activities	$	(114)	$	(99)
Cash flows from financing activities:
Proceeds from notes payable	5,554		—
Payments on notes payable	(7,054)		(172)
Taxes paid related to net share settlement of equity awards	(68)		6
Net cash used in financing activities	$	(1,568)	$	(166)
Net increase in cash and cash equivalents	980		6,648
Cash and cash equivalents, beginning of period	3,511		854
Cash and cash equivalents, end of period	$	4,491	$	7,502

Supplemental cash flow information:
Interest paid	$	338	$	440
Supplemental disclosure for non-cash investing and financing activities:
Accrued liability settled through issuance of stock	$	54	$	106
Gain on early extinguishment of debt	$	50	$	—

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Comstock Holding Companies, Inc. and subsidiaries (“Comstock”, “CHCI” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X and other applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Such financial statements do not include all of the disclosures required by GAAP for complete financial statements. In our opinion, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation have been included in the accompanying consolidated financial statements. The Company has evaluated subsequent events through the date these consolidated financial statements were issued and has included all necessary adjustments and disclosures. For further information and a discussion of our significant accounting policies, other than discussed below, refer to our audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Comstock Holding Companies, Inc., incorporated in 2004 as a Delaware corporation, is a multi-faceted asset management and services company primarily focused in the Washington, D.C. Metropolitan Statistical Area. In 2018, the Company made a strategic decision to transform its operating platform from being primarily focused on developing on-balance sheet, for-sale, homebuilding projects to being focused on commercial and residential asset management and real estate related services. On April 30, 2019, the Company announced the exit from the homebuilding business. The Company now operates through five subsidiaries – CDS Asset Management, LC (“CAM”), Comstock Residential Management, LC, Comstock Commercial Management, LC, Park X Management, LC and Comstock Environmental Services, LLC (“CES”). The Company’s homebuilding operations are presented in Discontinued Operations (see Note 19 – Discontinued Operations). References in these Consolidated Financial Statements to “Comstock,” “Company”, “we,” “our” and “us” refer to Comstock Holding Companies, Inc. together in each case with our subsidiaries unless the context suggests otherwise.

The Company’s Class A common stock is traded on the NASDAQ Capital Market under the symbol “CHCI”.

Throughout this quarterly report on Form 10-Q, amounts are in thousands, except per share data, number of stock options, number of stock awards, or as otherwise noted.

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

For the three and nine months ended September 30, 2020 and 2019, comprehensive income (loss) equaled net income (loss); therefore, a separate statement of comprehensive income (loss) is not included in the accompanying consolidated financial statements.

Certain amounts in the prior period have been reclassified to conform to the current year presentation in connection with the classification of 'General and administrative' expenses on the consolidated statement of operations and the accompanying notes to the consolidated financial statements. The reclassification had no effect on the previously reported totals (e.g. operating income, income before income tax, and net income).

Recent Developments

In March 2020, the Coronoavirus Aid Relief and Economic Security Act ("CARES Act") was signed into law in response to the COVID-19 pandemic, and we opted into the CARES Act payroll tax deferral program in the third quarter of 2020. See Note 9 - Coronavirus Aid Relief and Economic Security Act' for further discussion.

On October 31, 2020, the Company’s then-current lease for its corporate headquarters in Reston, Virginia expired following a one-month extension of the lease term. On November 1, 2020, the Company agreed to a new lease to relocate its corporate headquarters to new office space in Reston, Virginia for a ten year term. See Note 20 - Subsequent Events for further discussion.

Use of Estimates

Our condensed consolidated financial statements have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts for the reporting periods. We base these estimates and judgments on historical experience and on various other factors that we believe to

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be reasonable under the circumstances. We evaluate these estimates and judgments on an ongoing basis. Actual results may differ from those estimates under different assumptions or conditions. Material estimates are utilized in the valuation of deferred tax assets, analysis of goodwill impairment, valuation of equity-based compensation, valuation of preferred stock issuances, capitalization of costs, consolidation of variable interest entities and fair value of financial instruments (including the fair value of our equity method investments).

