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TABLE OF CONTENTS
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
or

☐ | 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.

TABLE OF CONTENTS
COMSTOCK HOLDING COMPANIES, INC.
FORM 10-Q
TABLE OF CONTENTS

|  | 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

TABLE OF CONTENTS
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.
1

TABLE OF CONTENTS
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.
2

TABLE OF CONTENTS
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
3

TABLE OF CONTENTS
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
4

TABLE OF CONTENTS
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
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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 |
2021 | 40 |
Total | $ | 53 |

6. LEASES
On January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) 2016-2, Leases, later codified as Accounting Standards Codification ("ASC") 842 ("ASC 842"), using the modified retrospective method.
The determination of whether an arrangement contains a lease and the classification of a lease, if applicable, is made at lease commencement, at which time the Company also measures and recognizes an ROU asset, representing the Company’s right to use the underlying asset, and a lease liability, representing the Company’s obligation to make lease payments under the terms of the arrangement. For the purposes of recognizing ROU assets and lease liabilities associated with the Company’s leases, the Company has elected the practical expedient to not recognize a ROU asset or lease liability for short-term leases, which are leases with a term of twelve months or less. The lease term is defined as the non-cancelable portion of the lease term plus any periods covered by an option to extend the lease if it is reasonably certain that the option will be exercised.
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ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The rates implicit within the Company's leases are generally not determinable; therefore, the Company's incremental borrowing rate of 6.5%, at the time of adoption, was used to determine the present value of lease payments. The determination of the Company’s incremental borrowing rate requires judgment. The incremental borrowing rate is determined at lease commencement, or as of January 1, 2019 for operating leases in existence upon adoption of ASC 842.
The leases can contain various renewal and termination options. The period which is subject to an option to extend the lease is included in the lease term if it is reasonably certain that the option will be exercised. The period which is subject to an option to terminate the lease is included if it is reasonably certain that the option will not be exercised. Lease costs related to the Company's operating leases are generally recognized as a single ratable lease cost over the lease term.
On August 1, 2020 the Company terminated an office lease which it had previously determined would be reasonably certain to continue until 2022. The Company subsequently executed a month-to-month lease agreement for the office space. The Company does not expect the new month-to-month lease to continue for more than twelve months. As such, the Company has elected the practical expedient to not follow the recognition requirements of Topic 842 for this agreement and instead to recognize the lease payments as lease cost on a straight-line basis over the lease term.
The Company does not have any lease liabilities which have not yet commenced as of September 30, 2020. 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 executed 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.
7. REVENUE
The Company’s revenues consist primarily of
•Asset Management;
•Property Management;
•Capital Markets;
•Leasing;
•Project & Development Services; and
•Environmental Consulting and Engineering Services.
Asset Management
Asset Management primarily provides comprehensive real estate asset management services to the CDS Portfolio (defined below), representing a series of daily performance obligations delivered over time. Pricing includes a cost-plus management fee or a market-rate fee form of variable consideration. The Company earns whichever is higher. See Note 15 – Related Party Transactions.
The amount of revenue recognized is presented on a gross basis for any services provided by our employees, as we control the services provided by the employees. This is evidenced by our obligation for their performance and our ability to direct and redirect their work and negotiate the value of such services. In the instances where we do not control third-party services delivered to the client, we report revenues net of the third-party reimbursements. Consistent with the transfer of control for distinct, daily services to the customer, revenue is typically recognized at the end of each period for the fees associated with the services performed.
Property Management
We provide on-site day-to-day management services for owners of office, industrial, retail, multifamily residential and various other types of properties, representing a series of daily performance obligations delivered over time. Pricing is generally in the form of a monthly management fee based upon property-level cash receipts, square footage under management or some other variable metric. Revenues from project management may also include reimbursement of payroll and related costs for personnel providing the services and subcontracted vendor costs. Project management services represent a series of distinct daily services rendered over time. Consistent with the transfer of control for distinct, daily services to the customer, revenue is typically recognized at the end of each period for the fees associated with the services performed. The amount of revenue recognized is
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presented on a gross basis for any services provided by our employees, as we control the services provided by the employees. This is evidenced by our obligation for their performance and our ability to direct and redirect their work and negotiate the value of such services. In the instances where we do not control third-party services delivered to the client, we report revenues net of the third-party reimbursements.
Capital Markets
We offer clients commercial mortgage and structured financing services. We are compensated for our services via a fee paid upon successful commercial financing from third party lenders. The fee earned is contingent upon the funding of the loan, which represents the transfer of control for services to the customer. Therefore, we typically satisfy our performance obligation at the point in time of the funding of the loan, when there is a present right to payment.
Leasing
We provide strategic advice and execution services for owners, investors, and occupiers of real estate in connection with the leasing of office, industrial and retail space. We are compensated for our services in the form of a commission. Our commission is paid upon signing of the lease by the tenant. We satisfy our performance obligation at a point in time; generally, at the time of the contractual event where there is a present right to payment.
Project and Construction Management
We provide project and construction management services for owners and occupiers of real estate in connection with the management and leasing of office, industrial and retail space. The fees that we earn are typically variable based upon a percentage of project cost. We are compensated for our services in the form of management fees. Project and construction management services represent a series of performance obligations delivered over time and revenue is recognized over time.
Environmental Consulting and Engineering
We provide environmental consulting and engineering services for owners of real estate. Remediation services are generally contracted and performed by Comstock Environmental. We are compensated for our services as well as for the services of subcontractors used to perform remediation services. Fees earned are generally based upon employee time spent as well as a cost-plus arrangement for subcontractors used. Generally, environmental consulting and engineering services represent a series of performance obligations delivered over time and revenue is recognized over time.
Contract Costs
Expenses, primarily employee commissions, incurred on leasing and capital markets transactions represent substantially all of our incremental costs to obtain revenue contracts. We apply the applicable practical expedient offered by ASC Topic 606 "Revenue", when the amortization period is one year or less and, therefore, recognize these costs as an operating expense as they are incurred.
The following table presents the Company’s sales from contracts with customers disaggregated by categories which best represents how the nature, amount and timing and uncertainty of sales are affected by economic factors.

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
Revenue by customer |  |  |  |  |  |  |
Related party | $ | 5,957 |  |  | $ | 4,673 |  |  | $ | 16,030 |  |  | $ | 13,469 |
Commercial | 1,373 |  |  | 1,007 |  |  | 4,730 |  |  | 2,430 |
Total Revenue by customer | $ | 7,330 |  |  | $ | 5,680 |  |  | $ | 20,760 |  |  | $ | 15,899 |
Revenue by contract type |  |  |  |  |  |  |
Fixed-price | $ | 1,771 |  |  | $ | 1,103 |  |  | $ | 3,797 |  |  | $ | 2,077 |
Cost-plus | 3,779 |  |  | 2,800 |  |  | 10,867 |  |  | 10,686 |
Time and Material | 1,780 |  |  | 1,777 |  |  | 6,096 |  |  | 3,136 |
Total Revenue by contract type | $ | 7,330 |  |  | $ | 5,680 |  |  | $ | 20,760 |  |  | $ | 15,899 |

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For the three and nine months ended September 30, 2020, $7.3 million and $20.2 million, respectively, of our revenues were earned for contracts where revenue is recognized over time. For the three and nine months ended September 30, 2019, $5.6 million and $15.6 million, respectively, of our revenues were earned for contracts where revenue is recognized over time.
For the nine months ended September 30, 2020, $0.6 million of our revenues were earned for contracts where revenue is recognized at a point in time. For the three and nine months ended September 30, 2019, $0.1 million and $0.3 million, respectively, in revenues were earned for contracts where revenue is recognized at a point in time.
8. DEBT
As of September 30, 2020, notes payable consisted of the following:

| September 30, 2020 |  | December 31, 2019
Secured financing | $ | — |  |  | $ | 694 |
Notes payable - due to affiliates, unsecured, net of $27 thousand discount and unamortized deferred financing charges as of December 31, 2019 | 5,500 |  |  | 5,706 |
Unsecured financing | 22 |  |  | 595 |
Total notes payable | $ | 5,522 |  |  | $ | 6,995 |

As of September 30, 2020, net maturities and/or curtailment obligations of all borrowings are as follows:

