Income Opportunity Realty Investors Inc. Q2 2024 10-Q Filing

TL;DR

**IOR filed its Q2 10-Q. Financials and operations detailed.**

AI Summary

Income Opportunity Realty Investors Inc. (IOR) filed its 10-Q for the period ending June 30, 2024. The filing details financial performance for the second quarter and the first half of the year. Specific financial figures and operational updates are provided within the report.

Why It Matters

This filing provides investors with a detailed look at the financial health and operational performance of Income Opportunity Realty Investors Inc. during the second quarter of 2024.

Risk Assessment

Risk Level: medium — As a real estate investment trust, the company is subject to market fluctuations and interest rate risks inherent in the real estate sector.

Key Numbers

• 20240630 — Period End Date (Indicates the end of the reporting period for this 10-Q.)
• 20240808 — Filing Date (The date the report was officially submitted to the SEC.)

Key Players & Entities

• INCOME OPPORTUNITY REALTY INVESTORS INC /TX/ (company) — Filer
• 20240630 (date) — Period of Report
• 20240808 (date) — Filing Date
• 752615944 (dollar_amount) — IRS Number

FAQ

Filing Documents

• ior-10q_063024.htm (10-Q) — 252KB
• ex31-1.htm (EX-31.1) — 10KB
• ex31-2.htm (EX-31.2) — 10KB
• ex32-1.htm (EX-32.1) — 6KB
• 0001999371-24-009758.txt ( ) — 1394KB
• ior-20240630.xsd (EX-101.SCH) — 13KB
• ior-20240630_cal.xml (EX-101.CAL) — 19KB
• ior-20240630_def.xml (EX-101.DEF) — 36KB
• ior-20240630_lab.xml (EX-101.LAB) — 110KB
• ior-20240630_pre.xml (EX-101.PRE) — 85KB
• ior-10q_063024_htm.xml (XML) — 111KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION PAGE Item 1.

Financial Statements

Financial Statements 3 Consolidated Balance Sheets at June 30, 2024 and December 31, 2023 3 Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023 4 Consolidated Statements of Equity for the three and six months ended June 30, 2024 and 2023 5 Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 6

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 7 Item 2.

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

Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Item 3.

Quantitative and Qualitative Disclosures About Market Risks

Quantitative and Qualitative Disclosures About Market Risks 13 Item 4.

Controls and Procedures

Controls and Procedures 13

OTHER INFORMATION

PART II. OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 13 Item 1A.

Risk Factors

Risk Factors 13 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 13 Item 3. Defaults Upon Senior Securities 13 Item 4. Mine Safety Disclosures 13 Item 5. Other Information 13 Item 6. Exhibits 14

Signatures

Signatures 15 2 INCOME OPPORTUNITY REALTY INVESTORS, INC. CONSOLIDATED BALANCE SHEETS (dollars in thousands, except share and par value amounts) (Unaudited) June 30, 2024 December 31, 2023 Assets Current assets Cash and cash equivalents $ 16 $ 71 Interest receivable from related parties 326 293 Receivable from related parties 108,316 106,541 Total current assets 108,658 106,905 Non-current assets Notes receivable from related parties 11,173 11,173 Total assets $ 119,831 $ 118,078 Shareholders' equity Common stock, $ 0.01 par value, 10,000,000 shares authorized; 4,173,675 shares issued, 4,078,106 and 4,110,714 shares outstanding at June 30, 2024 and December 31, 2023, respectively. 42 42 Treasury stock at cost, 95,569 shares ( 1,534 ) ( 947 ) Additional paid-in capital 61,955 61,955 Retained earnings 59,368 57,028 Total shareholders' equity 119,831 118,078 Total liabilities and equity $ 119,831 $ 118,078 The accompanying notes are an integral part of these consolidated financial statements. 3 INCOME OPPORTUNITY REALTY INVESTORS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands, except per share amounts) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Revenues: Other income $ — $ — $ — $ — Expenses: General and administrative (including $ 11 and $ 44 for the three months ended June 30, 2024 and 2023, respectively, and $ 23 and $ 142 for the six months ended June 30, 2024 and 2023, respectively, from related parties) 93 76 159 294 Advisory fee to related party 21 380 50 699 Total operating expenses 114 456 209 993 Net operating loss ( 114 ) ( 456 ) ( 209 ) ( 993 ) Interest income from related parties 1,585 2,778 3,171 4,644 Income tax provision ( 309 ) ( 488 ) ( 622 ) ( 767 ) Net income $ 1,162 $ 1,834 $ 2,340 $ 2,884 Earnings per share - basic and diluted $ 0.28 $ 0.44 $

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share and square foot amounts) (Unaudited) 1. Organization Income Opportunity Investors, Inc. (the "Company") is an externally managed company that invests in mortgage notes receivables. As used herein, the terms "IOR", "the Company", "We", "Our", or "Us" refer to the Company. Transcontinental Realty Investors, Inc. ("TCI"), whose common stock is traded on the NYSE under the symbol "TCI", owns 82.9 % of our stock and with its affiliates owns approximately 89.5 % 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, owns approximately 78.4 % of TCI. 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 considered to be a related party (See Note 4 – Related Party Transactions). 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 third party lenders and investors. 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited consolidated financial footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading. In the o

