EXHIBIT 13
J.W. MAYS, INC.
| Annual Report | |
| 2023 | |
| Year Ended July 31, 2023 |
| J.W. MAYS, INC. | |||||
| Contents | Page No. | ||||
| The Company | 2 | ||||
| Message to Shareholders | 2 | ||||
| Consolidated Balance Sheets | 3 | ||||
| Consolidated Statements of Operations | 4 | ||||
| Consolidated Statements of Changes in Shareholders’ Equity | 5 | ||||
| Consolidated Statements of Cash Flows | 6 | ||||
| Notes to Consolidated Financial Statements | 7-17 | ||||
| Real Estate and Accumulated Depreciation (Schedule III) | 18 | ||||
| Report of Management | 19 | ||||
| Report of Independent Registered Public Accounting Firm | 20-21 | ||||
| Management’s Discussion and Analysis of Financial Condition and Results of Operations | 22-26 | ||||
| Controls and Procedures | 26 | ||||
| Common Stock Information | 27 | ||||
| Officers and Directors | 27 | ||||
Executive Offices
9 Bond Street, Brooklyn, N.Y. 11201-5805
Transfer Agent and Registrar
American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, N.Y. 11219
Special Counsel
Holland & Knight LLP
31 West 52nd Street
New York, N.Y. 10019
Independent Registered Public Accounting Firm
Prager Metis CPAs, LLC
401 Hackensack Avenue
Hackensack, NJ, 07601
Annual Meeting
The Annual Meeting of Shareholders will be
held on Tuesday, November 21, 2023, at
10:00 A.M., Eastern Standard time, at J.W. MAYS, INC.,
9 Bond Street, Brooklyn, New York 11201-5805
J.W. MAYS, INC.
THE COMPANY
J.W. Mays, Inc. was founded in 1924 and incorporated under the laws of the State of New York on July 6, 1927.
The Company operates a number of commercial real estate properties located in Brooklyn and Jamaica in New York City; in Levittown and Massapequa, Long Island, New York; in Fishkill, Dutchess County, New York; and in Circleville, Ohio. The major portions of these properties are owned and the balance is leased. A substantial percentage of these properties are leased to tenants while the remainder is available for lease.
More comprehensive information concerning the Company appears in its Form 10-K Annual Report for the fiscal year ended July 31, 2023.
J.W. MAYS, INC.
TO OUR SHAREHOLDERS:
The economy, still suffering from the effects of the COVID-19 pandemic, continued a gloomy operating environment for the Company in fiscal 2023. Remote work and on-line shopping trends, which surged during the pandemic, have had a significant nationwide effect on office and retail commercial real estate rentals. Volatility in the fair value of investments post pandemic have also had a negative impact on the economy resulting in a lower valuation of our equity investments. Even with reduced demand for office and retail rentals, local real estate taxes have increased while costs of inflation were higher than anticipated. Although these adverse economic effects in our industry have been significant, the Company:
| • | added several new tenants during this past fiscal year combined with increased rents for various existing tenants; partially offset by the loss of several tenants. Overall, this resulted in a $1,180,420 increase in revenue from operations in fiscal 2023 to $22,576,455, compared to $21,396,035 in the 2022 fiscal year. | |
| • | reduced its fiscal 2022 net loss of $(712,371), or $(.35) per share, to $(82,964), or $(.04) per share in fiscal 2023. | |
| • | increased cash, cash equivalents and restricted cash by $147,838 in fiscal 2023 compared to a $(364,822) decrease in the 2022 fiscal year. Cash flows from operations improved $532,465 in fiscal 2023 to $2,221,910 from $1,689,445 in the 2022 fiscal year. |
Our strategy of pursuing and entering into leases with governmental agencies and health care providers as tenants, as well as a significant educational institution in our Fishkill building, and our ability to retain significant tenants over a long period of time, continues to serve our Company well.
With our long history of resilience when facing difficult market conditions, I believe our Company will continue moving forward from these challenging economic times. I specifically want to thank Mays’ personnel and our Board colleagues for their ongoing commitment and support, our shareholders for their continuing belief in our Company and its future and our tenants for their continuing loyalty to our Company.
Lloyd J. Shulman
Chairman, President and Chief Executive Officer
October 19, 2023
2
J.W. MAYS, INC.
CONSOLIDATED BALANCE SHEETS
July 31, 2023 and 2022
| July 31 | ||||||||
| ASSETS | 2023 | 2022 | ||||||
| Property and Equipment-at cost: | ||||||||
| Land | $ | $ | ||||||
| Buildings held for leasing: | ||||||||
| Buildings, improvements and fixtures | ||||||||
| Construction in progress | ||||||||
| Accumulated depreciation | ( |
) | ( |
) | ||||
| Buildings – net | ||||||||
| Property and equipment-net | ||||||||
| Cash and cash equivalents | ||||||||
| Restricted cash | ||||||||
| Receivables, net | ||||||||
| Marketable securities | ||||||||
| Prepaids and other assets | ||||||||
| Deferred charges, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Liabilities: | ||||||||
| Mortgages payable | $ | $ | ||||||
| Accounts payable and accrued expenses | ||||||||
| Security deposits payable | ||||||||
| Operating lease liabilities | ||||||||
| Deferred income taxes | ||||||||
| Total liabilities | ||||||||
| Shareholders’ Equity: | ||||||||
| Common stock, par value $ each share (shares- authorized; issued) | ||||||||
| Additional paid in capital | ||||||||
| Retained earnings | ||||||||
| Common stock held in treasury, at cost - shares at July 31, 2023 and July 31, 2022 | ( |
) | ( |
) | ||||
| Total Shareholders’ Equity | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | ||||||
See Notes to Accompanying Consolidated Financial Statements.
3
J.W. MAYS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| Years Ended July 31, | ||||||||
| 2023 | 2022 | |||||||
| Revenues | ||||||||
| Rental income | $ | $ | ||||||
| Total revenues | ||||||||
| Expenses | ||||||||
| Real estate operating expenses | ||||||||
| Administrative and general expenses | ||||||||
| Depreciation | ||||||||
| Total expenses | ||||||||
| Income (loss) from operations | ( |
) | ||||||
| Other income (loss) and interest expense | ||||||||
| Investment income | ||||||||
| Change in fair value of marketable securities | ( |
) | ( |
) | ||||
| Interest expense | ( |
) | ( |
) | ||||
| ( |
) | ( |
) | |||||
| Loss before income tax | ( |
) | ( |
) | ||||
| Income tax provision (benefit) | ( |
) | ( |
) | ||||
| Net loss | $ | ( |
) | $ | ( |
) | ||
| Loss per common share, basic and diluted | $ | ) | $ | ) | ||||
| Dividends per share | $ | $ | ||||||
| Average common shares outstanding, basic and diluted | ||||||||
See Notes to Accompanying Consolidated Financial Statements.
4
J.W. MAYS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Common Stock |
Additional Paid In Capital |
Retained Earnings |
Common Stock Held in Treasury |
Total | ||||||||||||||
| Balance at July 31, 2021 | $ | $ | $ | $ | ( |
) | $ | |||||||||||
| Net loss, year ended July 31, 2022 | ( |
) | ( |
) | ||||||||||||||
| Balance at July 31, 2022 | ( |
) | ||||||||||||||||
| Net loss, year ended July 31, 2023 | ( |
) | ( |
) | ||||||||||||||
| Balance at July 31, 2023 | $ | $ | $ | $ | ( |
) | $ | |||||||||||
See Notes to Accompanying Consolidated Financial Statements.