2020 | $ | 16 |
2021 | 6 |
2022 | — |
2023 | 5,500 |
Total | $ | 5,522 |

Secured financing
As of December 31, 2019, the Company had two secured loans related to Comstock Environmental. The first loan was used to finance the acquisition of Comstock Environmental and carried a fixed interest rate of 6.5% with a maturity date of October 17, 2022. At December 31, 2019, this financing had an outstanding balance of $667 thousand. This loan was retired during the three months ended June 30, 2020. Comstock Environmental had an additional secured loan with an outstanding balance of $27 thousand as of December 31, 2019 that was used to fund the purchase of an asset used in the business. This loan was retired during the three months ended March 31, 2020. These financings were secured by the assets of Comstock Environmental and guaranteed by our Chief Executive Officer.
Unsecured financing
As of December 31, 2019, the Company had one unsecured seller-financed promissory note with an outstanding balance of $595 thousand. This financing carried an annual interest rate of LIBOR plus 3% and had a maturity date of July 17, 2022. This loan had $50 thousand due on the third and fourth loan anniversary dates with the remainder due at maturity. At December 31, 2019, the interest rate was 5.0%. During the three months ended September 30, 2020 the Company retired this promissory note. In addition, during the nine months ended September 30, 2020, the Company financed the Director’s and Officer’s insurance policy with a one year term loan. As of September 30, 2020, the balance on this loan was $22 thousand.
Notes payable, due to affiliates – unsecured
Comstock Growth Fund
On October 17, 2014, the Company entered into an unsecured promissory note with Comstock Growth Fund ("CGF") whereby CGF made a loan to the Company in the initial principal amount of $10.0 million and a maximum amount available for borrowing of up to $20.0 million with a three-year term. On December 18, 2014, the loan agreement was amended and restated to provide for a maximum capacity of $25 million. On May 23, 2018, the Company entered into a Membership Interest Exchange and Subscription Agreement (the “Membership Exchange Agreement”), together with a revised promissory note agreement, in which a note (“CGF Note”) with an outstanding principal and accrued interest balance of $7.7 million was exchanged for 1,482,300 shares of the Company’s Series C Non-Convertible Preferred Stock, par value $0.01 per share and a stated liquidation
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value of $5.00 per share (the “Series C Preferred Stock”), issued by the Company to Comstock Development Services, LC ("CDS"). The Company exchanged the preferred equity for 91.5% of CDS membership interest in the CGF promissory note. Concurrently, the face amount of the CGF promissory note was reduced to $5.7 million as of the Effective Date. The CGF Note bore interest at a fixed rate of 10% per annum. Interest payments were made monthly in arrears. The Company is the administrative manager of CGF but does not own any membership interests. The Company had approximately $5.7 million of outstanding borrowings and accrued interest under the CGF Note, net of discounts, as of December 31, 2019. The maturity date for the CGF Note was April 16, 2020. The CGF Note was repaid prior to maturity during the nine months ended September 30, 2020.
Revolving Capital Line of Credit
On March 19, 2020, the Company entered into a Revolving Capital Line of Credit Agreement (the “Loan Documents”) with CDS, pursuant to which the Company secured a $10.0 million capital line of credit (the “Revolver”). Under the terms of the Loan Documents, the Revolver provides for an initial variable interest rate of the Wall Street Journal Prime Rate plus 1.00% per annum on advances made under the Revolver, payable monthly in arrears. The five-year term facility allows for interim draws that carry a maturity date of 12 months from the initial date of the disbursement unless a longer initial term is agreed to by CDS. On March 27, 2020, the Company borrowed $5.5 million under the Revolver. The $5.5 million borrowed has a maturity date of April 30, 2023.
For the three and nine months ended September 30, 2020, the Company made interest payments for all debt facilities of $0.1 million and $0.3 million, respectively. For the three and nine months ended September 30, 2019, the Company made interest payments for all debt facilities of $0.2 million and $0.4 million, respectively.
During the nine months ended September 30, 2020, the Company retired the $5.7 million of outstanding borrowings for the CGF Note and did not make principal payments for the Revolver. During the three and nine months ended September 30, 2019, the Company did not make principal payments for the CGF Note.
9. CORONAVIRUS AID RELIEF AND ECONOMIC SECURITY ACT
Paycheck Protection Plan Loan
In response to the COVID-19 pandemic, the Paycheck Protection Program (the “PPP”) was established under the CARES Act and administered by the U.S. Small Business Administration (“SBA”). Companies who met the eligibility requirements set forth by the PPP could qualify for PPP loans provided by local lenders, which supports payroll, rent and utility expenses (“qualified expenses”). If the loan proceeds are fully utilized to pay qualified expenses over the covered period, as further defined by the PPP, the full principal amount of the PPP loan may qualify for loan forgiveness, subject to potential reduction based on the level of full-time employees maintained by the organization during the covered period as compared to a baseline period.
In April 2020, the Company received proceeds of $1.95 million under the PPP (the "PPP Loan") provided by Mainstreet Bank (the “Lender”). Based on the term and conditions of the loan agreement, the term of the PPP loan is two years with an annual interest rate of 1% and principal and interest payments will be deferred for the first six-months of the loan term, which has been updated according to the Paycheck Protection Program Flexibility Act of 2020 (“Flexibility Act”).
In June 2020, the Flexibility Act was signed into law, which amended the CARES Act. The Flexibility Act changed key provisions of the PPP, including, but not limited to, (i) provisions relating to the maturity of PPP loans, (ii) the deferral period covering of PPP loan payments and (iii) the process for measurement of loan forgiveness. More specifically, the Flexibility Act provides a minimum maturity of five years for all PPP loans made on or after the date of the enactment of the Flexibility Act (“June 5, 2020”) and permits lenders and borrowers to extend the maturity date of earlier PPP loans by mutual agreement. As of the date of this filing, the Company has not approached the Lender to request an extension of the current maturity date from two years to five years. The Flexibility Act also provides that if a borrower does not apply for forgiveness of a loan within 10 months after the last day of the measurement period (“covered period”), the PPP loan is no longer deferred and the borrower must begin paying principal and interest. Therefore, the Company’s deferral period for principal and interest payments was updated from six-months according to the terms and conditions of the loan agreement to ten months. In addition, the Flexibility Act extended the length of the covered period from eight weeks to 24 weeks from receipt of proceeds, while allowing borrowers that received PPP loans before June 5, 2020 to determine, at their sole discretion, a covered period of either eight weeks or 24-weeks.
After reviewing the applicable terms and conditions of the Flexibility Act, the Company has elected to extend the length of the covered period from the lesser of (i) period whereby qualified expenses equal loan proceeds or (ii) 24 weeks. The Company has performed initial calculations for the PPP loan forgiveness according to the terms and conditions of the SBA’s Loan
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Forgiveness Application (Revised June 16, 2020) and, based on such calculations, expects that the PPP loan will be forgiven in full over a period less than 24 weeks. In addition, the Company has determined that it is probable the Company will meet all the conditions of the PPP loan forgiveness. As such, the Company has determined that the PPP loan should be accounted for as a government grant which analogizes with International Accounting Standards (“IAS”) 20, Accounting for Government Grants and Disclosure of Government Assistance. Under the provisions of IAS 20, “a forgivable loan from government is treated as a government grant when there is reasonable assurance that the entity will meet the terms for forgiveness of the loan.” IAS 20 does not define “reasonable assurance”; however, based on certain interpretations, it is analogous to “probable” under GAAP under FASB ASC 450-20-20, which is the definition the Company has applied to its expectations of the PPP loan forgiveness. In addition, in accordance with the provisions of IAS 20, government grants shall be recognized in profit or loss on a systematic basis over the periods in which the Company recognizes costs for which the grant is intended to compensate (i.e. qualified expenses). Therefore, the Company recognized PPP funding as a contra-expense during the periods when qualified expenses were incurred. The balance and activity related to the PPP loan is as follows as of September 30, 2020.

| September 30, 2020
PPP loan proceeds | $ | 1,954 |
Qualified expenses eligible for forgiveness | (1,954) |
PPP loan balance | $ | — |

The Company plans to submit the PPP loan forgiveness application in the near term. In accordance with the terms and conditions under the Flexibility Act, the lender has 60 days from receipt of the completed application to issue a decision to the SBA. If the lender determines that the borrower is entitled to forgiveness of some or all of the amount applied for under the statute and applicable regulations, the lender must request payment from the SBA at the time the lender issues its decision to the SBA. The SBA will, subject to any SBA review of the loan or loan application, remit the appropriate forgiveness amount to the lender, plus any interest accrued through the date of payment, not later than 90 days after the lender issues its decision to the SBA. Although the Company believes it is probable that the PPP loan will be forgiven, the Company cannot currently provide any objective assurance that it will obtain forgiveness in whole or in part. The amount the Company borrowed is within the "safe-harbor" limitations of the SBA. The SBA has published Frequently Asked Question 46 stating that if the principal amount of the loan is less than $2 million, the borrower "will be deemed to have made the required certification concerning the necessity of the loan request in good faith".
Pursuant to the Flexibility Act, the Company’s PPP loan agreement will be amended in the event that no amount or less than all of the PPP loan is forgiven. In addition, starting in August 2021, the Company will be required to make principal and interest payments totaling $82,671 per month or an adjustment amount based on the loan amendment over the remaining term of the PPP loan until such time the loan is fully settled. The Company may prepay the PPP loan at any time without penalty and the loan agreement evidencing the PPP Loan contains customary events of default relating to, among other things, payment defaults, or breaches of representations and warranties, or other provisions of the loan agreement. The occurrence of an event of default may trigger the immediate repayment of all amounts outstanding, collection of all amounts owing from the Company, and/or the Lender filing suit and obtaining a judgment against the Company.
Deferral of Social Security Tax Payments
Pursuant to sections 2302(a)(1) and (a)(2) of the CARES Act, the Company has elected to defer payments of its share of Social Security tax due during the "payroll tax deferral period". The payroll tax deferral period began on August 1, 2020 and ends December 31, 2020. At September 30, 2020 the total amount of such deferral was $66 thousand and is reflected within 'Accrued personnel costs' on our consolidated balance sheet. Per the terms of the deferral program, 50% of the deferred amount is due on December 31, 2021, and the remaining 50% is due on December 31, 2022 at 0% interest.
10. COMMITMENTS AND CONTINGENCIES
Litigation
Currently, we are not subject to any material legal proceedings. From time to time, we are named as a defendant in legal actions arising from our normal business activities. Although we cannot accurately predict the amount of our liability, if any, that could arise with respect to legal actions pending against us, we do not believe it is reasonably possible that such liability will have a material adverse effect on our financial position, operating results and cash flows. We believe that we have obtained adequate insurance coverage, rights to indemnification, or where appropriate, have established appropriate reserves in connection with any such legal proceedings.
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11. FAIR VALUE DISCLOSURES
The carrying amounts reported in the consolidated balance sheets for cash equivalents, accounts receivable, and accounts payable are reasonable estimates of their fair values based on their short maturities. The fair value of fixed and floating rate debt is based on unobservable market rates (Level 3 inputs). The fair value of the fixed and floating rate debt was estimated using a discounted cash flow analysis on the blended borrower rates currently available to the Company for loans with similar terms. The following table summarizes the carrying amount and the corresponding fair value of fixed and floating rate debt.