Recently Adopted Accounting Standards

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: (i) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and (ii) the entity’s valuation processes for Level 3 fair value measurements. ASU 2018-13 adds the following disclosure requirements: (i) provide information about the measurement uncertainty of Level 3 fair value measurements as of the reporting date rather than a point in the future, (ii) disclose changes in unrealized gains and losses related to Level 3 measurements for the period included in other comprehensive income, and (iii) disclose for Level 3 measurements the range and weighted average of the significant unobservable inputs and the way it is calculated. ASU 2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. 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.

Recently Issued Accounting Standards

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments", 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 consolidated financial statements and related disclosures

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes", which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 will be effective for public business entities for annual reporting periods beginning after December 15, 2020, and interim periods within those periods. Early adoption is permitted. We do not expect the adoption of this pronouncement to have a material impact on our consolidated financial statements.

We assessed other accounting pronouncements issued or effective during the three and nine months ended September 30, 2020 and deemed they were either not applicable to us or are not anticipated to have a material effect on our consolidated financial statements. Other standards previously issued and adopted by the Company have been disclosed in previous filings.

2. 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 for its property management revenue arrangements. Specifically, the Company incorrectly accounted for debt discount of certain notes payable due to affiliates that should have been fully amortized at the end of the initial three-year term in October 2017. In addition, in 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 previously reported operating income (loss) or total cash flows from operations, investing, or financing of the Company.

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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 September 30, 2019						For the nine months ended September 30, 2019
	As previously reported		Adjustment		As adjusted		As previously reported		Adjustment		As adjusted
Revenue—asset management	$	4,293	$	440	$	4,733	$	12,178	$	1,148	$	13,326
Direct costs—asset management	3,710		487		4,197		10,541		1,263		11,804
Interest (expense)	(186)		16		(170)		(352)		48		(304)
Other income, net	—		47		47		16		115		131
Net income (loss)	(643)		16		(627)		(827)		48		(779)
Additional paid-in capital	198,184		1,025		199,209		198,184		1,025		199,209
Accumulated deficit	(195,146)		(1,724)		(196,870)		(195,146)		(1,724)		(196,870)
Total equity	7,221		(699)		6,522		7,221		(699)		6,522

3. TRADE RECEIVABLES & TRADE RECEIVABLES – RELATED PARTIES

Trade receivables include amounts due from real estate services, asset management and commercial development. The Company records an allowance for doubtful accounts based on historical collection experience and the aging of receivables. As of September 30, 2020, the allowance for doubtful accounts was de minimis based on the Company’s historical collection experience for receivables older than 90 days along with an analysis of collections received as of the filing date.

As of September 30, 2020 and December 31, 2019, the Company had $3.0 million and $3.6 million, respectively, of receivables from related parties, primarily related to the 2019 AMA, as defined in Note 15. The Company does not record an allowance for doubtful accounts related to receivables from related parties. This is due to the related party nature of the receivables along with the collection history.

4. EQUITY METHOD INVESTMENTS IN REAL ESTATE VENTURES 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 September 30, 2020 and December 31, 2019, the Company had equity method investments in real estate ventures at fair value of $7.0 million and $8.4 million, respectively. The table below shows the change in the Company’s investments in real estate ventures reported at fair value.


	Nine Months Ended September 30, 2020
Fair value of investments as of December 31, 2019	$	8,421
Distributions	(1,322)
Change in fair value	(134)
Fair value of investments as of September 30, 2020	$	6,965

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

Investors X

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

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underlying asset. Expected future cash flows includes contractually fixed revenues and expenses as well as estimates for future revenues and expenses where contracts do not currently exist. These estimates are based on prior experience as well as comparable, third party data.

