me Opportunity Realty Investors(IOR) - 2025 Q1 - Quarterly Report

Report Information Filing Details This section identifies the filing as a Form 10-Q for the quarterly period ended March 31, 2025, for Income Opportunity Realty Investors, Inc., and provides key company identification and filing status - The report is a Quarterly Report on Form 10-Q for the period ended March 31, 2025[2] Registrant Information | Field | Value | | :--- | :--- | | Exact Name of Registrant | INCOME OPPORTUNITY REALTY INVESTORS, INC. | | State of Incorporation | Nevada | | I.R.S. Employer Identification No. | 75-2615944 | | Principal Executive Offices Address | 1603 Lyndon B. Johnson Freeway, Suite 800, Dallas, Texas 75234 | | Telephone Number | (469) 522-4200 | | Common Stock Trading Symbol | IOR | | Exchange Registered | NYSE American Exchange | Filer Status | Filer Type | Status | | :--- | :--- | | Large accelerated filer | ☐ | | Accelerated filer | ☐ | | Non-accelerated filer | ☒ | | Smaller reporting company | ☒ | | Emerging growth Company | ☐ | | Shell company | ☒ No | PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements, including the balance sheets, statements of operations, equity, and cash flows, along with their accompanying notes, for the periods ended March 31, 2025, and December 31, 2024 (for balance sheet) or March 31, 2024 (for income, equity, and cash flow statements) Consolidated Balance Sheets The consolidated balance sheets show a slight increase in total assets and shareholders' equity from December 31, 2024, to March 31, 2025, primarily driven by an increase in cash and receivables from related parties Consolidated Balance Sheet Highlights (dollars in thousands) | Item | March 31, 2025 | December 31, 2024 | Change (QoQ) | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $156 | $9 | +$147 | | Receivable from related parties | $111,401 | $110,481 | +$920 | | Total current assets | $111,775 | $110,781 | +$994 | | Total assets | $122,921 | $121,927 | +$994 | | Total shareholders' equity | $122,916 | $121,927 | +$989 | Consolidated Statements of Operations For the three months ended March 31, 2025, the company reported a decrease in net income and earnings per share compared to the same period in 2024, primarily due to lower interest income from related parties Consolidated Statements of Operations Highlights (dollars in thousands, except per share) | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Total operating expenses | $95 | $95 | $0 | | Interest income from related parties | $1,347 | $1,586 | -$239 | | Income tax provision | ($263) | ($313) | +$50 | | Net income | $989 | $1,178 | -$189 | | Earnings per share - basic and diluted | $0.24 | $0.29 | -$0.05 | Consolidated Statements of Equity Shareholders' equity increased for the three months ended March 31, 2025, driven by net income, while the prior year period also saw a decrease due to common share repurchases Consolidated Statements of Equity Highlights (dollars in thousands) | Item | March 31, 2025 | January 1, 2025 | Change (QoQ) | | :--- | :--- | :--- | :--- | | Balance, beginning of period | $121,927 | $121,927 | | | Net income | $989 | $989 | | | Balance, end of period | $122,916 | $122,916 | | | Item | March 31, 2024 | January 1, 2024 | Change (QoQ) | | :--- | :--- | :--- | :--- | | Balance, beginning of period | $118,078 | $118,078 | | | Net income | $1,178 | $1,178 | | | Repurchase of common shares | ($587) | ($587) | | | Balance, end of period | $118,669 | $118,669 | | Consolidated Statements of Cash Flows Net cash provided by operating activities significantly decreased in the three months ended March 31, 2025, compared to the prior year, primarily due to changes in related party receivables, resulting in a net increase in cash and cash equivalents Consolidated Statements of Cash Flows Highlights (dollars in thousands) | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Net income | $989 | $1,178 | -$189 | | Accrued interest on related party notes receivable | $73 | $102 | -$29 | | Related party receivables | ($920) | ($731) | -$189 | | Net cash provided by operating activities | $147 | $552 | -$405 | | Repurchase of common shares (financing activities) | $0 | ($587) | +$587 | | Net increase (decrease) in cash and cash equivalents | $147 | ($35) | +$182 | | Cash and cash equivalents, end of period | $156 | $36 | +$120 | Notes to Consolidated Financial Statements These notes provide detailed information on the company's organization, significant accounting policies, notes receivable, related party transactions, stockholders' equity, commitments, and subsequent events, which are integral to understanding the consolidated financial statements 1. Organization The company is an externally managed entity primarily investing in mortgage notes receivables, with significant ownership by Transcontinental Realty Investors, Inc. (TCI) and management by Pillar Income Asset Management, Inc., a related party - The Company is an externally managed company that currently holds investments in mortgage notes receivables[19] - Transcontinental Realty Investors, Inc. (TCI) owned approximately 84.0% of the Company's stock at March 31, 2025, and together with an affiliate, owned approximately 90.6% of common stock[20] - The