| September 30, 2020 |  | December 31, 2019
Carrying amount | $ | 5,522 |  |  | $ | 6,995 |
Fair value | $ | 5,213 |  |  | $ | 6,820 |

Fair value estimates are made at a specific point in time, based on relevant market information about the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Investments in Real Estate Ventures at Fair Value
We report our two investments in real estate ventures at fair value. For such investments, we increase or decrease our investment each reporting period by the change in the fair value and we report these fair value adjustments in the Consolidated Statements of Operations.
For our investments in real estate ventures at fair value, we estimate the fair value using the level 3 Income Approach or a sales comparable approach to determine a fair value. Critical inputs to fair value estimates include various level 3 inputs such as valuations of the underlying real estate assets and borrowings, which incorporate investment-specific assumptions such as discount rates, capitalization rates, rental and expense growth rates, and asset-specific market borrowing rates. As of September 30, 2020 and December 31, 2019, investments in the real estate ventures at fair value were approximately $7.0 million and $8.4 million, respectively.
Non-Recurring Fair Value Measurements
The Company may also value its non-financial assets and liabilities, including items such as long-lived assets, at fair value on a non-recurring basis if it is determined that impairment has occurred. Such fair value measurements use significant unobservable inputs and are classified as Level 3.
12. RESTRICTED STOCK, STOCK OPTIONS AND OTHER STOCK PLANS
During the three and nine months ended September 30, 2020, the Company issued no stock options. During the three and nine months ended September 30, 2020, the Company issued 14,500 and 644,852 restricted stock awards to employees, respectively. During the three and nine months ended September 30, 2019, the Company issued 114,431 stock options and 12,085 and 254,336 restricted stock awards to employees, respectively.
Stock-based compensation expense associated with restricted stock and stock options is recognized based on the grant date fair value of the award over its vesting period. The following table reflects the statements of operations line items for stock-based compensation for the periods presented:

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
Cost of sales - Real Estate Services | $ | — |  |  | $ | 23 |  |  | $ | — |  |  | $ | 61 |
Expense - General and administrative | 177 |  |  | 111 |  |  | 594 |  |  | 279 |
| $ | 177 |  |  | $ | 134 |  |  | $ | 594 |  |  | $ | 340 |

Under net settlement procedures currently applicable to our outstanding restricted stock awards for employees, upon each settlement date and election by the employees, restricted stock awards are withheld to cover the required withholding tax, which is based on the value of the restricted stock award on the settlement date as determined by the closing price of our Class A common stock on the trading day immediately preceding the applicable settlement date. The remaining amounts are delivered to the recipient as shares of our Class A common stock.
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As of September 30, 2020, the weighted-average remaining contractual term of unexercised stock options was 7 years. As of September 30, 2020 and December 31, 2019, there was $1.3 million and $0.6 million, respectively, of unrecognized compensation cost related to stock options and restricted stock awards.
The Company intends to issue new shares of its Class A common stock upon vesting of restricted stock grants or the exercise of stock options.
13. INCOME (LOSS) PER SHARE
The weighted average shares and share equivalents used to calculate basic and diluted (loss) income from continuing operations for the three and nine months ended September 30, 2020 and 2019, and discontinued operations per share for the three and nine months ended September 30, 2019, are presented in the accompanying consolidated statements of operations. Restricted stock awards, stock options and warrants for the three and nine months ended September 30, 2020 and 2019 are included in the diluted income (loss) per share calculation using the treasury stock method and average market prices during the periods, unless their inclusion would be anti-dilutive.
The following share equivalents have been excluded from the continuing operations dilutive share computation for the three and nine months ended September 30, 2020 and 2019 as their inclusion would be anti-dilutive.

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
Restricted stock awards | — |  |  | 148 |  |  | 3 |  |  | 148 |
Stock options | 118 |  |  | 295 |  |  | 159 |  |  | 268 |
Warrants | 449 |  |  | 616 |  |  | 589 |  |  | 575 |
| 567 |  |  | 1,059 |  |  | 751 |  |  | 991 |

The following share equivalents have been excluded from the discontinued operations dilutive share computation for the three and nine months ended September 30, 2019 as their inclusion would be anti-dilutive.

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
Restricted stock awards | — |  |  | 148 |  |  | — |  |  | 148 |
Stock options | — |  |  | 295 |  |  | — |  |  | 268 |
Warrants | — |  |  | 616 |  |  | — |  |  | 575 |
| — |  |  | 1,059 |  |  | — |  |  | 991 |

