me Opportunity Realty Investors(IOR) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Unaudited consolidated financial statements show increased assets, equity, and net income, primarily from related party interest income Consolidated Balance Sheets | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | % Change | | :----------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Total assets | $113,070 | $111,989 | $1,081 | 0.96% | | Total liabilities | $35 | $4 | $31 | 775.00% | | Total shareholders' equity | $113,035 | $111,985 | $1,050 | 0.94% | | Receivable from related parties | $101,560 | $100,134 | $1,426 | 1.42% | Consolidated Statements of Operations | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (in thousands) | % Change | | :---------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :-------------------- | :------- | | Total operating expenses | $537 | $460 | $77 | 16.74% | | Interest income from related parties | $1,866 | $1,252 | $614 | 49.04% | | Net income | $1,050 | $626 | $424 | 67.73% | | Earnings per share - basic and diluted | $0.25 | $0.15 | $0.10 | 66.67% | Consolidated Statements of Equity | Metric | Balance, January 1, 2023 (in thousands) | Net income (in thousands) | Balance, March 31, 2023 (in thousands) | | :-------------------- | :------------------------------------ | :------------------------ | :------------------------------------- | | Total Shareholders' Equity | $111,985 | $1,050 | $113,035 | Consolidated Statements of Cash Flows | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :------------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Net income | $1,050 | $626 | | Accrued interest on related party notes receivable | $345 | $261 | | Related party receivables | $(1,426) | $(877) | | Net cash provided by operating activities | $0 | $3 | | Cash and cash equivalents, end of the period | $6 | $5 | Notes to Consolidated Financial Statements - The Company is an externally managed entity investing in mortgage notes receivables, with Transcontinental Realty Investors, Inc. (TCI) owning 81.1% of its stock[21][22][23] Notes Receivable from Related Parties (March 31, 2023 and December 31, 2022) | Borrower / Project | Carrying Value (March 31, 2023, in thousands) | Carrying Value (December 31, 2022, in thousands) | Interest Rate | Maturity Date | | :-------------------------------- | :-------------------------------------------- | :----------------------------------------------- | :------------ | :------------ | | United Housing Foundation (Echo Station) | $1,481 | $1,481 | 12.00% | 12/31/2032 | | United Housing Foundation (Lakeshore Villas) | $2,000 | $2,000 | 12.00% | 12/31/2032 | | United Housing Foundation (Lakeshore Villas) | $6,369 | $6,369 | 12.00% | 12/31/2032 | | United Housing Foundation (Timbers of Terrell) | $1,323 | $1,323 | 12.00% | 12/31/2032 | | Total | $11,173 | $11,173 | | | Related Party Transactions (Three Months Ended March 31) | Transaction Type | 2023 (in thousands) | 2022 (in thousands) | Change (in thousands) | % Change | | :----------------------------------- | :------------------ | :------------------ | :-------------------- | :------- | | Advisory fees paid to Pillar | $319 | $268 | $51 | 19.03% | | Interest income from UHF notes | $331 | $331 | $0 | 0.00% | | Interest income from TCI receivables | $1,535 | $921 | $614 | 66.67% | - The Company anticipates generating sufficient excess cash from property operations in the next twelve months to meet its obligations[35] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and operations, emphasizing related party note investments and external management, expecting sufficient liquidity - The Company is an externally advised and managed entity, primarily investing in notes receivable collateralized by income-producing properties in the Southern United States, with interest income from related parties as its principal source of income[40] - Operations are managed by Pillar Income Asset Management, Inc., a related party due to common ownership with TCI, the controlling shareholder, and related party transactions may not always be on an arm's length basis[41][42] - Critical accounting policies include judgments on provisions for uncollectible accounts and fair value measurements, applying ASC Topic 820 for fair value hierarchy (Level 1, 2, 3) and ASC Topic 805 for evaluating related party relationships[43][45][47] - Management stated there were no significant changes in operating results for the three months ended March 31, 2023, compared to the same period in 2022, despite increases in net income and interest income from related parties as shown in the financial statements[50][51] - The Company's principal liquidity needs are normal recurring expenses, funded by the collection of mortgage notes receivables and receivables/interest from related companies, with management anticipating current cash and future receivables will be sufficient for the next twelve months[52][53] Item 3. Quantitative and Qualitative Disclosures About Market Risks This item is optional for smaller reporting companies and was not included in this quarterly report - This section is optional and not included in the report[54] Item 4. Controls and Procedures Disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control - As of March 31, 2023, the Company's disclosure controls and procedures were deemed effective by management and the Principal Executive and Financial Officer[55] - There has been no material change in the Company's internal control over financial reporting during the most recent fiscal quarter[56] PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company reported no legal proceedings for the period - There are no legal proceedings to report[57] Item 1A. Risk Factors No material changes to risk factors previously disclosed in the 2022 Form 10-K were reported - No material changes from the risk factors previously disclosed in the 2022 10-K[57] - General risks include those associated with financing availability, managing growth, economic downturns, interest rate increases, potential liability for uninsured losses, environmental contamination, and dependence on key personnel[42] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company's share repurchase program has 406,465 shares remaining, with no repurchases during the quarter - The Company has a share repurchase program allowing for the repurchase of up to 1,637,000 shares of common stock, with no termination date[58] - No shares were purchased under this program during the three months ended March 31, 2023[58] - As of March 31, 2023, 1,230,535 shares have been purchased, leaving 406,465 shares available for purchase under the program[58] Item 3. Defaults Upon Senior Securities The Company reported no defaults upon senior securities - There were no defaults upon senior securities[59] Item 4. Mine Safety Disclosures This item is not applicable to the Company - This item is not applicable[59] Item 5. Other Information The Company reported no other information for this item - No other information was reported[60] Item 6. Exhibits This section lists all exhibits, including organizational documents, advisory agreements, and required certifications - The report includes various exhibits such as Certificates of Restatement and Amendment of Articles of Incorporation, By-laws, Certificates of Designation for Preferred Stock, and the Advisory Agreement with Pillar Income Asset Management, LLC[61] - Certifications required by Rule 13a-14(a) and 18 U.S.C. Section 1350, along with XBRL instance and taxonomy documents, are filed herewith[61][63] Signatures Signatures The report was signed by Erik L. Johnson, Executive Vice President and Chief Financial Officer, on May 11, 2023 - The report was signed by Erik L. Johnson, Executive Vice President and Chief Financial Officer, on May 11, 2023[65][67]