5
J.W. MAYS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Years Ended July 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net loss | $ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
| Bad debt expense (recovery) | ( |
) | ||||||
| Provision (benefit) for deferred income tax | ( |
) | ( |
) | ||||
| Net realized (gain) on sale of marketable securities | ( |
) | ( |
) | ||||
| Net unrealized loss on marketable securities | ||||||||
| Depreciation | ||||||||
| Amortization of deferred charges | ||||||||
| Operating lease expense in excess of cash payments | ||||||||
| Deferred finance costs included in interest expense | ||||||||
| Deferred charges | ( |
) | ( |
) | ||||
| Changes in Operating Assets and Liabilities: | ||||||||
| Receivables | ( |
) | ( |
) | ||||
| Prepaids and other assets | ( |
) | ( |
) | ||||
| Accounts payable and accrued expenses | ( |
) | ( |
) | ||||
| Security deposits payable | ( |
) | ||||||
| Net cash provided by operating activities | ||||||||
| Cash Flows From Investing Activities: | ||||||||
| Acquisition of property and equipment | ( |
) | ( |
) | ||||
| Marketable securities: | ||||||||
| Receipts from sales | ||||||||
| Payments for purchases | ( |
) | ( |
) | ||||
| Net cash (used) in investing activities | ( |
) | ( |
) | ||||
| Cash Flows From Financing Activities: | ||||||||
| Payments – mortgages | ( |
) | ( |
) | ||||
| Net cash (used) by financing activities | ( |
) | ( |
) | ||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | ( |
) | ||||||
| Cash, cash equivalents and restricted cash at beginning of year | ||||||||
| Cash, cash equivalents and restricted cash at end of year | $ | $ | ||||||
See Notes to Accompanying Consolidated Financial Statements.
6
J.W. MAYS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization
J.W. Mays, Inc. (the “Company” or “Registrant”) with executive offices at 9 Bond Street, Brooklyn, New York 11201, operates a number of commercial real estate properties in New York and one building in Ohio. The Company’s business was founded in 1924 and incorporated under the laws of the State of New York on July 6, 1927.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, a New York corporation and its subsidiaries (J. W. M. Realty Corp. and Dutchess Mall Sewage Plant, Inc.), which are wholly-owned. Material intercompany items have been eliminated in consolidation.
Use of Estimates
The accounting records are maintained in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of the Company’s consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements, the disclosure of contingent assets and liabilities, incremental borrowing rates and recognition of renewal options for operating lease right-of-use assets and liabilities, and the reported amounts of revenues and expenses during the reporting period. The estimates that we make include allowance for doubtful accounts, depreciation, impairment analysis of long-lived assets, income tax assets and liabilities, fair value of marketable securities and revenue recognition. Estimates are based on historical experience where applicable or other assumptions that management believes are reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results may differ from those estimates under different assumptions or conditions.
Restricted Cash
Restricted cash primarily consists of cash held in bank accounts for tenant security deposits and other amounts required under certain loan agreements.
Accounts Receivable
Generally, rent is due from tenants at the beginning of the month in accordance with terms of each lease. Based upon its periodic assessment of the quality of the receivables, management uses its historical knowledge of the tenants and industry experience to determine whether a reserve or write-off is required. The Company uses specific identification to reserve for uncollectible accounts receivable in the period when issues of collectibility become known. Collectibility issues include late rent payments, circumstances when a tenant indicates their intention to vacate the property without paying, or when tenant litigation or bankruptcy proceedings are not expected to result in full payment. Management also assesses collectibility by reviewing accounts receivable on an aggregate basis where similar characteristics exist. In determining the amount of the allowance for credit losses, the Company considers past due status and a tenant’s payment history. We also consider current market conditions and reasonable and supportable forecasts of future economic conditions. Our assessment considers volatility in market conditions and evolving shifts in credit trends that may have a material impact on our allowance for uncollectible accounts receivables in future periods. The Company’s allowance for uncollectible receivables is recorded as an offset to receivables. Activity in the allowance for uncollectible receivables for each period follows:
Allowance for Uncollectible
| Allowance
for Uncollectible Accounts Receivable |
Bad Debt Expense | |||||||||||||||
| Period Ended July 31 | Period Ended July 31 | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Beginning balance | $ | $ | $ | — | $ | — | ||||||||||
| Charge-offs | ( |
) | ||||||||||||||
| Reserve Adjustments | ( |
) | ( |
) | ||||||||||||
| Ending Balance | $ | $ | $ | ( |
) | $ | ||||||||||
7
Marketable Securities
The Company’s marketable securities consist of investments in equity securities and mutual funds. Dividends and interest income are accrued as earned. Realized gains and losses are determined on a specific identification basis. The Company reviews marketable securities for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered. The changes in the fair value of these securities are recognized in current period earnings in accordance with Accounting Standards Codification (“ASC”) 825.
The Company follows GAAP which establishes a fair value hierarchy that prioritizes the valuation techniques and creates the following three broad levels, with Level 1 valuation being the highest priority:
Level 1 valuation inputs are quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date (e.g., equity securities traded on the New York Stock Exchange).
Level 2 valuation inputs are from other than quoted market prices included in Level 1 that are observable for the asset or liability, either directly or indirectly (e.g., quoted market prices of similar assets or liabilities in active markets, or quoted market prices for identical or similar assets or liabilities in markets that are not active).
Level 3 valuation inputs are unobservable (e.g., an entity’s own data) and should be used to measure fair value to the extent that observable inputs are not available.
Following is a description of the valuation methodologies used for assets measured at fair value on a recurring basis. There have been no changes in the methodologies used at July 31, 2023 and 2022.
Equity securities are valued at the closing price reported on the active market on which the individual securities are traded that the Company has access to.
Mutual funds are valued at the daily closing price as reported by the fund. Mutual funds held by the Company are open-end mutual funds that are registered with the U.S. Securities and Exchange Commission. These funds are required to publish their daily net asset value (“NAV”) and to transact at that price. The mutual funds held by the Company are deemed to be actively traded.
In accordance with the provisions of Fair Value Measurements, the following are the Company’s financial assets measured on a recurring basis presented at fair value.
| Fair value measurements at reporting date | ||||||||||||||||||||||||
| Description | July 31, 2023 | Level 1 | Level 2 | Level 3 | July 31, 2022 | Level 1 | Level 2 | Level 3 | ||||||||||||||||
| Assets: | ||||||||||||||||||||||||
| Marketable securities | $ |
$ |
$ | $ | $ |
$ |
$ | $ | ||||||||||||||||
Property and Equipment
Property and equipment are stated at cost. Depreciation is calculated using the straight-line method and the declining-balance method. Amortization of improvements to leased property is calculated over the life of the lease. Lives used to determine depreciation and amortization are generally as follows:
| Buildings and improvements | |||
| Improvements to leased property | |||
| Fixtures and equipment | |||
| Other |
Maintenance, repairs, renewals and improvements of a non-permanent nature are charged to expense when incurred. Expenditures for additions and major renewals or improvements are capitalized along with the associated interest cost during construction. The cost of assets sold or retired, and the accumulated depreciation or amortization thereon are eliminated from the respective accounts in the year of disposal, and the resulting gain or loss is credited or charged to income. Capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset’s estimated useful life.