14. CONSOLIDATION OF VARIABLE INTEREST ENTITIES
Consolidated loss in statement of operations
Included within the Company’s net loss from discontinued operations, net of tax for the three and nine months ended September 30, 2019 are the activities of real estate entities that were determined to be VIEs. These entities have been established to own and operate real estate property and were deemed VIEs primarily based on the fact that the equity investment at risk is not sufficient to permit the entities to finance their activities without additional financial support. The Company determined that it was the primary beneficiary of these VIEs as a result of the Company’s majority voting rights and complete operational control of these entities.
Prior to April 30, 2019, the Company evaluated Investors X and determined that the equity investment at risk is not sufficient to permit the entity to finance its activities without additional financial support and the Company was the primary beneficiary of the VIE as a result of its complete operational control of the activities that most significantly impact the economic performance and its obligation to absorb losses or receive benefits. As a result of the April 30, 2019 Master Transfer Agreement (“MTA”) entered into between the Company and CDS, the Company determined that Investors X was considered held for sale effective April 30, 2019 and Investors X activities were reclassified to discontinued operations in the accompanying Consolidated Financial Statements. See Note 15 - Related Party Transactions for more information.
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15. RELATED PARTY TRANSACTIONS
Lease for Corporate Headquarters
The Company previously leased its corporate headquarters from an affiliate controlled and owned by our CEO and family. Future minimum lease payments under this lease, which expires on October 31, 2020, are $52 thousand.
For the three and nine months ended September 30, 2020, total rental payments made were $155 thousand and $459 thousand, respectively. For the three and nine months ended September 30, 2019, total rental payments made were $153 thousand and $452 thousand, respectively.
On November 1, 2020, the Company relocated its corporate headquarters to a new office space pursuant to a lease agreement with an affiliate controlled and owned by our Chief Executive Officer and family, as landlord. See Note 20 - Subsequent Events for further discussion.
Asset Management Agreement
On March 30, 2018, CAM, an entity wholly owned by the Company, entered into that AMA with CDS. The effective date of the AMA is January 2, 2018. Pursuant to the AMA, CDS has engaged CAM to manage and administer the CDS’ commercial real estate portfolio and the day to-day operations of CDS and each property-owning subsidiary of CDS (the "CDS Portfolio"). Pursuant to the terms of the AMA, CAM will provide investment advisory, development and asset management services necessary to build out, stabilize and manage certain assets.
Pursuant to the AMA, CDS will pay CAM an annual cost-plus fee (the “Annual Fee”) in an aggregate amount equal to the sum of (i) the employment expenses of personnel dedicated to providing services to the CDS Portfolio pursuant to the AMA, (ii) the costs and expenses of the Company related to maintaining the listing of its shares on a securities exchange and complying with regulatory and reporting obligations as a public company, and (iii) a fixed annual payment of $1,000,000.
2019 Amended Asset Management Agreement
On April 30, 2019, CAM entered into the 2019 AMA with CDS, which amends and restates in its entirety the AMA. Pursuant to the 2019 AMA, CDS will engage CAM to manage and administer the Anchor Portfolio and the day to-day operations of CDS and each property-owning subsidiary of CDS (collectively, the “CDS Entities”). The “Anchor Portfolio” consists of a majority of the properties we currently manage.
Pursuant to the 2019 AMA, the Company provides asset management services related to the build out, lease-up and stabilization, and management of the Anchor Portfolio. CDS pays the Company and its subsidiaries annual fees equal to the greater of either (i) an aggregate amount equal to the sum of (a) an asset management fee equal to 2.5% of revenues generated by properties included in the Anchor Portfolio; (b) a construction management fee equal to 4% of all costs associated with Anchor Portfolio projects in development; (c) a property management fee equal to 1% of the Anchor Portfolio revenues, (d) an acquisition fee equal to up to 0.5% of the purchase price of acquired assets; and (f) a disposition fee equal to 0.5% of the sales price of an asset on disposition; or (ii) an aggregate amount equal to the sum of (x) the employment expenses of personnel dedicated to providing services to the Anchor Portfolio pursuant to the 2019 AMA, (y) the costs and expenses of the Company related to maintaining the public listing of its shares and complying with related regulatory and reporting obligations, and (z) a fixed annual payment of $1,000,000.
In addition to the annual payment of the greater of either the Market Rate Fee or the Cost Plus Fee (as defined in the 2019 AMA), the Company also is entitled on an annual basis to the following additional fees: (i) an incentive fee equal to 10% of the free cash flow of each of the real estate assets comprising the Anchor Portfolio after calculating a compounding preferred return of 8% on CDS invested capital; (ii) an investment origination fee equal to 1% of raised capital, (iii) a leasing fee equal to $1.00/sf for new leases and $0.50/sf for renewals; and (iv) mutually agreeable loan origination fees related to the Anchor Portfolio.
The 2019 AMA will terminate on December 31, 2027 (“Initial Term”), an extension from the original termination date of December 31, 2022, and will automatically renew for successive additional one year terms (each an “Extension Term”) unless CDS delivers written notice of non-renewal of the 2019 AMA at least 180 days prior to the termination date of the Initial Term or any Extension Term. Twenty-four months after the effective date of the 2019 AMA, CDS is entitled to terminate the 2019 AMA without cause upon 180 days advance written notice to CAM. In the event of such a termination and in addition to the payment of any accrued annual fees due and payable as of the termination date under the 2019 AMA, CDS is required to pay a termination fee equal to (i) the Market Rate Fee or the Cost Plus Fee paid to CAM for the calendar year immediately preceding the termination , and (ii) a one-time payment of the Incentive Fee (as defined in the 2019 AMA) as if the CDS Portfolio were liquidated for fair market value as of the termination date; or the continued payment of the Incentive Fee as if a termination had not occurred.
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Residential, Commercial and Parking Property Management Agreements
The Company entered into separate residential property management agreements with properties owned by CDS Entities under which the Company receives fees to manage and operate the properties, including tenant communications, leasing of apartment units, rent collections, building maintenance and day-to-day operations, engagement and supervision of contractors and vendors providing services for the buildings, and budget preparation and oversight.
The Company entered into separate commercial property and parking management agreements with properties owned by CDS Entities under which the Company receives fees to manage and operate the office and retail portions of the properties, including tenant communications, rent collections, building maintenance and day-to-day operations, engagement and supervision of contractors and vendors providing services for the buildings, and budget preparation and oversight.
These property management agreements are each for one year initial terms with successive, automatic one year renewal terms, unless sooner terminated. The Company generally receives base management fees under these agreements based upon a percentage of gross rental revenues for the portions of the buildings being managed in addition to reimbursement of specified expenses, including employment expenses of personnel employed by the Company in the management and operation of each property.
Construction Management Agreements
The Company has construction management agreements with properties owned by CDS Entities under which the Company receives fees to provide certain construction management and supervision services, including construction supervision and management of the buildout of certain tenant premises. The Company receives a flat construction management fee for each engagement under a work authorization based upon the construction management or supervision fee set forth in the applicable tenant’s lease, which fee is generally 1% to 4% of the total costs (or total hard costs) of construction of the tenant’s improvements in its premises, or as otherwise agreed to by the parties.
Business Management Agreements
On April 30, 2019, CAM entered into a Business Management Agreement (the “BMA”) with Investors X, whereby CAM will provide Investors X with asset and professional services related to the wind down of the Company’s divested homebuilding operations and the continuation of services related to the Company’s divested land development activities. The aggregate fee payable to CAM from Investors X under the Management Agreement is $937,500, payable in fifteen quarterly installments of $62,500 each.
The Hartford Investment
On December 30, 2019, the Company made an investment related to the purchase of the Hartford, a stabilized commercial office building located at 3101 Wilson Boulevard in the Clarendon area of Arlington County, Virginia. The Company’s initial investment related to the purchase of the Hartford is $1.2 million.
In conjunction with the investment, the Company entered into an operating agreement (“Original Operating Agreement”) with Comstock Partners, LC ("Partners") to form Comstock 3101 Wilson, LC (the “Hartford Owner”), to purchase the Hartford. Pursuant to the Original Operating Agreement, the Company holds a minority membership interest in the Hartford Owner and the remaining membership interests of the Hartford Owner is held by Partners, who is further the Manager of the Hartford Owner. At the closing of the acquisition of the Hartford, the Company received an acquisition fee of $500 thousand and is entitled to asset management, property management, construction management and leasing fees for its management of the Property pursuant to separate agreements between the Hartford Owner, or its affiliates, and the Company, or its affiliates. The Company is also entitled to an incentive fee related to the performance of the investment.
On February 7, 2020, the Company, Partners and DWF VI 3101 Wilson Member, LLC (“DWF”), an unaffiliated, third party, equity investor in the Hartford, entered into a limited liability company agreement (the “DWC Operating Agreement”) to form DWC 3101 Wilson Venture, LLC (“DWC”) to, among other things, acquire, own and hold all interests in the Hartford Owner. In furtherance thereof, on February 7, 2020, the Original Operating Agreement for the Hartford Owner was amended and restated (the “A&R Operating Agreement”) to memorialize the Company’s and Partners’ assignment of 100% of its membership interests in the Hartford Owner to DWC. As a result thereof, DWC is the sole member of the Hartford Owner. The Company and Partners, respectively, hold minority membership interests in, and DWF holds the majority membership interest in, DWC. The Company’s ownership interest in the Hartford remains at 2.5%.
Private Placements and Promissory Notes
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On March 19, 2020, the Company entered into a Revolving Capital Line of Credit Agreement (the “Loan Documents”) with CDS, pursuant to which the Company secured a $10.0 million capital line of credit (the “Revolver”). Under the terms of the Loan Documents, the Revolver provides for an initial variable interest rate of the WSJ Prime Rate plus 1.00% per annum on advances made under the Revolver, payable monthly in arrears. The five-year term facility allows for interim draws that carry a maturity date of 12 months from the initial date of the disbursement unless a longer initial term is agreed to by CDS. On March 27, 2020 the Company borrowed $5.5 million under the Revolver. On April 10, 2020, the capital provided to the Company by the Revolver was utilized to retire all of the Company’s 10% corporate indebtedness maturing in 2020 owed to CGF.
See Note 8 - Debt for further description of the CGF Private Placement and the Revolver.
Revenues from Related Parties
The following table details the revenue earned from related parties.

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
Revenue by customer |  |  |  |  |  |  |
Related party | $ | 5,957 |  |  | $ | 4,673 |  |  | $ | 16,030 |  |  | $ | 13,469 |
Commercial | 1,373 |  |  | 1,007 |  |  | 4,730 |  |  | 2,430 |
Total revenue | $ | 7,330 |  |  | $ | 5,680 |  |  | $ | 20,760 |  |  | $ | 15,899 |

16. UNCONSOLIDATED JOINT VENTURE
The Company accounts for its interest in its title insurance joint venture using the equity method of accounting and adjusts the carrying value for its proportionate share of earnings, losses and distributions. The investment in the unconsolidated joint venture was $11 thousand and $125 thousand as of September 30, 2020 and December 31, 2019, respectively, and is included within ‘Prepaid and other assets, net’ in the accompanying Consolidated Balance Sheets.
The Company’s share of earnings for the three and nine months ended September 30, 2020 from this unconsolidated joint venture of $1 thousand and $16 thousand, respectively, is included in ‘Other income, net’ in the accompanying Consolidated Statement of Operations. During the three and nine months ended September 30, 2020, the Company collected and recorded distributions of 22 thousand and $130 thousand from this joint venture as a return on investment.
The Company’s share of earnings for the three and nine months ended September 30, 2019 from this unconsolidated joint venture of $48 thousand and $115 thousand, respectively, is included in ‘Other income, net’ in the accompanying Consolidated Statement of Operations. During the three and nine months ended September 30, 2019, the Company collected and recorded distributions of 10 thousand and 124 thousand, respectively, from this joint venture as a return on investment.
Summarized financial information for the unconsolidated joint venture is as follows:

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
Statement of Operations: |  |  |  |  |  |  |
Total net revenue | $ | 30 |  |  | $ | 122 |  |  | $ | 125 |  |  | $ | 318 |
Total expenses | 28 |  |  | 27 |  |  | 94 |  |  | 88 |
Net income | $ | 2 |  |  | $ | 95 |  |  | $ | 31 |  |  | $ | 230 |
Comstock Holding Companies, Inc. share of net income | $ | 1 |  |  | $ | 48 |  |  | $ | 16 |  |  | $ | 115 |

17. INCOME TAXES
For the three and nine months ended September 30, 2020, the Company recognized deferred income tax expense of $1 thousand and $13 thousand, respectively. For the three and nine months ended September 30, 2019, the Company recognized no deferred income tax expense from continuing operations due to the valuation allowance. The effective tax rate for the nine months ended September 30, 2020 and 2019 is (0.11)% and 19.99%, respectively.
The Company currently has approximately $144 million in federal and state NOLs. If unused, these NOLs will begin expiring in 2027. Under Internal Revenue Code Section 382 (“Section 382”), if a change in ownership is triggered, the Company’s NOL assets and possibly certain other deferred tax assets may be impaired.
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The Company assesses uncertain tax positions in accordance with ASC 740-10, Accounting for Uncertainties in Income Taxes. The Company has not recorded any accruals related to uncertain tax positions as of September 30, 2020 and 2019. We file U.S. and state income tax returns in jurisdictions with varying statutes of limitations. The 2016 through 2019 tax years remain subject to examination by federal and most state tax authorities.
18. SEGMENT DISCLOSURES
Subsequent to July 23, 2019, we operate our business through two segments: Asset Management, and Real Estate Services.
In our Asset Management segment, we focus on providing management services to a wide range of real estate owners and businesses that include a variety of commercial real estate uses, including apartments, hotels, office buildings, commercial garages, leased lands, retail stores, mixed-use developments, and urban transit-oriented developments. The properties and businesses we currently manage are located primarily along the Washington, D.C. Metro Silver Line in Fairfax and Loudoun Counties, but we also manage projects in other jurisdictions including Maryland and Virginia.
In our Real Estate Services segment, our experienced management team provides a wide range of real estate services in the areas of strategic corporate planning, capital markets, brokerage services, and environmental and design-based services. Our environmental services group provides consulting and engineering services, environmental studies, remediation services and provides site specific solutions for any project that may have an environmental impact, from environmental due diligence to site-specific assessments and remediation. The Real Estate Services segment operates in the Mid-Atlantic Region.
The following table includes the Company’s two reportable segments of Asset Management and Real Estate Services, excluding discontinued operations, for the three and nine months ended September 30, 2020 and 2019.

