Income Opportunity Realty Investors Inc. Files 2023 Annual Report

TL;DR

<b>Income Opportunity Realty Investors Inc. filed its 2023 10-K report detailing financial data and related party transactions.</b>

AI Summary

INCOME OPPORTUNITY REALTY INVESTORS INC /TX/ (IOR) filed a Annual Report (10-K) with the SEC on March 21, 2024. Filed 10-K for the fiscal year ending December 31, 2023. Company incorporated in Nevada. Primary business address in Dallas, TX. Reports on related party transactions for 2021, 2022, and 2023. Includes financial data for common stock, treasury stock, additional paid-in capital, and retained earnings for multiple years.

Why It Matters

For investors and stakeholders tracking INCOME OPPORTUNITY REALTY INVESTORS INC /TX/, this filing contains several important signals. The filing provides a comprehensive overview of the company's financial position and activities for the fiscal year 2023. Disclosure of related party transactions is crucial for investors to understand potential conflicts of interest and inter-company dealings.

Risk Assessment

Risk Level: low — INCOME OPPORTUNITY REALTY INVESTORS INC /TX/ shows low risk based on this filing. The filing is a standard annual report (10-K) and does not contain immediate, significant financial or operational disclosures that would suggest high risk.

Analyst Insight

Review the detailed financial statements and related party disclosures within the 10-K to assess the company's financial health and operational structure.

Key Numbers

• 2023-12-31 — Fiscal Year End (Reporting Period)
• 2024-03-21 — Filing Date (Date of Submission)
• 6798 — SIC Code (Standard Industrial Classification)
• 752615944 — IRS Number (Company Tax ID)

Key Players & Entities

• INCOME OPPORTUNITY REALTY INVESTORS INC /TX/ (company) — Filer
• 2023-12-31 (date) — Fiscal Year End
• 2024-03-21 (date) — Filing Date
• NV (jurisdiction) — State of Incorporation
• Dallas, TX (location) — Business Address
• IOR (ticker) — Ticker Symbol

FAQ

Industry Context

The company operates within the Real Estate Investment Trusts (REITs) sector, which involves owning, operating, or financing income-producing real estate.

Regulatory Implications

As a publicly traded company, Income Opportunity Realty Investors Inc. is subject to SEC regulations, including the requirement to file annual reports (10-K) under the Securities Exchange Act of 1934.

What Investors Should Do

1. Analyze the financial statements for the fiscal year ended December 31, 2023.
2. Examine disclosures related to related party transactions for the years 2021, 2022, and 2023.
3. Review the company's organizational structure and state of incorporation (Nevada).

Key Dates

• 2023-12-31: Fiscal Year End — End of the reporting period for the 10-K filing.
• 2024-03-21: Filing Date — Date the 10-K report was officially submitted to the SEC.

Year-Over-Year Comparison

This is the initial filing analyzed, so no comparison to a previous filing is available.

Key Financial Figures

• $16.50 — stock on the NYSE American Exchange was $16.50 per share, and was held by 342 stockhol
• $15.75 — 0 shares in three block transactions at $15.75 per share. As of December 31, 2023, the
• $3.1 million — the year ended December 31, 2022: Our $3.1 million increase in net income during the year
• $3.5 million — rily attributed to the following: The $3.5 million increase in interest income was primari
• $0.6 million — interest rates in 2022 and 2023. The $0.6 million increase in income tax provision was pr

Filing Documents

• ior-10k_123123.htm (10-K) — 632KB
• ex21-1.htm (EX-21.1) — 2KB
• ex26-1.htm (EX-26.1) — 9KB
• ex31-1.htm (EX-31.1) — 18KB
• ex32-1.htm (EX-32.1) — 7KB
• 0001999371-24-003780.txt (&nbsp;) — 2431KB
• ior-20231231.xsd (EX-101.SCH) — 20KB
• ior-20231231_cal.xml (EX-101.CAL) — 29KB
• ior-20231231_def.xml (EX-101.DEF) — 45KB
• ior-20231231_lab.xml (EX-101.LAB) — 150KB
• ior-20231231_pre.xml (EX-101.PRE) — 118KB
• ior-10k_123123_htm.xml (XML) — 240KB

Business

Business 3 Item 1A.