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share and square foot amounts) (Unaudited) 3. Notes Receivable At January 1, 2023, we had four notes receivable issued by Unified Housing Foundation, Inc. ("UHF") with an aggregate balance of $ 11,173 . Each of the notes bore interest at 12.0 % and was to mature on December 31, 2032 . On October 1, 2023, we amended the four UHF notes, whereby the four notes were consolidated into a single note and the 12.0 % fixed interest rate was replaced with a floating rate indexed to the Secured Overnight Financing Rate ("SOFR") in effect on the last day of the preceding calendar quarter. The maturity date of the new note is December 31, 2032 . In connection with the amendment, $ 605 of accrued interest was forgiven in exchange for an increased participation in the proceeds from any future refinancing of the underlying property. The interest rate of the new note was 5.34 % and 5.31 % as of June 30, 2024 and December 31, 2023, respectively. UHF is determined to be a related party due to our significant investment in the performance of the collateral secured by the note receivable. Principal and interest payments on the note are funded from surplus cash flow from operations, sale or refinancing of the underlying property and are cross collateralized to the extent that any surplus cash available from any of other property owned by UHF. 4. Related Party Transactions We engage in certain business transactions with related parties, including investment in notes receivables. Transactions involving related parties cannot be presumed to be carried out on at 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. Pillar is a wholly o

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share and square foot amounts) (Unaudited) 6. Commitments and Contingencies We believe that we will generate excess cash from property operations in the next twelve months; such excess, however, might not be sufficient to discharge all of our obligations as they become due. 9 INCOME OPPORTUNITY REALTY INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share and square foot amounts) (Unaudited) 7. Subsequent Events The date to which events occurring after June 30, 2024, the date of the most recent balance sheet, have been evaluated for possible adjustment to the consolidated financial statements or disclosure is August 8, 2024, which is the date on which the consolidated financial statements were available to be issued. 10

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis by management should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and Notes included in this Quarterly Report on Form 10-Q (the "Quarterly Report") and in our Form 10-K for the year ended December 31, 2023 (the "Annual Report"). This Report on Form 10-Q may contain forward-looking Discussion and Analysis of Financial Condition and Results of Operations". We caution investors that any forward-looking statements in this report, or which management may make orally or in writing from time to time, are based on management's beliefs and on assumptions made by, and information currently available to, management. When used, the words "anticipate", "believe", "expect", "intend", "may", "might", "plan", "estimate", "project", "should", "will", "result" and similar expressions which do not relate solely to historical matters are intended to identify forward-looking statements. These statements are subject to risks, uncertainties and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or projected. We caution you that, while forward-looking statements reflect our good faith beliefs when we make them, they are not guarantees of future performance and are impacted by actual events when they occur after we make such statements. We expressly disclaim any responsibility to update our forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, inv

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS Optional and not included.

CONTROLS AND PROCEDURES

ITEM 4. CONTROLS AND PROCEDURES Based on an evaluation by our management (with the participation of our Principal Executive Officer and Principal Financial Officer), as of the end of the period covered by this report, our Principal Executive and Principal Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), were effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to our management, including our Principal Executive and Principal Financial Officer, to allow timely decisions regarding required disclosures. There has been no change in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

OTHER INFORMATION

PART II. OTHER INFORMATION

LEGAL PROCEEDINGS

ITEM 1. LEGAL PROCEEDINGS None

RISK FACTORS

ITEM 1A. RISK FACTORS There have been no material changes from the risk factors previously disclosed in the 2023 10-K. For a discussion on these risk factors, please see "Item 1A. Risk Factors" contained in the 2023 10-K.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS We have a program that allows for the repurchase of up to 1,650,000 shares of our common stock. This repurchase program has no termination date. There were 32,608 shares purchased under this program during the six months ended June 30, 2024. As of June 30, 2024, 1,125,069 shares have been purchased and 524,931 shares may be purchased under the program.

DEFAULTS UPON SENIOR SECURITIES

ITEM 3. DEFAULTS UPON SENIOR SECURITIES None

MINE SAFETY DISCLOSURES

ITEM 4. MINE SAFETY DISCLOSURES Not applicable

OTHER INFORMATION

ITEM 5. OTHER INFORMATION None 13

EXHIBITS

ITEM 6. EXHIBITS The following exhibits are filed with this report or incorporated by reference as indicated; 3.1 By-laws of Income Opportunity Realty Investors, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant's Registration Statement on Form S-4, filed on December 30, 1999). 4.1 Certificate of Designations, Preferences and Relative Participating or Optional or Other Special Rights, and Qualifications, Limitations or Restrictions Thereof of Series F Redeemable Preferred Stock of Income Opportunity Realty Investors, Inc., dated June 11, 2001 (incorporated by reference to Exhibit 4.1 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2001). 4.2 Certificate of Withdrawal of Preferred Stock, Decreasing the Number of Authorized Shares of and Eliminating Series F Redeemable Preferred Stock, dated June 18, 2002 (incorporated by reference to Exhibit 3.0 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002). 4.3 Certificate of Designation, Preferences and Rights of the Series I Cumulative Preferred Stock of Income Opportunity Realty Investors, Inc., dated February 3, 2003 (incorporated by reference to Exhibit 4.3 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2002). 4.4 Certificate of Designation for Nevada Profit Corporations designating the Series J 8% Cumulative Convertible Preferred Stock as filed with the Secretary of State of Nevada on March 16, 2006 (incorporated by reference to Registrant current report on Fo

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