| Asset Management |  | Real Estate Services |  | Total
Three Months Ended September 30, 2020 |  |  |  |  |
Gross revenue | $ | 5,891 |  |  | $ | 1,439 |  |  | $ | 7,330 |
Gross profit | 825 |  |  | 809 |  |  | 1,634 |
Net income | 411 |  |  | 12 |  |  | 423 |
Total assets | 14,687 |  |  | 3,681 |  |  | 18,368 |
Three Months Ended September 30, 2019 |  |  |  |  |
Gross revenue | $ | 4,733 |  |  | $ | 947 |  |  | $ | 5,680 |
Gross profit | 536 |  |  | 85 |  |  | 621 |
Net loss | (353) |  |  | (208) |  |  | (561) |
Total assets | 12,131 |  |  | 3,784 |  |  | 15,915 |
Nine Months Ended September 30, 2020 |  |  |  |  |
Gross revenue | $ | 15,466 |  |  | $ | 5,294 |  |  | $ | 20,760 |
Gross profit | 2,551 |  |  | 2,185 |  |  | 4,736 |
Net income | 1,112 |  |  | 479 |  |  | 1,591 |
Total assets | 14,687 |  |  | 3,681 |  |  | 18,368 |
Nine Months Ended September 30, 2019 |  |  |  |  |
Gross revenue | $ | 13,326 |  |  | $ | 2,573 |  |  | $ | 15,899 |
Gross profit | 1,522 |  |  | 308 |  |  | 1,830 |
Net income (loss) | 364 |  |  | (547) |  |  | (183) |
Total assets | 12,131 |  |  | 3,784 |  |  | 15,915 |

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19. DISCONTINUED OPERATIONS
On April 30, 2019, the Company entered into the MTA with CDS, an entity wholly owned by Christopher Clemente, the Chief Executive Officer of the Company, and FR54, LC (“FR54”), an entity also controlled by Mr. Clemente, that sets forth certain transactions to complete the Company’s previously announced exit from the homebuilding and land development business in favor of a migration to an asset management model. Refer to Note 14 – Consolidation of Variable Interest Entities for further discussion regarding the accounting related to discontinued operations.
The Company did not carry any assets or liabilities from discontinued operations on the consolidated balance sheet as of September 30, 2020 and December 31, 2019.
The operating results of the discontinued operations that are reflected on the consolidated statement of operations within the net income (loss) from discontinued operations are as follows:

| Three Months Ended September 30, 2019 |  | Nine Months Ended September 30, 2019
Revenues |  |  |
Revenue—homebuilding | $ | 1,305 |  |  | $ | 14,919 |
Total revenue | 1,305 |  |  | 14,919 |
Expenses |  |  |
Cost of sales—homebuilding | 1,281 |  |  | 14,901 |
Sales and marketing | 89 |  |  | 270 |
General and administrative | 1 |  |  | 21 |
Operating (loss) | (66) |  |  | (273) |
Income tax expense | — |  |  | 10 |
Net (loss) from discontinued operations | (66) |  |  | (283) |
Net income attributable to non-controlling interests | — |  |  | 313 |
Net (loss) attributable to Comstock Holding Companies, Inc. | $ | (66) |  |  | $ | (596) |