Risk Factors

Risk Factors 4 Item 1B. Unresolved Staff Comments 5 Item 1C. Cybersecurity 5 Item 2.

Properties

Properties 5 Item 3.

Legal Proceedings

Legal Proceedings 5 Item 4. Mine Safety Disclosures 5 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities 6 Item 6.

Selected Financial Data

Selected Financial Data 6 Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 6 Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 9 Item 8. Consolidated Financial Statements and Supplementary Data 10 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 27 Item 9A.

Controls and Procedures

Controls and Procedures 27 Item 9B. Other Information 27 PART III Item 10. Directors, Executive Officers and Corporate Governance 28 Item 11.

Executive Compensation

Executive Compensation 35 Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 35 Item 13. Certain Relationships and Related Transactions, and Director Independence 37 Item 14. Principal Accounting Fees and Services 38 PART IV Item 15. Exhibits, Financial Statement Schedules 40 Item 16. Form 10-K Summary 42

Signatures

Signatures 43 2 FORWARD-LOOKING Certain Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. The words "estimate," "plan," "intend," "expect," "anticipate," "believe," and similar expressions are intended to identify forward-looking statements. The forward-looking statements are found at various places throughout this Report and in the documents incorporated herein by reference. The Company disclaims any intention or obligations to update or revise any forward-looking reasonable assumptions, we can give no assurance that our goals will be achieved. Important factors that could cause our actual results to differ from estimates or projections contained in any forward-looking statements are described in Part I, Item 1A. "Risk Factors". PART I

BUSINESS

ITEM 1. BUSINESS General Income Opportunity Realty Investors, Inc. (the "Company"), a Nevada Corporation, is an externally managed company that invests in mortgage notes receivables and real property. As used herein, the terms "IOR", "the Company", "We", "Our", or "Us" refer to the Company. Controlling Shareholder Transcontinental Realty Investors, Inc. ("TCI"), whose common stock is traded on the NYSE under the symbol "TCI", owns 82.3% of our stock and with its affiliates owns approximately 88.8% of our common stock. Accordingly our financial results are included in the consolidated financial statements of TCI's in their Form 10-K and in their tax filings. American Realty Investors, Inc. ("ARL"), whose common stock is traded on the NYSE under the symbol "ARL", in turn, own approximately 78.4% of TCI. As described in Part III, Item 13. "Certain Relationships and Related Transactions, and Director Independence", our officers and directors also serve as officers and directors of TCI and ARL. Management Our business is managed by Pillar Income Asset Management, Inc. ("Pillar") in accordance with an Advisory Agreement that is reviewed annually by our Board of Directors. Pillar is a wholly-owned affiliate of ARL's controlling stockholder. Pillar's duties include, but are not limited to, locating, evaluating and recommending real estate and real estate-related investment opportunities. Pillar also arranges our debt and equity financing with unaffiliated independent third party lenders and investors. They also serve as the contractual Advisor and Cash Manager to TCI. As the contractual advisor, Pillar is compensated by us under an Advisory Agreement that is more fully described in Part III, Item 10. "Directors, Executive Officers and Corporate Governance – The Advisor". We have no employees. Employees of Pillar render services to us in accordance with the terms of the Advisory Agreement. In addition, as described in Part III, Item 13. "Certain Relationshi

Business

Business Plan and Investment Policy We also invest in notes receivables that are collateralized by investments in land and/or multifamily properties. These investments have included notes receivables from Unified Housing Foundation, Inc. ("UHF") Due to our ongoing relationship and the significant investment in the performance of the collateral secured under the notes receivable, we consider UHF to be a related party. 3 Human Capital We have no employees. Employees of Pillar render services to us in accordance with the terms of the Advisory Agreement. Available Information We maintain an internet site at www.incomeopp-realty.com. We make available through our website free of charge Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, reports filed pursuant to Section 16, and amendments to those reports, as soon as reasonably practicable after we electronically file or furnish such materials to the Securities and Exchange Commission. In addition, we have posted the charters for our Audit Committee, Compensation Committee, and Governance and Nominating Committee, as well as our Code of Business Conduct and Ethics, Corporate Governance Guidelines on Director Independence and other information on the website. These charters and principles are not incorporated in this Report by reference. We will also provide a copy of these documents free of charge to stockholders upon written request. The Company issues Annual Reports containing audited financial statements to its common shareholders.