Impairment
The Company reviews property and equipment and related lease intangibles for possible impairment when certain events or changes in circumstances indicate the carrying amount of the asset may not be recoverable though operations plus estimated disposition proceeds. Events or changes in circumstances that may occur include, but are not limited to, significant changes in real
8
estate market conditions, estimated residual values, and an expectation to sell assets before the end of the previously estimated life. Impairments are measured to the extent the current book value exceeds the estimated fair value of the asset less disposition costs for any assets classified as held for sale. As of July 31, 2023 and 2022, the Company has determined there was no impairment of its property and equipment and related lease intangibles.
Deferred Charges
Deferred charges consist
principally of costs incurred in connection with the leasing of property to tenants. Such costs are amortized over the related lease periods,
ranging from
Leases – Lessor Revenue
The Company accounts for revenue in accordance with Accounting Standards Update (ASU) 2014-09 (Topic 606) Revenue from Contracts with Customers. Rental income is recognized from tenants under executed leases no later than on an established date or on an earlier date if the tenant should commence conducting business. Unbilled receivables are included in accounts receivable and represent the excess of scheduled rental income recognized on a straight-line basis over rental income as it becomes receivable according to the provisions of the lease. The effect of lease modifications that result in rent relief or other credits to tenants, including any retroactive effects relating to prior periods, are recognized in the period when the lease modification is signed. At the time of the lease modification, we assess the realizability of any accrued but unpaid rent and amounts that had been recognized as revenue in prior periods. As lessor, we have elected to combine the lease components (base rent), non-lease components (reimbursements of common area maintenance expenses) and reimbursements of real estate taxes and account for the components as a single lease component in accordance with ASC 842. If the amounts are not determined to be realizable, the accrued but unpaid rent is written off. Accounts receivable are recognized in accordance with lease agreements at its net realizable value. Rental payments received in advance are deferred until earned.
In April 2020, the Financial
Accounting Standards Board issued a Staff Q&A on accounting for leases during the COVID-19 pandemic, focused on the application of
lease guidance in ASC Topic 842, Leases (“ASC 842”). The Q&A states that it would be acceptable to make a policy election
regarding rent concessions resulting from COVID-19, which would not require entities to account for these rent concessions as lease modifications
under certain conditions. Entities making the election will continue to recognize rental revenue on a straight-line basis for qualifying
concessions. Rent deferrals would result in an increase to accounts receivable during the deferral period with no impact on rental revenue
recognition. The Company elected this policy during the year ended July 31, 2020. Rent deferrals included in receivables were $
Leases – Lessee
The Company determines if an arrangement is a lease at inception. With the adoption of ASC 842, operating leases are included in operating lease right-of-use assets and operating lease liabilities on the Company’s consolidated balance sheets.
Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
Taxes
Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities. Deferred tax assets result principally from the recording of certain accruals, reserves and net operating loss carry forwards which currently are not deductible for tax purposes. Deferred tax liabilities result principally from temporary differences in the recognition of unrealized gains and losses from certain investments and from the use, for tax purposes, of accelerated depreciation. Deferred tax assets and liabilities are offset for each jurisdiction and are presented net on the consolidated balance sheets.
9
The effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date. Actual income taxes could vary from these estimates due to future changes in income tax law or results from the final review of tax returns by federal, state or city tax authorities. Financial statement effects on tax positions are recognized in the period in which it is more likely than not that the position will be sustained upon examination, the position is effectively settled or when the statute of limitations to challenge the position has expired. Interest and penalties, if any, related to unrecognized tax benefits are recorded as interest expense and administrative and general expenses, respectively.
Income per share has been computed by dividing net income for the year by the weighted average number of shares of common stock outstanding during the year, adjusted for the purchase of treasury stock. Shares used in computing income per share were in fiscal years 2023 and 2022.
2. MARKETABLE SECURITIES:
As of July 31, 2023 and 2022, the Company’s marketable securities were classified as follows:
| July 31, 2023 | July 31, 2022 | |||||||||||||||||||||||||||||||
| Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||||||||||||||
| Available-for-sale: | ||||||||||||||||||||||||||||||||
| Mutual funds | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Corporate equity securities | ||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||
Investment income for the years ended July 31, 2023 and 2022 consists of the following:
| 2023 | 2022 | |||||||
| Dividend and interest income | $ | $ | ||||||
| Gain on sale of marketable securities | ||||||||
| Total | $ | $ | ||||||
3. LONG-TERM DEBT—MORTGAGES:
| Years Ended July 31, | ||||||||||||||
| Current Annual Interest Rate | Final Payment Date | 2023 | 2022 | |||||||||||
| Mortgage: | ||||||||||||||
| Bond St. land and building, Brooklyn, NY (1) | $ | $ | ||||||||||||
| Fishkill land and building (2) | ||||||||||||||
| Deferred financing costs | ( | ) | ( | ) | ||||||||||
| Total | $ | $ | ||||||||||||
| (1) |
| (2) |
10
Maturities of long-term mortgages outstanding at July 31, 2023 are as follows:
| Year Ended July 31: | Amount | |||
| 2024 | $ | |||
| 2025 | ||||
| Subtotal | ||||
| Deferred financing costs | ( | ) | ||
| Total | $ | |||
The carrying value of the
property collateralizing the above debt is $
4. OPERATING LEASES:
Lessor
The Company leases office
and retail space to tenants under operating leases in commercial buildings. The rental terms range from approximately
The following table disaggregates the Company’s revenues by lease and non-lease components:
| Years Ended July 31, | ||||||||
| 2023 | 2022 | |||||||
| Base rent – fixed | $ | $ | ||||||
| Reimbursements of common area costs | ||||||||
| Non-lease components (real estate taxes) | ||||||||
| Rental income | $ | $ | ||||||
| Years Ended July 31, | ||||||||
| 2023 | 2022 | |||||||
| Base rent – fixed | ||||||||
| Company owned property | $ | $ | ||||||
| Leased property | ||||||||
| Reimbursements of common area costs & Non lease components (real estate taxes) | ||||||||
| Company owned property | ||||||||
| Leased property | ||||||||
| Total | $ | $ | ||||||
Future minimum non-cancelable rental income for leases with initial or remaining terms of one year or more is as follows:
| Year Ended July 31, | Company Owned Property | Leased Property | Total | |||||||||
| 2024 | $ | $ | $ | |||||||||
| 2025 | ||||||||||||
| 2026 | ||||||||||||
| 2027 | ||||||||||||
| 2028 | ||||||||||||
| After 2028 | ||||||||||||
| Total | $ | $ | $ | |||||||||
11
Lessee
The Company’s real estate operations include leased properties under long-term, non-cancelable operating lease agreements. The leases expire at various dates through 2073, including options to extend or terminate the lease when it is reasonably certain the Company will exercise that option. Certain leases provide for increases in future minimum annual rental payments as defined in the lease agreements.
In July 2022, the Company entered into lease agreements with its landlord for two of its properties as follows:
| (1) | Jamaica Avenue at 169th Street, Jamaica, New York - Giving the Company four five-year option periods to
extend its lease beyond May 31, 2030 for a total of twenty years through May 31, 2050. In April 2023, the Company exercised the first
five-year option period, extending the lease expiration date to |
| Jamaica Avenue at 169th Street | ||||||||||||
| Increase
in Operating Lease Right- of-Use Asset | Increase
in Operating Lease Liability | Decrease
in Monthly Rent Expense | ||||||||||
| Remeasurement change resulting from April 2023 lease extension | $ | $ | $( | ) | ||||||||
As of July 31, 2023, it is not reasonably certain the remaining three options to extend the lease will be exercised by the Company.
| (2) | 504-506 Fulton Street, Brooklyn, New York – In July, 2022 the lease agreement was modified to increase
monthly lease payments from $ |
| 504-506 Fulton Street | ||||||||||||
| Increase
in Operating Lease Right- of-Use Asset | Increase
in Operating Lease Liability | Increase
in Monthly Rent Expense | ||||||||||
| Remeasurement change resulting from July 2022 lease modification | $ | $ | $ | |||||||||
The landlord is Weinstein Enterprises, Inc., an affiliated company principally owned by the Chairman of the Board of Directors who also principally owns the Company.