As of September 30, 2020 and December 31, 2019, the fair value of the Company’s investment in Investors X is $5.8 million and $7.2 million, respectively. The Company received distributions of $581 thousand and $1,239 thousand during the three and nine months ended September 30, 2020, respectively, and recognized a loss in fair value of $47 thousand and $161 thousand, respectively.

Summarized Financial Information for Investors X (unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Statement of Operations:
Total revenue	$	5,078	$	3,072	$	12,276	$	3,072
Direct costs	4,653		3,750		10,915		3,750
Net income (loss)	$	425	$	(678)	$	1,361	$	(678)
Comstock Holding Companies, Inc. share of net income (loss)	$	425	$	(678)	$	1,361	$	(678)

The Hartford

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. As of September 30, 2020 and December 31, 2019, the fair value of the Company’s investment in the Hartford was $1.1 million. The fair value of the Hartford remained at approximately $1.2 million during the three and nine months ended September 30, 2020. The Company received distributions of $24 thousand and $83 thousand during the three and nine months ended September 30, 2020, respectively.

Summarized Financial Information for the Hartford (unaudited)


	Three Months Ended September 30,		Nine Months Ended September 30,
	2020		2020
Statement of Operations:
Total revenue	$	2,486	$	6,544
Direct costs	814		1,966
Other costs	2,366		6,257
Net loss	$	(694)	$	(1,679)
Comstock Holding Companies, Inc. share of net loss	$	(17)	$	(42)

5. GOODWILL & INTANGIBLES

Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in a business acquisition. Following an acquisition, we perform an analysis to value the acquired company’s tangible and identifiable intangible assets and liabilities. With respect to identifiable intangible assets, we consider backlog, non-compete agreements, client relationships, trade names, patents and other assets. We amortize our intangible assets based on the period over which the contractual or economic benefits of the intangible assets are expected to be realized. We assess the recoverability of the unamortized balance of our intangible assets when indicators of impairment are present based on expected future profitability and undiscounted expected cash flows and their contribution to our overall operations. Should the review indicate that the carrying value is not fully recoverable, the excess of the carrying value over the fair value of the intangible assets would be recognized as

TABLE OF CONTENTS

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

We perform our annual goodwill impairment review during our fourth quarter as of October 1. In addition, we regularly evaluate whether events and circumstances have occurred that may indicate a potential change in recoverability of goodwill. We perform interim goodwill impairment reviews between our annual reviews if certain events and circumstances have occurred, including a deterioration in general economic conditions, an increased competitive environment, a change in management, key personnel, strategy or customers, significant or unusual changes in market capitalization, negative or declining cash flows, or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods. During the three months ended March 31, 2020 we considered the impact of the coronavirus ("COVID-19") pandemic and the resulting economic impact a triggering event and performed a goodwill impairment review. There were no events indicating a potential change in recoverability of goodwill during the three months ended September 30, 2020.

When assessing goodwill for impairment, the Company may first assess qualitative factors to evaluate whether it is more likely than not that the fair value of a reporting unit is less than it's carrying amount or elect to bypass such assessment. If it is determined that it is more likely than not that the fair value of a reporting unit is less than it’s carrying value, or the Company elects to bypass such assessment, the Company then determines the fair value of each reporting unit. 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 fair value of each reporting unit is compared to the carrying amount of the reporting unit. If the carrying value of the reporting unit exceeds the fair value, then an impairment loss is recognized for the difference. For the three months ended March 31, 2020 the Company determined that there was no impairment to goodwill. As of September 30, 2020 and December 31, 2019, the balance of goodwill was $1.7 million. This goodwill is reflected within our Real Estate Services segment.

Intangible assets include customer relationships which have an amortization period of four years. During the three and nine months ended September 30, 2020, $17 thousand and $50 thousand of intangible asset amortization was recorded in ‘General and administrative’ expense on the Consolidated Statements of Operations, respectively.