RISK

ITEM 1A. RISK FACTORS An investment in our securities involves various risks. All investors should carefully consider the following risk factors, applicable to us and our assets in conjunction with the other information in this report before investing in our securities. Our business may be impacted as a result of any health emergency like the pandemic impact the coronavirus. Considerable uncertainty still surrounds the recent Covid-19 pandemic, including its conclusion, the availability of and effectiveness of vaccines, the potential short-term and long term effects, including but not limited to shifts in consumer housing demand based on geography, affordability, housing type (e.g., multi-family vs. single family) and unit type (e.g., office studio vs. multi-bedroom), mainly resulting from the paradigm shift of work culture, the decentralization of corporate headquarters and the success of "work from home" models. Moreover, local, state and national measures taken to limit the spread of the recent pandemic have already resulted in significant economic impacts and mortality rates, the duration and scope of which cannot currently be predicted. The extent to which our financial condition or operating results will be effected in the future by any future pandemic will largely depend on future demand and developments, which are highly uncertain and cannot be accurately predicted. We may not be able to access financial markets to obtain capital on a timely basis, or on acceptable terms. We may need to rely on third party capital sources for a portion of our capital needs, including capital for acquisitions and development. The public debt and equity markets are among the sources on which we rely. There is no guarantee that we will be able to access these markets, or any other source of capital. The ability to access the public debt and equity markets depends on a variety of factors, including: general economic conditions affecting these markets; our own finan

CYBERSECURITY

ITEM 1C. CYBERSECURITY We rely on the information technology and systems maintained by Pillar and their employees to identify and manage material risks from cybersecurity threats. Pillar takes various actions, and incurs significant costs, to maintain and manage the operation and security of information technology and systems, including the data maintained in those systems. We believe that Pillar's Director of Information Technology and his associates endeavor to evaluate and address cyber risks in alignment with our business objectives, operational needs and industry-accepted standards, such as the National Institute of Standards and Technology and CIS Critical Security Controls frameworks. Since we rely on accounting, financial, operational, management and other information systems, including the Internet and third-party hosted services to conduct our operations, store personal and sensitive data, process financial information and results of operations for internal reporting purposes and comply with financial reporting, legal and tax requirements, we have processes and procedures in place to monitor the prevention, detection, mitigation and remediation of cybersecurity risks. These include, but are not limited to (i) maintaining a defined and practiced incident response plan; (ii) employing appropriate incident prevention and detection safeguards; (iii) maintaining a defined disaster recovery policy and employing disaster recovery software, where appropriate; (iv) educating, training and testing our user community on information security practices and identification of potential cybersecurity risks and threats; and (v) reviewing and evaluating new developments in the cyber threat landscape. Recognizing the complexity and evolving nature of cybersecurity risk, we engage with a range of external support in evaluating, monitoring and testing our cybersecurity management systems and related cyber risks. The Audit Committee of the Board of Directors oversees cybers

PROPERTIES

ITEM 2. PROPERTIES At present, we don't own any real estate. ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 5 PART II