Operating lease costs for leased real property was exceeded by sublease rental income from the Company’s real estate operations as follows:
| Years Ended July 31, | ||||||||
| 2023 | 2022 | |||||||
| Sublease income | $ | | $ | |||||
| Operating lease cost | ( | ) | ( | ) | ||||
| Excess of sublease income over lease cost | $ | $ | ||||||
| Years Ended July 31, | ||||||||
| 2023 | 2022 | |||||||
| Other information: | ||||||||
| Operating cash flows from operating leases | $ | $ | ||||||
12
The following is a maturity analysis of the annual undiscounted cash flows of the operating lease liabilities as of July 31, 2023:
| Year ended July 31 | Operating Leases | |||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total undiscounted cash flows | ||||
| Less: present value discount | ( | ) | ||
| Total Lease Liabilities | $ | |||
As of July 31, 2023, our
operating leases had a weighted average remaining lease term of
5. INCOME TAX:
Income taxes provided for the years ended July 31, 2023 and 2022 consist of the following:
| 2023 | 2022 | |||||||
| Current: | ||||||||
| Federal | $ | $ | ||||||
| Deferred taxes (benefit): | ||||||||
| Federal | ( | ) | ( | ) | ||||
| State | ( | ) | ( | ) | ||||
| Income tax provision (benefit) | $ | ( | ) | $ | ( | ) | ||
Taxes provided for the years ended July 31, 2023 and 2022 differ from amounts which would result from applying the federal statutory tax rate to pre-tax income, as follows:
| 2023 | 2022 | |||||||
| Loss before income taxes | $ | ( | ) | $ | ( | ) | ||
| Other-net | ( | ) | ( | ) | ||||
| Adjusted pre-tax loss | $ | ( | ) | $ | ( | ) | ||
| Statutory rate | % | % | ||||||
| Income tax provision (benefit) at statutory rate | $ | ( | ) | $ | ( | ) | ||
| State deferred income taxes (benefit) | ( | ) | ( | ) | ||||
| Other-net | ||||||||
| Income tax provision (benefit) | $ | ( | ) | $ | ( | ) | ||
The Company has a federal
net operating loss carryforward approximating $
New York State and New York City taxes are calculated using the higher of taxes based on income or the respective capital based franchise taxes. Beginning with the Company’s tax year ended July 31, 2025, changes in the law required the state capital based tax will be phased out. New York City taxes will be based on capital for the foreseeable future. Capital-based franchise taxes are recorded to administrative and general expense. State tax amounts in excess of the capital-based franchise taxes are recorded to income tax expenses. Due to both the application of the capital-based tax and due to the possible absence of city taxable income, the Company does not record city deferred taxes.
Generally, tax returns filed are subject to audit for three years by the appropriate taxing jurisdictions. The statute of limitations in each of the state jurisdictions in which the Company operates remain open until the years are settled for federal income tax purposes, at which time amended state income tax returns reflecting all federal income tax adjustments are filed. As of July 31, 2023, there were no income tax audits in progress that would have a material impact on the consolidated financial statements.
13
Significant components of the Company’s deferred tax assets and liabilities as of July 31, 2023 and 2022 are a result of temporary differences related to the items described as follows:
| 2023 | 2022 | |||||||||||||||
| Deferred Tax Assets | Deferred Tax Liabilities | Deferred Tax Assets | Deferred Tax Liabilities | |||||||||||||
| Rental income received in advance | $ | $ | $ | $ | ||||||||||||
| Operating lease liabilities | ||||||||||||||||
| Federal net operating loss carryforward | ||||||||||||||||
| State net operating loss carryforward | ||||||||||||||||
| Unbilled receivables | ||||||||||||||||
| Property and equipment | ||||||||||||||||
| Unrealized gain on marketable securities | ||||||||||||||||
| Operating lease right-of-use assets | ||||||||||||||||
| Other | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Net deferred tax liability | $ | $ | ||||||||||||||
Management periodically assesses the realization of its net deferred tax assets by evaluating all available evidence, both positive and negative, associated with the Company and determining whether, based on the weight of that associated evidence, a valuation allowance for the deferred tax assets is needed. Based on this analysis, management has determined that it is more likely than not that future taxable income will be sufficient to fully utilize the federal and state deferred tax assets at July 31, 2023.
Components of the deferred tax provision (benefit) for the years ended July 31, 2023 and 2022 consist of the following:
| 2023 | 2022 | |||||||
| Book depreciation exceeding tax depreciation | $ | $ | ||||||
| Reserve for bad debts | ( | ) | ||||||
| Lease expense per book in excess of cash paid | ( | ) | ( | ) | ||||
| Federal net operating loss carryforward | ||||||||
| State net operating loss carryforward | ( | ) | ( | ) | ||||
| Rental income received in advance | ( | ) | ||||||
| Unbilled receivables | ||||||||
| Other | ( | ) | ( | ) | ||||
| $ | ( | ) | $ | ( | ) | |||
6. EMPLOYEES’ RETIREMENT PLANS:
The Company sponsors a non-contributory
Money Purchase Plan covering substantially all of its non-union employees. Operations were charged $
MULTI-EMPLOYER PLAN:
The Company contributes
to a union sponsored multi-employer pension plan covering its union employees. The Company contributions to the pension plan for the years
ended July 31, 2023 and 2022 were $
CONTINGENT LIABILITY FOR PENSION PLANS:
Information as to the Company’s portion of accumulated plan benefits and plan assets is not reported separately by the pension plan. Under the Employee Retirement Income Security Act, upon withdrawal from a multi-employer benefit plan, an employer is required to continue to pay its proportionate share of the plan’s unfunded vested benefits, if any. Any liability under
14
this provision cannot be determined: however, the Company has not made a decision to withdraw from the plan. Information for contributing employer’s participation in the multi-employer plan:
| Legal name of Plan: | United Food and Commercial Workers Local 888 Pension Fund | |
| Employer identification number: | 13-6367793 | |
| Plan number: | 001 | |
| Date of most recent Form 5500: | December 31, 2021 | |
| Certified zone status: | Critical and declining status | |
| Status determination date: | January 1, 2021 | |
| Plan used extended amortization provisions in status calculation: | Yes | |
| Minimum required contribution: | Yes | |
| Employer contributing greater than contributions for year ended December 31, 2021: |
Yes | |
| Rehabilitation plan implemented: | Yes | |
| Employer subject to surcharge: | Yes | |
| Contract expiration date: | November 30, 2025 |
For the plan years 2019
through November 30, 2021, under the pension fund’s rehabilitation plan, the Company agreed to pay a minimum contribution rate equal
to a
7. CASH FLOW INFORMATION:
For purposes of reporting cash flows, the Company considers cash equivalents to consist of short-term highly liquid investments with maturities of three months or less, which are readily convertible into cash. The following is a reconciliation of the Company’s cash and cash equivalents and restricted cash to the total presented on the consolidated statements of cash flows:
| July 31 | ||||||||
| 2023 | 2022 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash, tenant security deposits | ||||||||
| Restricted cash, escrow | ||||||||
| Restricted cash, other | ||||||||
| $ | $ | |||||||
Amounts in restricted cash primarily consist of cash held in bank accounts for tenant security deposits, amounts set aside in accordance with certain loan agreements, and security deposits with landlords and utility companies.