business is managed by Pillar Income Asset Management, Inc. ('Pillar'), a related party, which locates, evaluates, and recommends investment opportunities and arranges financing[21] 2. Summary of Significant Accounting Policies The financial statements are prepared in accordance with Form 10-Q and GAAP, with certain disclosures condensed. The company consolidates entities where it is the primary beneficiary of a VIE or holds a majority voting interest, and uses the equity method for non-controlling interests - Unaudited consolidated financial statements are prepared in accordance with Form 10-Q and Article 10 of Regulation S-X, with certain GAAP disclosures condensed or omitted[22] - The Company consolidates entities where it is the primary beneficiary of a variable interest entity (VIE) or has a majority voting interest[24] - Entities with less than a controlling financial interest or where the Company is not the primary beneficiary are accounted for using the equity method[25] 3. Notes Receivable The company holds a note receivable from Unified Housing Foundation, Inc. (UHF), a related party, which bears interest at SOFR and matures on December 31, 2032. Payments are funded from UHF's surplus cash flow or property sales/refinancing - The Company has a note receivable from Unified Housing Foundation, Inc. (UHF), which is a related party[27][28] - The note bears interest at the Secured Overnight Financing Rate (SOFR) and matures on December 31, 2032[27] UHF Note Receivable Interest Rates | Date | Interest Rate | | :--- | :--- | | March 31, 2025 | 4.49% | | December 31, 2024 | 4.96% | 4. Related Party Transactions The company engages in significant transactions with related parties, including advisory fees paid to Pillar and interest income from notes receivable and other receivables from Pillar, with interest rates on Pillar Receivable changing to SOFR in 2024 - Related party transactions, including investment in notes receivables, may not always be on an arm's length basis or necessarily beneficial to the Company[29] Related Party Financial Transactions (dollars in thousands) | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Advisory fees paid to Pillar | $27 | $29 | | Interest income on UHF notes | $124 | $150 | | Interest income on Pillar Receivable | $1,223 | $1,436 | | Item | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Receivables from related parties (Pillar Receivable) | $111,401 | $110,481 | - The interest rate on the Pillar Receivable changed from prime plus one percent to SOFR on January 1, 2024[32] 5. Stockholders' Equity The company has an ongoing stock repurchase program, under which 32,608 shares were repurchased for $587 thousand during the three months ended March 31, 2024, with 513,003 shares remaining authorized for repurchase as of March 31, 2025 - The Company has a stock repurchase program authorizing up to 1,650,000 shares with no termination date[33] - During the three months ended March 31, 2024, 32,608 shares were repurchased for $587 thousand[33] - As of March 31, 2025, 513,003 shares remain available for repurchase under the program[34] 6. Commitments and Contingencies The company anticipates generating excess cash from property operations within the next twelve months, which it believes will be sufficient to meet its obligations - The Company believes it will generate excess cash from property operations in the next twelve months, which might be sufficient to discharge all obligations[35] 7. Subsequent Events Subsequent events occurring after March 31, 2025, were evaluated for financial statement adjustments or disclosure up to May 8, 2025, the date the consolidated financial statements were available to be issued - Subsequent events were evaluated up to May 8, 2025, the date the consolidated financial statements were available for issuance[36] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, results of operations, and liquidity, emphasizing its externally managed structure, reliance on related party transactions, and critical accounting policies, while also discussing the decrease in net income for the quarter Management's Overview The company is an externally advised and managed entity primarily investing in notes receivable collateralized by income-producing properties, with its principal income source being interest from related party receivables. Its operations are managed by Pillar, a related party - The Company is an externally advised and managed company that invests in notes receivable collateralized by income-producing properties[40] - The principal source of income is interest income from related party receivables[40] - Operations are managed by Pillar Income Asset Management, Inc., a related party due to common ownership with the controlling shareholder, TCI[42] - Related party transactions may not always be favorable or on an arm's length basis[41] Forward-Looking Statements and Risk Factors The report contains forward-looking statements subject to risks and uncertainties. Management cautions investors that actual results may differ, and refers to the 2024 Form 10-K for a comprehensive discussion of risk factors, noting no material changes - The report contains forward-looking statements, which are subject to risks, uncertainties, and assumptions that may cause actual results to vary materially[38] - Investors should review the risk factors described in Part I, Item 1A. 