	September 30, 2020		December 31, 2019
Intangibles	$	268	$	268
Less: accumulated amortization	(215)		(165)
	$	53	$	103

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


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

Price	2.00	EPS	-0
Shares	8	P/E	-30
MCap	16	P/FCF	2
Net Debt	5	EBIT	-0
TEV	21	TEV/EBIT	-58
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-09-30	Filed 2020-11-16
10-Q	2020-06-30	Filed 2020-08-14
10-Q	2020-03-31	Filed 2020-05-28
10-K	2019-12-31	Filed 2020-04-15
10-Q	2019-09-30	Filed 2019-11-14
10-Q	2019-06-30	Filed 2019-08-20
10-Q	2019-03-31	Filed 2019-05-15
10-K	2018-12-31	Filed 2019-03-29
10-Q	2018-09-30	Filed 2018-11-08
10-Q	2018-06-30	Filed 2018-08-14
10-Q	2018-03-31	Filed 2018-05-16
10-K	2017-12-31	Filed 2018-04-20
10-Q	2017-09-30	Filed 2017-11-16
10-Q	2017-06-30	Filed 2017-08-14
10-Q	2017-03-31	Filed 2017-05-15
10-K	2016-12-31	Filed 2017-04-17
10-Q	2016-09-30	Filed 2016-11-14
10-Q	2016-06-30	Filed 2016-08-15
10-Q	2016-03-31	Filed 2016-05-16
10-K	2015-12-31	Filed 2016-04-04
10-Q	2015-09-30	Filed 2015-11-16
10-Q	2015-06-30	Filed 2015-08-14
10-Q	2015-03-31	Filed 2015-05-15
10-K	2014-12-31	Filed 2015-04-15
10-Q	2014-09-30	Filed 2014-11-13
10-Q	2014-06-30	Filed 2014-08-13
10-Q	2014-03-31	Filed 2014-05-15
10-K	2013-12-31	Filed 2014-03-31
10-Q	2013-09-30	Filed 2013-11-12
10-Q	2013-06-30	Filed 2013-08-13
10-Q	2013-03-31	Filed 2013-05-15
10-K	2012-12-31	Filed 2013-03-27
10-Q	2012-09-30	Filed 2012-11-14
10-Q	2012-06-30	Filed 2012-07-27
10-Q	2012-03-31	Filed 2012-05-11
10-K	2011-12-31	Filed 2012-03-30
10-Q	2011-09-30	Filed 2011-11-14
10-Q	2011-06-30	Filed 2011-08-12
10-Q	2011-03-31	Filed 2011-05-13
10-K	2010-12-31	Filed 2011-03-31
10-Q	2010-09-30	Filed 2010-11-12
10-Q	2010-06-30	Filed 2010-08-13
10-Q	2010-03-31	Filed 2010-05-14
10-K	2009-12-31	Filed 2010-03-31

8-K	2020-08-05
8-K	2020-06-24
8-K	2020-06-17
8-K	2020-04-27
8-K	2020-04-20
8-K	2020-03-19
8-K	2019-12-30
8-K	2019-06-19
8-K	2019-04-30
8-K	2019-02-12
8-K	2018-06-12
8-K	2018-06-12
8-K	2018-05-22
8-K	2018-03-30

EX-31.1	chci-20200930xex311.htm
EX-31.2	chci-20200930xex312.htm
EX-32.1	chci-20200930xex321.htm


		Page
PART I – FINANCIAL INFORMATION		1

ITEM 1.	FINANCIAL STATEMENTS (unaudited):	1

	Consolidated Balance Sheets	1

	Consolidated Statements of Operations	2

	Consolidated Statements of Changes in Stockholders’ Equity	3

	Consolidated Statements of Cash Flows	5

	Notes to Consolidated Financial Statements	6

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	23

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	31

ITEM 4.	CONTROLS AND PROCEDURES	31

PART II – OTHER INFORMATION		32

ITEM 1.	LEGAL PROCEEDINGS	32

ITEM 6.	EXHIBITS	32

SIGNATURES		33

CHCI 10Q Quarterly Report

Comstock Earnings 2020-09-30