Supplemental disclosure:
| July 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash Flow Information | ||||||||
| Interest paid, net of capitalized interest of $ | $ | $ | ||||||
| Income tax (refunded) | ||||||||
| Non-cash information | ||||||||
| Recognition of operating lease right-of-use assets | $ | $ | ||||||
| Recognition of operating lease liabilities | ||||||||
15
8. FINANCIAL INSTRUMENTS AND CREDIT RISK CONCENTRATIONS:
The following disclosure of estimated fair value was determined by the Company using available market information and appropriate valuation methods. Considerable judgment is necessary to develop estimates of fair value. The estimates presented herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial instruments.
The Company estimates the fair value of its financial instruments using the following methods and assumptions: (i) quoted market prices, when available, are used to estimate the fair value of investments in marketable debt and equity securities; (ii) discounted cash flow analyses are used to estimate the fair value of long-term debt, using the Company’s estimate of current interest rates for similar debt; and (iii) carrying amounts in the consolidated balance sheet approximate fair value for cash and cash equivalents, restricted cash, and tenant security deposits due to their high liquidity.
| July 31, 2023 | July 31, 2022 | |||||||||||||||
| Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | ||||||||||||
| Restricted cash | $ | $ | $ | $ | ||||||||||||
| Marketable securities | $ | $ | $ | $ | ||||||||||||
| Security deposit payable | $ | $ | $ | $ | ||||||||||||
| Mortgages payable | $ | $ | $ | $ | ||||||||||||
Financial instruments that are potentially subject to concentrations of credit risk consist principally of marketable securities, restricted cash, cash and cash equivalents, and receivables. Marketable securities, restricted cash, cash and cash equivalents are placed with multiple financial institutions and instruments to minimize risk. No assurance can be made that such financial institutions and instruments will minimize all such risk.
As of July 31, 2023, four
tenants accounted for approximately
9. DEFERRED CHARGES:
Deferred charges for the fiscal years ended July 31, 2023 and 2022 consist of the following:
| July 31, 2023 | July 31, 2022 | |||||||||||||||
| Gross
Carrying Amount | Accumulated | Gross
Carrying Amount | Accumulated | |||||||||||||
| Leasing brokerage commissions | $ | $ | $ | $ | ||||||||||||
| Professional fees for leasing | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
The aggregate amortization
expense for the periods ended July 31, 2023 and July 31, 2022 were $
The weighted average life
of current year additions to deferred charges was
The estimated aggregate amortization expense for each of the five succeeding fiscal years is as follows:
| Year Ended July 31 | Amortization | |||
| 2024 | $ | |||
| 2025 | $ | |||
| 2026 | $ | |||
| 2027 | $ | |||
| 2028 | $ | |||
16
10. RELATED PARTY TRANSACTIONS:
The Company has two operating leases with Weinstein Enterprises, Inc. (“Landlord”), an affiliated company, principally owned by the Chairman of the Board of Directors of both the Company and Landlord. One lease is for building, improvements, and land (Premises”) located at Jamaica Avenue at 169th Street, Jamaica, New York. Another lease is for Premises located at 504-506 Fulton Street, Brooklyn, New York.
In July 2022, the Company entered into lease agreements with Landlord as follows:
| (1) | Jamaica Avenue at 169th Street, Jamaica, New York - Giving the Company four five-year option periods to extend its lease beyond May 31, 2030 for a total of twenty years through May 31, 2050. In April 2023, the Company exercised the first five-year option period, extending the lease expiration date to May 31, 2035. As of July 31, 2023, it is not reasonably certain the remaining three options to extend the lease will be exercised by the Company. |
| (2) |
Rent payments and expense relating to these two operating leases with Landlord follow:
| Rent Payments | Rent Expense | |||||||||||||||
| Year Ended July 31 | Year Ended July 31 | |||||||||||||||
| Property | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Jamaica Avenue at 169th Street | $ | $ | $ | $ | ||||||||||||
| 504-506 Fulton Street | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
The following summarizes assets and liabilities related to these two leases:
| Right-Of-Use Assets | Liabilities | ||||||||||||||||||
| July 31 | July 31 | ||||||||||||||||||
| Property | 2023 | 2022 | 2023 | 2022 | Expiration Date | ||||||||||||||
| Jamaica Avenue at 169th Street | $ | $ | $ | $ | |||||||||||||||
| 504-506 Fulton Street | |||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||
Upon termination of the Jamaica, New York lease, currently in 2035, all premises included in operating lease right-of-use assets plus leasehold improvements will be turned over to the Landlord.
11. CAPITALIZATION:
The Company is capitalized entirely through common stock with identical voting rights and rights to liquidation. Treasury stock is recorded at cost and consists of shares at July 31, 2023 and July 31, 2022, respectively.
12. CONTINGENCIES:
There are various other lawsuits and claims pending against the Company. It is the opinion of management that the resolution of these matters will not have a material adverse effect on the Company’s Consolidated Financial Statements.
If the Company sells, transfers, disposes of or demolishes 25 Elm Place, Brooklyn, New York, then the Company may be liable to create a condominium unit for the loading dock. The necessity of creating the condominium unit and the cost of such condominium unit cannot be determined at this time.