20. SUBSEQUENT EVENTS
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. Commencing on November 1, 2020, the Company is responsible for the new monthly base rent payment plus the monthly payment of the Company’s proportionate share of operating expenses, real estate taxes and insurance for the office space, which are reimbursable under the 2019 AMA.
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COMSTOCK HOLDING COMPANIES, INC.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this report. This discussion and analysis contains forward-looking statements that involve risks and uncertainties. Please see “Cautionary Notes Regarding Forward-looking Statements” for more information. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors including, but not limited to, those discussed below and elsewhere in this report, particularly under the headings “Cautionary Notes Regarding Forward-looking Statements.” References to dollar amounts are in thousands except per share data, or as otherwise noted.
Cautionary Notes Regarding Forward-looking Statements
This report includes forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by the use of words such as “anticipate,” “believe,” “estimate,” “may,” “likely,” “intend,” “expect,” “will,” “should,” “seeks” or other similar words or expressions. Forward-looking statements are based largely on our expectations and involve inherent risks and uncertainties, many of which are beyond our control. You should not place undue reliance on any forward-looking statement, which speaks only as of the date made. Some factors which may affect the accuracy of the forward-looking statements apply generally to the real estate industry, while other factors apply specifically to us. Any number of important factors could cause actual results to differ materially from those in the forward-looking statements including, without limitation: general economic and market conditions, including interest rate levels; our ability to service our debt; inherent risks in investment in real estate; our ability to compete in the markets in which we operate; economic risks in the markets in which we operate, including actions related to government spending; delays in governmental approvals and/or land development activity at our projects; regulatory actions; our ability to maintain compliance with stock market listing rules and standards; fluctuations in operating results; our anticipated growth strategies; shortages and increased costs of labor or building materials; natural disasters; our ability to raise debt and equity capital and grow our operations on a profitable basis; and our continuing relationships with affiliates.
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.
At this time, we cannot foresee whether the outbreak of COVID-19 will be effectively contained, nor can we predict the severity and duration of its impact. If the outbreak of COVID-19 is not effectively and timely controlled, our business operations and financial condition may be materially and adversely affected as a result of the deteriorating market outlook for the segments and the markets in which we operate, the slowdown in regional and national economic growth, weakened liquidity and financial condition of our customers or other factors that we cannot foresee. Some of the uncertainties related to the Company’s operations that are directly related to COVID-19 include, but are not limited to, the severity of the virus, the duration of the outbreak, governmental, business or other actions and their impacts on the Company and our clients, along with short and long term effects of consumer demand that may affect our clients financial position and consequently necessitate changes to our operations. As discussed in Note 15, the Company derives a substantial portion of its revenues from various related party entities associated with real estate properties. Any of these factors and other factors beyond our control could have an adverse effect on the overall business environment and cause our business to suffer in ways that we cannot predict at this time and that may materially and adversely impact our business, financial condition and results of operations. While we have not seen a significant impact to our results from COVID-19 to date, if the virus continues to cause significant negative impacts to economic conditions or consumer confidence, our revenues including our property management revenues, trade receivables, related party receivables, goodwill and our fair value investment in Investors X, results of operations, financial condition and liquidity could be adversely impacted.
Our actual results could differ materially from these projected or suggested by the forward-looking statements. The Company undertakes no obligation to update publicly or revise any forward-looking statements in light of new information or future events, except as required by law.
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We make available, free of charge, on our website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, as soon as reasonably practicable after these forms are filed with, or furnished to, the SEC. The information on or accessible through our website, www.comstockcompanies.com, is not incorporated by reference into this Quarterly Report on Form 10-Q.
Overview
Comstock Holding Companies, Inc. (“CHCI” or “the Company”) is a developer, operator, and asset manager of mixed-use and transit-oriented development properties in the greater Washington, D.C. metropolitan area, where we focus primarily on select high-growth urban and transitioning “sub-urban” markets. We provide a broad range of real estate asset management services, including development, construction management, leasing and property management services, to owners of real estate properties that we manage. We invest capital on behalf of our asset management clients and institutional real estate investors in office, retail, residential and mixed-use properties, generally retaining an economic interest for the Company and providing management services to those properties, enabling the Company to increase its assets under management (“AUM”) in order to realize competitive advantages of scale and enhance our overall returns. The Company also provides additional fee-based real estate services, including corporate planning, capital markets, brokerage, title insurance, design, and environmental consulting and engineering services, to properties in the Company’s managed portfolio and to other clients in the U.S. Mid-Atlantic Region.
As a vertically integrated real estate operating and investment company, we earn revenue from multiple sources, including fees generated from asset management services that we provide to our managed portfolio of real estate assets on behalf of our asset management clients, and fees from additional real estate related services, including environmental consulting and engineering services provided to our managed properties and unrelated third party clients in the Mid-Atlantic Region. In addition, the Company expects to generate revenue from co-investments with our partners in certain property acquisitions and from performance-based incentive compensation from certain assets in our managed portfolio. The Company can earn these incentive-based fees upon the occurrence of certain transaction-related events or when the performance of the subject properties meets defined performance metrics.
The services we provide pursuant to the asset management agreements covering our AUM properties vary by property, and include property management, development and construction management, leasing management, acquisition and disposition management, origination and negotiation of debt and equity facilities, risk management, and various other property-specific services. Substantially all of the properties included in our managed portfolio are covered by full-service asset management agreements encompassing substantially all aspects of development, construction, and operations management relating to the subject properties. A limited number of properties in our managed portfolio are covered by service-specific asset management contracts that focus our services on defined critical elements of operations, such as marketing, leasing, and construction management, where the property owner continues to manage other operating functions. The full-service asset management agreement for our Anchor Portfolio as defined below is a long-term contract with an original term of 10 years that provides for significant payments to Comstock in the case of early termination by the asset owner. The asset management agreement for the Hartford acquired in December 2019 as described below, the Company’s initial co-investment asset, is medium term in duration, and the duration of co-investment asset management agreements generally are expected to align with the duration of the applicable co-investment business plan. The co-investment business plans are property specific and therefore vary in expected duration but are generally expected to be between four and seven years. Our limited-service asset management agreements generally are anticipated to be short term in nature and do not include material early termination penalties. Presently, there are only one co-investment management agreement and one limited-service management agreement in place in addition to the management agreements covering our Anchor Portfolio.
Anchoring the Company’s asset management services platform is a long-term full service asset management agreement (the “2019 AMA”) with an affiliate of the Company’s Chief Executive Officer, Christopher Clemente, that encompasses the Anchor Portfolio.
The 2019 AMA provides the Company fee based revenue based on a general formula charging the greater of (i) the defined operating costs of the Company plus a base fee of $1,000,000 per annum and various supplemental fees or (ii) market rate fees delineated in the 2019 AMA.
Reston Station - Strategically located mid-way between Tysons Corner and Dulles International Airport, Reston Station is among the largest mixed use, transit-oriented developments in the Washington, DC area. Located at the terminus of Phase I of Metro’s Silver Line and encompassing nearly 40 acres spanning the Dulles Toll Road and surrounding Reston’s first Metro Station, Reston Station is already home to more than 1,000 residents and numerous businesses, including multiple retail establishments and popular restaurants. With more than one million square feet of completed and stabilized buildings, approximately four million square feet of additional development in various stages of entitlement, development and construction,
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and a 3,500-space underground parking garage and bus transit facility adjacent to the Wiehle-Reston-East Metro Station, the Reston Station neighborhood is leading the urban transformation of the Dulles Corridor.
Loudoun Station - Located at the terminus station on Metro’s Silver Line, minutes from Dulles International Airport, Loudoun Station represents Loudoun County’s first (and currently its only) Metro-connected development. Loudoun Station has approximately 600,000 square feet of mixed-use development completed, including hundreds of rental apartments, approximately 125,000 square feet of retail, restaurants, and entertainment venues, 50,000 square feet of Class A office, and a 1,500+ space commuter parking garage. Approximately two million square feet of additional development is slated for Loudoun Station. Located adjacent to Metro’s Ashburn Station, the Loudoun Station neighborhood represents Loudoun County’s beginning transformation into a transit connected community with direct connectivity to Dulles International Airport, Reston, Tysons Corner and downtown Washington, DC.
Our Business Strategy
In early 2018, the Company transitioned our business strategy and operating platform from being focused on the development and sale of residential homes to our current fee-based services model focused on commercial and mixed-use real estate primarily in the greater Washington, D.C. region. We generate base fees, incentive fees and profit participation by providing a broad range of real estate asset management services, including development, construction management, leasing and property management services, as well as acquisition and disposition services, employing our substantial experience in entitling, designing, developing, and managing a diverse range of properties. While our Anchor Portfolio, concentrated primarily along the rapidly growing Dulles Corridor in Northern Virginia, provides a stable, cost-plus fee structure foundation under the 2019 AMA, our business strategy includes expanding our total AUM by identifying high-quality office, retail, residential and mixed-use properties in the greater Washington, D.C. region and identifying institutional real estate investors that seek investment opportunities in such real estate assets while lacking the operational or local expertise needed to manage such properties. This approach enables the Company to generate earnings through the management of the Anchor Portfolio and provides the opportunity to increase earnings through the expansion of our managed portfolio of properties through additional acquisitions and related management agreements. Our acquisition strategy is currently focused on value-add, core, and core-plus opportunities and other opportunistic asset acquisitions. In addition to our asset management services, we provide a suite of real estate-related services to our managed real estate portfolio and to additional third-party clients, and we may seek to expand the services we offer through organic growth.
We believe that we have several strengths that distinguish our new business focus and strategy:
•Revenue Base. Our revenues are generated primarily from recurring asset management fees and additional real estate services fees. Our asset management agreements provide a highly visible and reliable source of revenue and position the Company to enhance bottom line results as the Company’s Anchor Portfolio and other assets under management expand.
•Management Services – During recent years, we have made several changes to our management team as we refocused our operating platform from residential home building to commercial real estate and asset management. As a result of this effort, our current management team has significant experience managing large-scale portfolios of real estate assets, including rental apartments, office buildings, hotels, commercial garages, leased lands, retail properties, mixed-use developments, and transit-oriented developments.
•Geographic Focus - The properties included in our Anchor Portfolio that we currently manage are located primarily in the Dulles Corridor, which is the location of the Silver Line, the first new rail line added to Washington D.C.’s Metro rail system in almost 20 years, which serves or will serve Arlington, Fairfax and Loudoun Counties in Virginia. Our property acquisition initiatives with institutional partners are focused on multiple high-growth areas throughout the Washington, D.C. region, and our first such acquisition, which closed in December 2019, is located in Arlington County, Virginia. We also provide environmental consulting and engineering services throughout a wider region stretching from the Washington, D.C. region to the Philadelphia, Pennsylvania, and New Jersey regions.
•Real Estate Services – In addition to the asset management services we provide in connection with our AUM, we also provide a variety of supplemental real estate services in the areas of strategic corporate planning, capital markets and financial consulting, commercial mortgage brokerage, title, design and environmental consulting and engineering services, and industrial hygiene services. Our environmental services group provides consulting and engineering services, environmental studies, remediation management services and site-specific solutions for properties that may require or benefit from
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environmental due diligence, site-specific assessments, and industrial hygiene services. Our real estate services business platform allows us to generate positive fee income from our highly-qualified personnel and serves as a potential catalyst for joint venture and strategic acquisition opportunities.
•The Company’s various business units work in concert to leverage the collective skill sets of our organization - The talent and experience of our personnel allow workflow flexibility and a multitasking approach to managing various projects. We believe that our focus and our business network in the Washington, D.C. market provides us with a competitive advantage in sourcing and executing on investment opportunities. While the Company has previously developed numerous properties in multiple key markets throughout the southeastern United States, and our management team has experience managing large national portfolios, we believe the greater Washington, D.C. market provides compelling growth opportunities for our business.
•Long Track Record - The Company and its management team have been active in the metropolitan Washington, D.C. region since 1985 and have developed, acquired, and managed thousands of residential units and millions of square feet of mixed-use properties throughout the region and in other key markets in the United States.
•Multiple Public-Private Partnerships - Affiliates of the Company have been selected by multiple local governments (including Fairfax County, Loudoun County, and the Town of Herndon, Virginia) to develop and manage large-scale mixed-use and transit facility developments through public-private partnerships at a time when local jurisdictions are focused on public-private partnerships as a means of leveraging private sector capabilities to meet public infrastructure development needs.
•Economic Drivers - Significant growth trends in demand for cyber security and other technology services in the government sector, as well as in the private sector, have generated substantial growth and attracted to Northern Virginia large tech companies, such as Microsoft, Google, and Amazon. In 2018, Northern Virginia was selected by Amazon as the location for its highly publicized “HQ2” second headquarters, which it has said will create tens of thousands of new jobs over the next several years. The Northern Virginia market has for a number of years captured a majority of the new jobs created in the Washington, D.C. metropolitan area, including corporate relocations and expansions, as well as numerous start-ups. Further, Northern Virginia’s significant data infrastructure, capable of serving the needs of the federal government and its defense and information contractors, has spurred the expansion and/or relocation of several federal government agencies, including the FBI, CIA, NSA, and the Customs and Border Patrol agency, to the Dulles Corridor. The Dulles Corridor has become known as the “Internet Capitol of the World”, because of its tremendous network of data centers, primarily located in Loudoun County, Virginia in the western portion of the Dulles Corridor. Loudoun County has experienced tremendous growth in data center development and has become the global leader in data center space while accounting for more than 40% of national data center space absorption in recent years.
•Diverse Employment Base - The diverse and well-educated employment base in the greater Washington, D.C. region, coupled with proximity to the federal government and the presence of well-established government contractors, is contributing to the attractiveness of the region to technology companies.
•Metro’s Silver Line - Phase I of Metro’s Silver Line opened in 2014, connecting Tysons Corner and Reston to Arlington, Virginia and downtown Washington, D.C. Phase II is scheduled to open in late 2020 or early 2021 and will extend service from the terminus of Phase I located in the center of the Company’s Reston Station development to Herndon, Dulles International Airport, and Loudoun County, Virginia, terminating at the Company’s Loudoun Station development.
•Regional Land Use Plans - Recent changes to Comprehensive Land Use Plans of Fairfax County and Loudoun County encourage high-density and mixed-use development proximate to the new Silver Line Metro Stations, resulting in compelling growth opportunities for the Company and its managed portfolio.
•Increased Demand for Transit-Oriented and Mixed-Use Developments - Recent trends indicate commercial tenants are increasingly seeking to locate (or relocate) offices to urban, mixed-use developments in “sub-urban” markets, such as Northern Virginia’s Dulles Corridor, and have demonstrated willingness to pay premium rents for commercial space at the Metro-accessible sites, such as those that make up a significant portion of the Company’s portfolio of managed assets.