'Risk Factors' in the Company's Annual Report on Form 10-K for the year ended December 31, 2024[39] - There have been no material changes from the risk factors previously described in the Company's Form 10-K for the fiscal year ended December 31, 2024[39] Critical Accounting Policies The preparation of financial statements requires management to make estimates and assumptions, particularly concerning fair value measurements and the identification of related parties, which are considered critical accounting policies - Critical accounting policies involve management estimates and assumptions, such as provisions for uncollectible accounts and fair value measurements[44][45] - Fair value measurements are categorized into a three-level hierarchy based on the transparency of inputs: Level 1 (quoted prices in active markets), Level 2 (observable inputs for similar assets/liabilities), and Level 3 (unobservable inputs)[46][47][52] - Related parties are defined by ASC Topic 805, 'Business Combinations,' including entities with significant influence or control over decision-making[48] Results of Operations Net income decreased for the three months ended March 31, 2025, compared to the same period in 2024, primarily due to a decrease in interest income from related party receivables, while operating expenses remained stable - The decrease in net income for the three months ended March 31, 2025, compared to the same period in 2024, is primarily due to a decrease in interest income from related party receivables[53] - Operating expenses, consisting mainly of general and administrative costs and advisory fees to a related party, remained consistent at $95 thousand for both periods[11][50] Liquidity and Capital Resources The company's primary liquidity needs are for recurring expenses, with cash generated from mortgage notes and related company receivables serving as principal sources. Management anticipates sufficient cash and cash equivalents to meet requirements for the next twelve months - Principal liquidity needs are to fund normal recurring expenses[54] - Principal sources of cash are the collection of mortgage notes receivables and collections of receivables and interests from related companies[54] - Management anticipates that cash and cash equivalents as of March 31, 2025, along with future cash generation from related party receivables, will be sufficient to meet current cash requirements for the next twelve months[55] Item 3. Quantitative and Qualitative Disclosures About Market Risks This item is optional and has not been included in this quarterly report - This section is optional and not included in the report[56] Item 4. Controls and Procedures Management, including the Principal Executive Officer and Principal Financial Officer, concluded that the company's disclosure controls and procedures were effective as of March 31, 2025, and there have been no material changes to internal control over financial reporting during the quarter - Disclosure controls and procedures were effective as of March 31, 2025, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[57] - There has been no material change in internal control over financial reporting during the most recent fiscal quarter[58] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company reported no legal proceedings - There are no legal proceedings[59] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's 2024 Form 10-K - There have been no material changes from the risk factors previously disclosed in the 2024 10-K[59] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company has a stock repurchase program, but no shares were purchased during the three months ended March 31, 2025. As of that date, 513,003 shares remain available for repurchase - The Company has a stock repurchase program allowing for the repurchase of up to 1,650,000 shares of common stock, with no termination date[60] - No shares were purchased under this program during the three months ended March 31, 2025[60] - As of March 31, 2025, 513,003 shares may still be purchased under the program[60] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - There are no defaults upon senior securities[61] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable[61] Item 5. Other Information The company reported no other information - There is no other information to report[61] Item 6. Exhibits This section lists all exhibits filed with the report or incorporated by reference, including various certificates of designation, by-laws, and Section 302 and 906 certifications - The report includes various exhibits, such as By-laws, Certificates of Designations for Preferred Stock, and XBRL documents[62] - Section 302 Certifications by Erik L. Johnson (CEO) and Alla Dzyuba (Chief Accounting Officer) and Section 906 Certifications are filed with this report[62] Signatures The report was duly authorized and signed on behalf of Income Opportunity Realty Investors, Inc. by Erik L. Johnson, President and Chief Executive Officer, on May 8, 2025 - The report was signed by Erik L. Johnson, President and Chief Executive Officer, on May 8, 2025[64][66]