17
SCHEDULE III
J.W. MAYS, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
July 31, 2023
| Col. A | Col. B | Col. C | Col. D | Col. E | Col. F | Col. G | Col. H | Col. I | ||||||||||||||||||||||||||||||||||||||||
| Initial Cost to Company | Cost
Capitalized Subsequent to Acquisition | Gross
Amount at Which Carried At Close of Period | Life on Which Depreciation in Latest Income | |||||||||||||||||||||||||||||||||||||||||||||
| Description | Encumbrances | Land | Building
& Improvements | Improvements | Carried Cost | Land | Building
& Improvements | Total | Accumulated Depreciation | Date
of Construction | Date Acquired | Statement
is Computed | ||||||||||||||||||||||||||||||||||||
| Office and Rental Buildings Brooklyn, New York Fulton Street at Bond Street | $1,653,117 | $ | 3,901,349 | $7,403,468 | $24,960,126 | $— | $ | 3,901,349 | $32,363,594 | $ | 36,264,943 | $16,299,148 | Various | Various | (1)(2) | |||||||||||||||||||||||||||||||||
| Jamaica, New York Jamaica Avenue at 169th Street | — | — | — | 474,358 | — | — | 474,358 | 474,358 | 153,378 | 1959 | 1959 | (3) | ||||||||||||||||||||||||||||||||||||
| Fishkill, New York Route 9 at Interstate Highway 84 | 3,545,719 | 594,723 | 7,212,116 | 16,547,736 | — | 594,723 | 23,759,852 | 24,354,575 | 10,451,069 | 10/74 | 11/72 | (1) | ||||||||||||||||||||||||||||||||||||
| Brooklyn, New York Jowein Building Fulton Street and Elm Place | — | 1,324,957 | 728,327 | 17,289,845 | — | 1,324,957 | 18,018,172 | 19,343,129 | 7,617,745 | 1915 | 1950 | (1)(2) | ||||||||||||||||||||||||||||||||||||
| Levittown, New York Hempstead Turnpike | — | 125,927 | — | — | — | 125,927 | — | 125,927 | — | 4/69 | 6/62 | (1) | ||||||||||||||||||||||||||||||||||||
| Circleville, Ohio Tarlton Road | — | 120,849 | 4,388,456 | 113,620 | — | 120,849 | 4,502,076 | 4,622,925 | 3,364,291 | 9/92 | 12/92 | (1) | ||||||||||||||||||||||||||||||||||||
| Total(A) | $5,198,836 | $ | 6,067,805 | $19,732,367 | $59,385,685 | $— | $ | 6,067,805 | $79,118,052 | $ | 85,185,857 | $37,885,631 | ||||||||||||||||||||||||||||||||||||
| (1) | Building and improvements 18–40 years |
| (2) | Improvements to leased property 3–40 years |
| (3) | Upon lease termination in 2035, the building and all improvements will be turned over to the landlord as property owner (See Notes 1 and 10 to the Accompanying Consolidated Financial Statements). Leasehold improvements are amortized over the life of the lease. |
| (A) | Does not include Office Furniture and Equipment and Transportation Equipment in the amount of $352,750 and Accumulated Depreciation thereon of $237,568 at July 31, 2023. |
| Year Ended July 31, | ||||||||
| 2023 | 2022 | |||||||
| Investment in Real Estate | ||||||||
| Balance at Beginning of Year | $ | 84,139,551 | $ | 82,496,432 | ||||
| Improvements | 1,046,306 | 1,643,119 | ||||||
| Retirements | — | — | ||||||
| Balance at End of Year | $ | 85,185,857 | $ | 84,139,551 | ||||
| Accumulated Depreciation | ||||||||
| Balance at Beginning of Year | $ | 36,244,642 | $ | 34,548,196 | ||||
| Additions Charged to Costs and Expenses | 1,640,989 | 1,696,446 | ||||||
| Retirements | — | — | ||||||
| Balance at End of Year | $ | 37,885,631 | $ | 36,244,642 | ||||
18
J.W. MAYS, INC.
REPORT OF MANAGEMENT
Management is responsible for the preparation and reliability of the financial statements and the other financial information in this Annual Report. Management has established systems of internal control over financial reporting designed to provide reasonable assurance that the financial records used for preparing financial statements are reliable and reflect the transactions of the Company and that established policies and procedures are carefully followed. The Company reviews, modifies and improves its system of internal controls in response to changes in operations.
The Board of Directors, acting through the Audit Committee, which is comprised solely of independent directors who are not employees of the Company, oversees the financial reporting process. The financial statements have been prepared in accordance with accounting standards generally accepted in the United States of America and include amounts based on judgments and estimates made by management. Actual results could differ from estimated amounts.
To ensure complete independence, Prager Metis CPAs, LLC, the independent registered public accounting firm, has full and free access to meet with the Audit Committee, without management representatives present, to discuss results of the audit, the adequacy of internal controls and the quality of financial reporting.
19
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
J.W. Mays, Inc. and Subsidiaries
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of J.W. Mays, Inc. and Subsidiaries (the “Company”) as of July 31, 2023 and 2022 and the related consolidated statements of operations, changes in shareholders equity and cash flows for the years ended July 31, 2023 and 2022, and the related notes and financial statement schedules (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of July 31, 2023 and 2022, and the consolidated results of its operations and its cash flows for each of the years ended July 31, 2023 and 2022, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which it relates.
Impairment
Critical Audit Matter Description
As described in Note 1 to the consolidated financial statements, the Company reviews its property and equipment for potential impairment when certain events or changes in circumstances indicate the carrying amount may not be recoverable. Those events and circumstances include, but are not limited to, significant changes in real estate market conditions, estimated residual values, and an expectation to sell assets before the end of the previously estimated life. In evaluating property and equipment for indicators of impairment, management considers undiscounted future cash flows, including the residual value of the real estate, with the carrying amount of the individual asset. Considering estimated future cash flows requires management to make assumptions about the probabilities of various outcomes relating to market conditions, estimated holding periods, capitalization rates, and potential proceeds if a property was sold. We identified the evaluation of impairment of property and equipment as a critical audit matter.
20
The principal consideration for our determination that the evaluation of impairment was a critical audit matter was a higher risk of estimation uncertainty due to sensitivity of management judgments not only regarding indicators of impairment but also regarding estimates and assumptions utilized in considering cash flows for cost recoverability and making fair value measurements.
How the Critical Audit Matter was addressed in Our Audit
Our audit procedures related to the evaluation of impairment included the following, among others. We obtained an understanding of the relevant controls over management’s evaluation of potential property and equipment impairments, such as controls over the Company’s monitoring of the property and equipment, controls over the Company’s consideration of future cash flows, and controls over the Company’s estimates of fair value. In consideration of impairment indicator criteria established in management’s accounting policies over impairment, we evaluated the completeness of the population of properties requiring further analysis. We examined and evaluated the Company’s undiscounted cash flows and estimates of fair value over properties identified for potential impairment. We evaluated the reasonableness of the methods and significant assumptions used, including probabilities of outcomes, holding periods, capitalization rates, and potential proceeds if a property was sold. We evaluated these items in comparison with historical performance of the impacted properties and with comparable observable market data. Our assessment included evaluation of these assumptions, and we considered whether such assumptions were consistent with evidence obtained in other areas of the audit.
/s/
We have served as the Company’s auditor since 2020.
October 19, 2023
21
J.W. MAYS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our consolidated financial statements and related notes thereto contained in this report. In this discussion, the words “Company”, “we”, “our” and “us” refer to J.W. Mays, Inc. and subsidiaries.
FORWARD LOOKING STATEMENTS
The following can be interpreted as including forward-looking statements under the Private Securities Litigation Reform Act of 1995. The words “outlook”, “intend”, “plans”, “efforts”, “anticipates”, “believes”, “expects” or words of similar import typically identify such statements. Various important factors that could cause actual results to differ materially from those expressed in the forward-looking statements are identified under the heading “Cautionary Statement Regarding Forward-Looking Statements” below. Our actual results may vary significantly from the results contemplated by these forward-looking statements based on a number of factors including, but not limited to, availability of labor, marketing success, competitive conditions and the change in economic conditions of the various markets we serve.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Critical accounting policies are defined as those most important to the portrayal of a company’s financial condition and results and require the most difficult, subjective or complex judgments. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and judgments that affect the reported amounts of assets and liabilities at the date of the financial statements, the reported amount of revenues, and expenses during the reporting period and related disclosure of contingent assets and liabilities. We believe the critical accounting policies in Note 1 affect our more significant judgments and estimates used in the preparation of our financial statements. Estimates are based on historical experience, where applicable or other assumptions that management believes are reasonable under the circumstances. We have identified the policies described below as our critical accounting policies. Actual results may differ from these estimates under different assumptions and conditions.
Receivables
Generally, rent is due from tenants at the beginning of the month in accordance with terms of each lease. Based upon its periodic assessment of the quality of the receivables, management uses its historical knowledge of the tenants and industry experience to determine whether a reserve or write-off is required. The Company uses specific identification to write-off receivables to bad debt expense in the period when issues of collectability become known.
Marketable securities
We invest in mutual funds with our extra available cash. The mutual funds are valued daily by the funds based on the assets included within the funds. Our mutual fund investments are recorded in the consolidated financial statements at the daily value established by the mutual funds and we can liquidate our investments at any time. Our investments in corporate equity securities are valued at prices established on the various stock exchanges. We can liquidate these investments at any time. Our investment valuations are subject to market fluctuations and can substantially change in value at any time.