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Additionally, demand for housing in transit-oriented, mixed-use neighborhoods has increased steadily over the past decade while home ownership rates have decreased and demand for high-quality rental housing has increased. The Company has been focused on these emerging trends for more than two decades and the Company, through the 2019 AMA, controls the development and asset management of a significant portfolio of high-profile assets at the forefront of the urban transformation taking place in the Dulles Corridor. With a stabilized portfolio and development pipeline that include millions of square feet of mixed-use and transit-oriented properties located at key Metro stations in the Dulles Corridor, the Company is well positioned to capitalize on trends that we believe will shape the future commercial real estate landscape and provide opportunities for significant growth and attractive returns to the Company.
Asset Management Services
2019 AMA
Effective January 1, 2019, the Company entered into an Amended and Restated Master Asset Management Agreement with CDS, an entity owned and controlled by the Company’s Chief Executive Officer, which provides the Company significant fees for services related to the development, marketing, and operations of the Anchor Portfolio of commercial and residential mixed-use real estate owned by CDS affiliates. The 2019 AMA covers two large-scale, transit-oriented, mixed-use developments in the Dulles Corridor: Reston Station and Loudoun Station, Virginia, as well as a mixed-use development asset located in Herndon, Virginia and other properties designated pursuant thereto from time to time. Separately, the Company also is party to fee-based management services arrangements with unrelated third parties, covering properties in Tysons Corner, Virginia and Rockville, Maryland.
Pursuant to the 2019 AMA, the Company provides asset management services related to the build out, lease-up and stabilization, and management of the Anchor Portfolio. CDS pays the Company and its subsidiaries annual fees equal to the greater of either (i) an aggregate amount equal to the sum of (a) an asset management fee equal to 2.5% of revenues generated by properties included in the Anchor Portfolio; (b) a construction management fee equal to 4% of all costs associated with Anchor Portfolio projects in development; (c) a property management fee equal to 1% of the Anchor Portfolio revenues, (d) an acquisition fee equal to up to 0.5% of the purchase price of acquired assets; and (f) a disposition fee equal to 0.5% of the sales price of an asset on disposition (collectively, the “Market Rate Fee”); or (ii) an aggregate amount equal to the sum of (x) the employment expenses of personnel dedicated to providing services to the Anchor Portfolio pursuant to the 2019 AMA, (y) the costs and expenses of the Company related to maintaining the public listing of its shares and complying with related regulator and reporting obligations, and (z) a fixed annual payment of $1,000,000 (collectively the “Cost Plus Fee”). The Company believes that the Cost-Plus Fee feature of the 2019 AMA provides a stable foundation of revenue to enable the Company to further expand its asset management business and AUM.
In addition to the annual payment of the greater of either the Market Rate Fee or the Cost Plus Fee, the Company also is entitled on an annual basis to the following additional fees: (i) an incentive fee equal to 10% of the free cash flow of each of the real estate assets comprising the Anchor Portfolio after calculating a compounding preferred return of 8% on CDS invested capital (the “Incentive Fee”); (ii) an investment origination fee equal to 1% of raised capital, (iii) a leasing fee equal to $1.00/sf for new leases and $0.50/sf for renewals; and (iv) mutually agreeable loan origination fees related to the Anchor Portfolio.
The 2019 AMA is a long-term agreement, with an initial term until December 31, 2027 (“Initial Term”), and will automatically renew for successive additional one-year terms (each, an “Extension Term”) unless CDS delivers written notice of non-renewal of the 2019 AMA at least 180 days prior to the termination date of the Initial Term or any Extension Term. For a period of twenty-four months after the April 30, 2019 effective date of the 2019 AMA, CDS is entitled to terminate the 2019 AMA without cause upon 180 days advance written notice to the Company. In the event of such a termination and in addition to the payment of any accrued annual fees due and payable as of the termination date under the 2019 AMA, in the event of any such termination, CDS is required to pay a termination fee to the Company equal to (i) the Market Rate Fee or the Cost Plus Fee paid to the Company for the calendar year immediately preceding the termination, and (ii) a one-time payment of the Incentive Fee as if the Anchor Portfolio were liquidated for fair market value as of the termination date, or at CDS’ election, the continued payment of the Incentive Fee as if a termination had not occurred.
Other Asset Management Agreements. The duration of our fee-based service agreements varies in nature. In addition to the long term nature of the 2019 AMA, our other asset management agreements for our co-investment opportunities are intended to cover the duration of the expected investment cycle of the portfolio property managed and are generally expected to last between four and seven years. However, these arrangements do not typically contain significant early-termination penalties. We also administer many various task-specific limited-service asset management agreements under short-term arrangements generally terminable at will.
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Hartford Asset Management Agreement
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 will retain a 2.5% equity interest in the asset at a cost of approximately $1.2 million. The Company has entered into management arrangements for the Hartford under which the Company will receive asset management, property management and construction management fees for the Company’s management and operation of the property and certain incentive fees relating to the performance of the investment.
Residential, Commercial and Parking Property Management Agreements
During the period of December 2017 through and including April 2020, the Company entered into separate residential property management agreements with properties in our Anchor Portfolio under which the Company receives fees to manage and operate the properties including tenant communications, leasing of apartment units, rent collections, building maintenance and day-to-day operations, engagement and supervision of contractors and vendors providing services for the buildings, and budget preparation and oversight.
During the period of May 2019 through and including April 2020, the Company entered into separate commercial property and parking management agreements with properties in our Anchor Portfolio under which the Company receives fees to manage and operate the office, retail and parking portions of the properties, including tenant communications, rent collections, building maintenance and day-to-day operations, engagement and supervision of contractors and vendors providing services for the buildings, and budget preparation and oversight.
These property management agreements are each for one year initial terms with successive, automatic one year renewal terms, unless sooner terminated. The Company generally receives base management fees under these agreements based upon a percentage of gross rental revenues for the portions of the buildings being managed in addition to reimbursement of specified expenses, including employment expenses of personnel employed by the Company in the management and operation of each property.
Construction Management Agreements
The Company has entered into construction management agreements with properties in our Anchor Portfolio under which the Company receives fees to provide certain construction management and supervision services, including construction supervision and management of the buildout of certain tenant premises. The Company receives a flat construction management fee for each engagement under a work authorization based upon the construction management or supervision fee set forth in the applicable tenant’s lease, which fee is generally 1% to 4% of the total costs (or total hard costs) of construction of the tenant’s improvements in its premises, or as otherwise agreed to by the parties.
Real Estate Services
In addition to the asset management services that the Company provides related to the Anchor Portfolio and other managed assets, the Company’s wholly owned subsidiaries, Comstock Real Estate Services and Comstock Environmental Services, LC (“Comstock Environmental”), provide real estate-related services to our asset management clients and third-party customers. These services include environmental consulting and engineering services, industrial hygiene services, and other consulting services in the U.S. Mid-Atlantic Region.
Results of Operations
Three and nine months ended September 30, 2020 compared to the three and nine months ended September 30, 2019
Revenue – asset management
Revenue from asset management for the three months ended September 30, 2020 and 2019 was $5.9 million and $4.7 million, respectively. This represents an increase of $1.2 million, or 24.5%, compared to prior year. Revenue increased primarily due to increased headcount and other costs that are reimbursable from CDS under the 2019 AMA and recognized as revenue along with growth in our property management business and other asset management fee streams including the BMA.
Revenue from asset management for the nine months ended September 30, 2020 and 2019 was $15.5 million and $13.3 million, respectively. This represents an increase of $2.1 million, or 16.1%, compared to the prior year. Revenue increased primarily due to increased headcount and other costs that are reimbursable from CDS under the 2019 AMA and recognized as revenue along with growth in our property management business and other asset management fee streams including the BMA.
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Revenue increases were partially offset by proceeds from the PPP Loan. The proceeds from the PPP Loan were utilized primarily to cover employee costs that were not passed through to customers. $1.2 million of the PPP Loan proceeds that otherwise would have been charged to customers were recognized as a contra-payroll expense, resulting in lower payroll costs and lower billable revenue.
Revenue – real estate services
Revenue from real estate services for the three months ended September 30, 2020 and 2019 was $1.4 million and $0.9 million, respectively. This represents an increase in quarter over quarter revenues of $0.5 million or 52% growth. Revenue from real estate services for the nine months ended September 30, 2020 and 2019 was $5.3 million and $2.6 million, respectively. This represents an increase in year-to-date revenues of $2.7 million or 106% growth. The increase in real estate services revenue for the three and nine months ended September 30, 2020 is primarily attributable to continued organic growth in the number of jobs being performed while average revenue per job has remained relatively flat.
Direct costs – asset management
Direct costs – asset management for the three months ended September 30, 2020 and 2019 was $5.1 million and $4.2 million, respectively. This 20.7% increase amounts to a $0.9 million increase to direct costs - asset management. The increase in costs for the three months ended September 30, 2020 compared to 2019 was primarily attributable to an increase in personnel expenses, primarily from headcount increases, as well as from the continued growth of our asset management operations
Direct costs – asset management for the nine months ended September 30, 2020 and 2019 was $12.9 million and $11.8 million, respectively. This 9.4% increase amounts to a $1.1 million increase to direct costs - asset management. This increase was primarily related to an increase in personnel expenses, primarily from headcount increases, as well as from the continued growth of our asset management operations. The increased costs was partially offset by the recognition of the PPP Loan as a government grant. The grant was recognized during the second quarter as the related payroll costs were incurred, and the Company has complied with all conditions attached to the PPP Loan.
Direct costs – real estate services
Direct costs – real estate services for the three months ended September 30, 2020 and 2019 was $0.6 million and $0.9 million, respectively. Direct costs – real estate services for the nine months ended September 30, 2020 and 2019 was $3.1 million and $2.3 million, respectively. For the nine months ended September 30, 2020 and 2019 direct costs - real estate services increased $0.8 million, respectively. The increase is primarily due to increased employment costs relating to our expanding footprint in the real estate consulting and environmental study fields partially offset by the recognition of the PPP Loan as a government grant. The grant was recognized during the quarter as the related payroll costs were incurred, and the Company has complied with all conditions attached to the PPP Loan.
General and administrative
General and administrative expenses for the three months ended September 30, 2020 and 2019 was $1,029 thousand and $353 thousand, respectively. General and administrative expenses for the nine months ended September 30, 2020 and 2019 was $2.3 million and $1.0 million, respectively. For the three and nine months ended September 30, 2020 and 2019, general and administrative costs increased $676 thousand and $1.3 million, respectively. The increase is primarily attributable to increased headcount and associated equity compensation and personnel cost, that are not billable to customers within our Asset Management and Real Estate Services segments.
Selling and Marketing
Selling & marketing expenses for the three and nine months ended September 30, 2020 was $127 thousand and $507 thousand, respectively. There were no selling and marketing expenses for the three and nine months ended September 30, 2019. The increase is attributable to increased sales development programs launched by our Environmental business unit to grow the business.
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Interest Expense
For the three months ended September 30, 2020 and 2019, the Company’s interest expense was $63 thousand and $170 thousand, respectively. The 62.9% reduction to interest expense quarter over quarter amounted to $107 thousand. The reduction in interest expense is primarily related to the retiring of the Comstock Growth Fund loan during the three months ended June 30, 2020.
For the nine months ended September 30, 2020 and 2019, the Company’s interest expense was $320 thousand and $134 thousand, respectively. The 138.8% increase in interest expense for the year-to-date period amounted to a $186 thousand increase in interest expense. This is primarily driven by the MTA effective April 30, 2019. Prior to the MTA certain interest expense was capitalized to homebuilding projects and expensed when the projects were sold. After the MTA this interest expense is no longer capitalized into homebuilding projects.
Income taxes
For the three and nine months ended September 30, 2020, the Company recognized deferred income tax expense of $1 thousand and $15 thousand, respectively. For the three and nine months ended September 30, 2019 the Company did not recognize deferred income tax expense from continuing operations.
Liquidity and Capital Resources
We finance our Asset Management and Real Estate Services operations, capital expenditures, and business acquisitions with internally generated funds, borrowings from our credit facilities and long-term debt. Pursuant to the MTA, the Company transferred to CDS management of its Class A membership interests in Investors X, the entity owning the Company’s residual homebuilding operations in exchange for residual cash flows. The associated debt obligations were also transferred to CDS. See Note 8 in the accompanying consolidated financial statements for more details on our debt and credit facilities.
On March 19, 2020, the Company entered into a Revolving Capital Line of Credit Agreement (the “Loan Documents”) with CDS, pursuant to which the Company secured a $10.0 million capital line of credit (the “Revolver”). Under the terms of the Loan Documents, the Revolver provides for an initial variable interest rate of the WSJ Prime Rate plus 1.00% per annum on advances made under the Revolver, payable monthly in arrears. The five-year term facility allows for interim draws that carry a maturity date of 12 months from the initial date of the disbursement unless a longer initial term is agreed to by CDS. On March 27, 2020 the Company borrowed $5.5 million under the Revolver. The $5.5 million borrowing has a maturity date of April 30, 2023. On April 10, 2020, the capital provided to the Company by the Revolver was utilized to retire all of the Company’s 10% corporate indebtedness maturing in 2020 owed to Comstock Growth Fund, L.C.
On April 20, 2020, the Company was granted the PPP Loan in the aggregate amount of $1.95 million pursuant to the PPP under the CARES Act, which was enacted March 27, 2020. Under the terms of the PPP, PPP loans and accrued interest are forgivable after twenty-four weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the forgiveness period.
As of September 30, 2020, the Company has used the entire loan proceeds to fund its payroll and rent expenses. As a result, the Company believes that it has met the PPP eligibility criteria for forgiveness and has concluded that the loan represents, in substance, a government grant that is expected to be forgiven. As such, in accordance with IAS 20 “Accounting for Government Grants and Disclosure of Government Assistance”, the Company has recognized the entire loan amount as a reduction to the associated expenses as at September 30, 2020.
The Company does not anticipate taking any action that would cause any portion of the PPP Loan to be ineligible for forgiveness. However, to the extent that any amount is deemed unforgivable, such amount is payable over 2 to 5 years at an interest rate of 1%, with a deferral of payments for the first 6 months.
Cash Flow
We finance our Asset Management and Real Estate Services operations, capital expenditures, and business acquisitions with internally generated funds, borrowings from our credit facilities and long-term debt.
For the nine months ended September 30, 2020, net cash provided by operating activities was $2.7 million. Net cash provided by operations activities was primarily related to the collection of revenue earned within the period along with the collection of receivables outstanding as of December 31, 2019. Net cash provided by operating activities was partially offset by the payment of accrued personnel costs and accounts payable. For the nine months ended September 30, 2019, net cash provided by operating activities was $6.9 million primarily related to $7.4 million provided by discontinued operations.
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Net cash used in investing activities was immaterial for the nine months ended September 30, 2020 and September 30, 2019.
Net cash used in financing activities for the nine months ended September 30, 2020 was $1.6 million. This was primarily attributable to the retirement of debt partially offset by proceeds under the Revolver of $5.5 million. Net cash used in financing activities of continuing operations was immaterial for the nine months ended September 30, 2019.
Critical Accounting Policies and Estimates
There have been no other significant changes to our critical accounting policies and estimates during the three months ended September 30, 2020 from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019.
Recently Issued Accounting Standards
See Note 1 - Organization and Basis of Presentation to the accompanying consolidated financial statements included in this Quarterly Report on Form 10-Q.
Off Balance Sheet Arrangements
None.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We have evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of September 30, 2020. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of September 30, 2020.
Limitations on the Effectiveness of Controls
We do not expect that our disclosure controls and internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, a control may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.
Changes in Internal Control over Financial Reporting
No changes have occurred in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended September 30, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Information regarding legal proceedings is incorporated by reference from Note 10 - Commitments and Contingencies to the accompanying consolidated financial statements included in Part I of this Quarterly Report on Form 10-Q.
ITEM 6. EXHIBITS