MARKET

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed and traded on the NYSE American Exchange under the symbol "IOR". The following table sets forth the high and low sales prices as reported in the consolidated reporting system of the NYSE American for the quarters ended: 2023 2022 High Low High Low First Quarter $ 12.40 $ 10.58 $ 16.99 $ 10.05 Second Quarter $ 11.68 $ 10.75 $ 15.06 $ 10.59 Third Quarter $ 13.39 $ 11.09 $ 13.99 $ 10.11 Fourth Quarter $ 13.99 $ 11.09 $ 13.50 $ 11.35 On March 19, 2024 , the closing market price of our commo n stock on the NYSE American Exchange was $16.50 per share, and was held by 342 stockholders of record. Our Board of Directors established a policy that dividend declarations on common stock would be determined on an annual basis following the end of each year. In accordance with that policy, the board determined not to pay any dividends on common stock in 2023, 2022 or 2021. Future distributions to common stockholders will be determined by the Board of Directors in light of conditions then existing, including our financial condition and requirements, future prospects, restrictions in financing agreements, business conditions and other factors deemed relevant by the Board. We have a stock repurchase program that allows for the repurchase of up to 1,650,000 shares of our common stock. This repurchase program has no termination date. During the year ended December 31, 2023, we repurchased a total of 57,700 shares in three block transactions at $15.75 per share. As of December 31, 2023, there are 557,539 shares remaining that can be repurchased. ITEM 6. SELECTED FINANCIAL DATA Optional and not included.

MANAGEMENT'S

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with our consolidated financial statements and related notes in Part II, Item 8 of this Report. Management's Overview We are an externally advised and managed company that invests in notes receivable that are collateralized by income-producing properties in the Southern United States and in the past, real property. Our current principal source of income is interest income on note receivables from related parties. We have historically engaged in and may continue to engage in certain business transactions with related parties, including but not limited to asset acquisition, dispositions and financings. Transactions involving related parties cannot be presumed to be carried out on an arm's length basis due to the absence of free market forces that naturally exist in business dealings between two or more unrelated entities. Related party transactions may not always be favorable to our business and may include terms, conditions and agreements that are not necessarily beneficial to or in our best interest. 6 Our operations are managed by Pillar in accordance with an Advisory Agreement. Pillar's duties include, but are not limited to, locating, evaluating and recommending investment opportunities. We have no employees. Employees of Pillar render services to us in accordance with the terms of the Advisory Agreement. Pillar is considered to be a related party due to its common ownership with TCI, who is our controlling stockholder. Critical Accounting Policies The preparation of our consolidated financial statements in conformity with United States generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reporte

financial statements. However, the following policies are deemed to be critical

financial statements. However, the following policies are deemed to be critical. Non-performing Notes Receivable The Company considers a note receivable to be non-performing when the maturity date has passed without principal repayment and the borrower is not making interest payments in accordance with the terms of the agreement. Interest recognition on Notes Receivable We record interest income as earned in accordance with the terms of the related loan agreements. Allowance for Estimated Losses We assess the collectability of notes receivable on a periodic basis, of which the assessment consists primarily of an evaluation of cash flow projections of the borrower to determine whether estimated cash flows are sufficient to repay principal and interest in accordance with the contractual terms of the note. We recognize impairments on notes receivable when it is probable that principal and interest will not be received in accordance with the contractual terms of the loan. The amount of the impairment to be recognized generally is based on the fair value of the partnership's real estate that represents the primary source of loan repayment. (See Note 3, below, Notes and Interest Receivable from Related Parties, for details on our notes receivable.) Fair Value of Financial Instruments We apply the guidance in ASC Topic 820, "Fair Value Measurements and Disclosures," to the valuation of real estate assets. These provisions define fair value as the price that would be received to sell an asset or paid to transfer a liability in a transaction between market participants at the measurement date, establish a hierarchy that prioritizes the information used in developing fair value estimates and require disclosure of fair value measurements by level within the fair value hierarchy. The hierarchy gives the highest priority to quoted prices in active markets (Level 1 measurements) and the lowest priority to unobservable data (Level 3 measurements), such as the repor

QUANTITATIVE

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Optional and not included. 9

CONSOLIDATED

ITEM 8. CONSOLIDATED

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO FINANCIAL STATEMENTS Page Financial Report of Independent Registered Public Accounting Firm for the Year Ended December 31, 2023 11 Report of Independent Registered Public Accounting Firm for the Years Ended D

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