Property and equipment
Property and equipment are stated at cost and depreciated over the shorter of the asset’s useful life or the life of the lease. Capital improvements no longer in use are written off. Management reviews the value of the properties for significant decreases in valuation. If any significant decreases in valuation are noted, the adjustment is recorded in the financial statements.
22
Deferred charges
Deferred charges consist principally of costs incurred in connection with the leasing of property to tenants. Such costs are amortized over the related lease periods, ranging from 5 to 21 years, using the straight-line method. If a lease is terminated early, such costs are expensed.
Leases - Lessor Revenue Recognition
The Company accounts for revenue in accordance with Accounting Standards Update (ASU) 2014-09 (Topic 606) Revenue from Contracts with Customers. Rental income is recognized from tenants under executed leases no later than on an established date or on an earlier date if the tenant should commence conducting business. The effect of lease modifications that result in rent relief or other credits to tenants are recognized in the period when the lease modification is signed. If the amounts are not determined to be realizable, the accrued but unpaid rent is written off. Accounts receivable are recognized in accordance with lease agreements at its net realizable value. Rental payments received in advance are deferred until earned. We have made the policy election available to us based on the Financial Accounting Standards Board’s guidance for leases during COVID-19, which allows us to continue recognizing rental revenue for rent deferral agreements and to recognize rent abatements as a reduction of revenue in the period granted.
Leases – Lessee
The Company determines if an arrangement is a lease at inception. With the adoption of ASC 842, operating leases are included in operating lease right-of-use assets and operating lease liabilities on the Company’s balance sheet. Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.
Taxes
Our income tax accrual takes into effect taxes that are currently payable, based on our income tax returns filed, and taxes that will be payable in the future based on income earned in the current year that is not taxable until future events occur offset by expenses incurred in the current year that are not deductible until future events occur. Tax audits increase or decrease the amounts currently payable based on the results of the audits. The tax provision is an estimate and can change at any time due to changes in tax laws and tax rates.
FISCAL 2023 COMPARED TO FISCAL 2022
Net loss for the year ended July 31, 2023 amounted to $(82,964) or $(.04) per share, compared to net loss for the year ended July 31, 2022 of $(712,371) or $(.35) per share.
Revenues in the current year increased to $22,576,455 from $21,396,035 in the comparable 2022 year primarily due to rental income from several new tenants, and increased rents from existing tenants; partially offset by the loss of several tenants.
Real estate operating expenses in the current year increased to $15,383,378 from $14,662,851 in the comparable 2022 year primarily due to increases in real estate taxes, insurance, building maintenance, and water and sewer costs.
Administrative and general expenses in the current year decreased to $5,280,853 from $5,647,733 in the comparable 2022 year primarily due to decreases in bad debt expense and legal and professional fees; partially offset by increases in payroll costs.
Depreciation expense in the current year of $1,688,557 decreased from $1,742,458 in the comparable 2022 year primarily from certain fully depreciated improvements at the Company’s 9 Bond Street and Jamaica, New York properties; partially offset by increased depreciation for improvements at the Company’s Fishkill, New York building.
Other income (loss) and interest expense of $(368,631) declined in the current year from $(345,364) in the comparable 2022 year, primarily due to a decrease in dividend and interest income partially offset by an increase in the fair value of marketable securities and a decrease in interest expense.
LIQUIDITY AND CAPITAL RESOURCES
In August 2022, the Company leased 58,832 square feet at the Company’s Fishkill, New York building for use as storage space for six months which expired in February 2023. Total rent of $576,259 was prepaid at lease commencement and amortized as revenue over the entire term of the lease. Brokerage commissions were $27,084.
23
In August 2022, a tenant notified the Company of its intention to extend its leases for one year through September 30, 2023 as follows:
(1) 25,423 square feet of office space at the Company’s 9 Bond Street building in Brooklyn, New York.
(2) 38,109 square feet of office space at the Company’s Jamaica, New York property.
In September 2022, a tenant who occupies 10,000 square feet at the Company’s Levittown, New York property exercised its option to renew the lease for another five-year term through May 4, 2028.
On October 4, 2022, a tenant who occupies 1,140 square feet of retail space at the Company’s Nine Bond Street building in Brooklyn, New York agreed to terminate their lease effective October 31, 2022. In July 2023 another retail tenant took occupancy of this space.
Effective November 1, 2022, a tenant who occupies 10,000 square feet at the Company’s Jowein building in Brooklyn, New York agreed to terminate their lease. The loss in rental income will approximate $120,000 per annum.
In December 2022, a tenant who occupies 5,167 square feet at the Company’s Nine Bond Street building in Brooklyn, New York agreed to terminate the lease. The loss in rental income will approximate $204,000 per annum.
In February 2023, a tenant who occupies 46,421 square feet at the Company’s Nine Bond Street building in Brooklyn, New York agreed to terminate their lease effective March 31, 2023. The loss in rental income will be approximately $1,000,000 per annum.
In February 2023, an office tenant who occupies 3,300 square feet at the Company’s Jowein building in Brooklyn, New York extended their lease an additional ten years until June 30, 2033.
In February 2023, an office tenant who occupies 10,569 square feet at the Company’s Jowein building in Brooklyn, New York extended their lease an additional year until March 31, 2024.
In April 2023, a tenant who occupies 108,000 square feet of warehouse space at the Company’s building in Circleville, Ohio extended their lease an additional three years until May 31, 2026. Brokerage commissions were $88,841.
In April 2023, a retail tenant who occupies 28,634 square feet at the Company’s Jamaica, New York property extended their lease an additional ten years until February 28, 2034.
In May 2023, an office tenant who occupies 2,000 square feet at the Company’s Jamaica, New York property extended their lease an additional year until June 30, 2024.
In June 2023, a retail tenant who occupies 63 square feet at the Company’s Nine Bond Street building in Brooklyn, New York extended their lease an additional five years until June 30, 2028.
CASH FLOWS:
The following table summarizes our cash flow activity for the fiscal years ended July 31, 2023 and 2022:
| 2023 | 2022 | |||||||
| Net cash provided by operating activities | $ | 2,221,910 | $ | 1,689,445 | ||||
| Net cash (used) by investing activities | (821,876 | ) | (855,667 | ) | ||||
| Net cash (used) by financing activities | (1,252,196 | ) | (1,198,600 | ) | ||||
CASH FLOWS FROM OPERATING ACTIVITIES:
Deferred Expenses: The Company had an additional $88,841 for brokerage commissions incurred from one new tenant at the Company’s Circleville, Ohio building.
Accounts Payable and Accrued Expenses: The Company had a balance due on July 31, 2023 for brokerage commissions of $134,649.
CASH FLOWS FROM INVESTING ACTIVITIES:
During the year ended July 31, 2023, the Company had expenditures at its Fishkill, New York building of:
| (1) | $346,771 for canopy work. The total cost was $1,498,410 and was completed in October 2022. |
| (2) | $211,205 for elevator modernization. The estimated total cost is $892,000 and is anticipated to be completed in January 2024. |
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| (3) | $43,101 for a store front. |
| (4) | $37,552 for lighting. |
During the year ended July 31, 2023, the Company completed facade restoration at its 9 Bond Street building in Brooklyn, New York for a total cost of $321,013. A new standpipe tank was also installed at a total cost of $48,000. A new boiler was installed at the Company’s Circleville, Ohio property for a total cost of $27,100. Costs for steelwork of $11,566 were incurred at the Company’s Jowein building in Brooklyn, NY.