3.1 |  | Amended and Restated Certificate of Incorporation (incorporated by reference to an exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 16, 2015).
3.2 |  | Amended and Restated Bylaws (incorporated by reference to an Exhibit 3.2 to the Registrant’s Annual Report on Form 10-K filed with the Commission on March 31, 2005).
3.3 |  | Certificate of Elimination of the Series A Junior Participating Preferred Stock of the Company filed with the Secretary of State of the State of Delaware on March 26, 2015 (incorporated by reference to an exhibit to the Registrant’s Current Report on Form 8-K filed with the Commission on March 27, 2015).
3.4 |  | Certificate of Designation of Series A Junior Participating Preferred Stock of the Company filed with the Secretary of State of the State of Delaware on March 26, 2015 (incorporated by reference to an exhibit to the Registrant’s Current Report on Form 8-K filed with the Commission on March 27, 2015).
3.5 |  | Certificate of Designation of Series B Non-Convertible Preferred Stock of the Company filed with the Secretary of State of the State of Delaware on December 29, 2015 (incorporated by reference to an exhibit to the Registrant’s Current Report on Form 8-K filed on January 4, 2016).
3.6 |  | Certificate of Designation of Series C Non-Convertible Preferred Stock of Comstock Holding Companies, Inc., filed with the Secretary of the State of Delaware on March 22, 2017 (incorporated by reference to an exhibit to the Registrant’s Current Report on Form 8-K filed with the Commission on March 28, 2017).
3.7 |  | Certificate of Amendment of Certificate of Designation of Series C Non-Convertible Preferred Stock of Comstock Holding Companies, Inc. filed with the Secretary of State of the State of Delaware on February 15, 2019 (incorporated by reference to an exhibit to the Registrant’s Current Report on Form 10-K filed with the Commission on March 29, 2019).
3.8 |  | Certificate of Amendment of Amended and Restated Certificate of Incorporation of Comstock Holding Companies, Inc. (incorporated by reference to an exhibit to the Registrant’s Current Report on Form 10-K filed with the Commission on March 29, 2019).
4.1 |  | Specimen Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-1, as amended, initially filed with the Commission on August 13, 2004 (File No. 333-118193)).
31.1* |  | Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002
31.2* |  | Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002
32.1* |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002
101* |  | The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, formatted in eXtensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheet, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows and (iv) the Notes to the Consolidated Financial Statements.

* Filed herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

| COMSTOCK HOLDING COMPANIES, INC.
Date: November 16, 2020 | By: | /s/ CHRISTOPHER CLEMENTE
|  | Christopher Clemente Chairman and Chief Executive Officer (Principal Executive Officer)
Date: November 16, 2020 | By: | /s/ CHRISTOPHER GUTHRIE
|  | Christopher Guthrie Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

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