RELATED PARTY TRANSACTIONS:
The Company has two operating leases with Weinstein Enterprises, Inc. (“Landlord”), an affiliated company, principally owned by the Chairman of the Board of Directors of both the Company and Landlord. One lease is for building, improvements, and land (Premises”) located at Jamaica Avenue at 169th Street, Jamaica, New York. Another lease is for Premises located at 504-506 Fulton Street, Brooklyn, New York.
In July 2022, the Company entered into lease agreements with Landlord as follows:
| (1) | Jamaica Avenue at 169th Street, Jamaica, New York - Giving the Company four five-year option periods to extend its lease beyond May 31, 2030 for a total of twenty years through May 31, 2050. In April 2023, the Company exercised the first five-year option period, extending the lease expiration date to May 31, 2035. As of July 31, 2023, it is not reasonably certain the remaining three options to extend the lease will be exercised by the Company. |
| (2) | 504-506 Fulton Street, Brooklyn, New York – In July 2022 the lease agreement was modified to increase monthly lease payments from $30,188 per month to $34,716 per month commencing on May 1, 2026 through April 30, 2031. |
Rent payments and expense relating to these two operating leases with Landlord follow:
| Rent Payments | Rent Expense | |||||||||||||||
| Year Ended July 31 | Year Ended July 31 | |||||||||||||||
| Property | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Jamaica Avenue at 169th Street | $ | 625,000 | $ | 625,000 | $ | 1,395,185 | $ | 1,517,437 | ||||||||
| 504-506 Fulton Street | 362,250 | 362,250 | 381,195 | 353,001 | ||||||||||||
| Total | $ | 987,250 | $ | 987,250 | $ | 1,776,380 | $ | 1,870,438 | ||||||||
The following summarizes assets and liabilities related to these two leases:
| Right-Of-Use Assets | Liabilities | ||||||||||||||||||
| July 31 | July 31 | ||||||||||||||||||
| Property | 2023 | 2022 | 2023 | 2022 | Expiration Date | ||||||||||||||
| Jamaica Avenue at 169th Street | $ | 11,430,657 | $ | 11,442,093 | $ | 5,210,087 | $ | 4,451,338 | May 31, 2035 | ||||||||||
| 504-506 Fulton Street | 2,431,554 | 2,683,787 | 2,556,421 | 2,789,709 | April 30, 2031 | ||||||||||||||
| Total | $ | 13,862,211 | $ | 14,125,880 | $ | 7,766,508 | $ | 7,241,047 | |||||||||||
Upon termination of the Jamaica, New York lease, currently in 2035, all premises included in operating lease right-of-use assets plus leasehold improvements will be turned over to the Landlord.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS:
This section, Management’s Discussion and Analysis of Financial Condition and Results of Operations, other sections of the Annual Report on Form 10-K and this Annual Report to Shareholders and other reports and verbal statements made by our representatives from time to time may contain forward-looking statements that are based on our assumptions, expectations and projections about us and the real estate industry. These include statements regarding our expectations about revenues, our liquidity, or expenses and our continued growth, among others. Such forward-looking statements by their nature involve a degree of risk and uncertainty. We caution that a variety of factors, including but not limited to the factors described under Item 1A, “Risk Factors” in our Form 10-K for the fiscal year ended July 31, 2023 and the following, could cause business conditions and our results to differ materially from what is contained in forward-looking statements:
| • | changes in the rate of economic growth, or inflation, in the United States; | |
| • | the ability to obtain credit from financial institutions and the related costs; | |
| • | changes in the financial condition of our customers; | |
| • | changes in regulatory environment; | |
| • | lease cancellations; | |
| • | changes in our estimates of costs; | |
| • | war and/or terrorist attacks on facilities where services are or may be provided; | |
| • | outcomes of pending and future litigation; | |
| • | increasing competition by other companies; | |
| • | compliance with our loan covenants; | |
| • | recoverability of claims against our customers and others by us and claims by third parties against us; | |
| • | changes in estimates used in our critical accounting policies; and | |
| • | pandemics, such as COVID-19. |
Other factors and assumptions not identified above were also involved in the formation of these forward-looking statements and the failure of such other assumptions to be realized, as well as other factors, may also cause actual results to differ materially from those projected. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described above in connection with any forward-looking statements that may be made by us.
We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any additional disclosures we make in proxy statements, Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and Current Reports on Form 8-K filed with the U. S. Securities and Exchange Commission.
CONTROLS AND PROCEDURES:
The Company’s management reviewed the Company’s internal controls and procedures and the effectiveness of these controls. As of July 31, 2023, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rules 13a-14(c) and 15d-14(c) of the Securities Exchange Act of 1934. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in its periodic SEC filings.
There was no change in the Company’s internal controls over financial reporting or in other factors during the Company’s last fiscal quarter that materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
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COMMON STOCK INFORMATION:
Effective November 8, 1999, the Company’s common stock commenced trading on The Nasdaq Capital Market tier of The Nasdaq Stock Market under the Symbol: “Mays”. Such shares were previously traded on The Nasdaq National Market. Effective August 1, 2006, NASDAQ became operational as an exchange in NASDAQ-Listed Securities. It is now known as The NASDAQ Stock Market LLC.
On September 5, 2023, the Company had approximately 800 shareholders of record.
J.W. MAYS, INC.
OFFICERS
| Lloyd J. Shulman | Chairman of the Board, Chief Executive Officer and President | |
| Mark S. Greenblatt | Vice President, Chief Financial Officer and Treasurer | |
| Ward N. Lyke, Jr. | Vice President and Assistant Treasurer | |
| George Silva | Vice President-Operations | |
| Salvatore Cappuzzo | Secretary |
BOARD OF DIRECTORS
| Jennifer L. Caruso3 | Practicing Attorney | |
| Robert L. Ecker2,3,4,6 | Partner in the law firm of Ecker, Ecker & Associates, LLP | |
| Mark S. Greenblatt3,5 | Vice President, Chief Financial Officer and Treasurer, J.W. Mays, Inc. | |
| Steven Gurney-Goldman2,3 | Solil Management, LLC | |
| John J. Pearl2,3,4,6 | Retired partner in the accounting firm of D’Arcangelo & Co., LLP | |
| Dean L. Ryder1,2,3,4,6 | President, Putnam County National Bank | |
| Lloyd J. Shulman1,3 | Chairman of the Board, Chief Executive Officer and President, J.W. Mays, Inc. |
Committee Assignments Key:
| 1 | Member of Executive Committee |
| 2 | Member of Audit Committee |
| 3 | Member of Investment Advisory Committee |
| 4 | Member of Compensation Committee |
| 5 | Member of Disclosure Committee (Mr. Lyke and Mr. Lance Myers, of Counsel to Holland & Knight LLP, are also members) |
| 6 | Member of Nominating Committee |
FORM 10-K ANNUAL REPORT
Copies of the Company’s Form 10-K Annual Report to the U. S. Securities and Exchange Commission for the fiscal year ended July 31, 2023 will be furnished without charge to shareholders upon written request to:
Secretary, J.W. Mays, Inc.
9 Bond Street
Brooklyn, New York 11201-5805.
Copies of the Notice of Meeting, Proxy Statement, Proxy Card and Annual Report to Shareholders are available at: http://www.astproxyportal.com/ast/03443
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