(7)

OTHER LIABILITIES AND DEFERRED REVENUE; OTHER REVENUES

Other revenues for the third quarter and first nine months of 2018 and 2017 consist of:

	Third Quarter of 2018		Third Quarter of 2017
	(in thousands)
Deferred revenue and other	$	193	$	94
	$	193	$	94

	First Nine Months of 2018		First Nine Months of 2017
	(in thousands)
Settlement gain	$	1,318	$	-
Sale of commercial building		-		1,496
Deferred revenue and other		367		336
	$	1,685	$	1,832

Deferred revenue and other includes the recognition of deferred revenue related to an oil and gas lease noted below, as well as fees and forfeited deposits from customers earned by AMREP Southwest, together with miscellaneous other income items.

Refer to Note 9 to the consolidated financial statements contained in the 2017 Form 10-K for detail about the settlement agreement entered into between Palm Coast and the State of Florida in the first quarter of 2018. In June 2009, Palm Coast received $3,000,000 pursuant to an agreement with the State of Florida (the “Award Agreement”) as part of the incentives made available in connection with the consolidation of the Company’s fulfillment services operations at its Palm Coast, Florida location. The Award Agreement included certain performance requirements in terms of job retention, job creation and capital investment which, if not met by Palm Coast, entitled the State of Florida to obtain the return of a portion, or all, of the $3,000,000. Palm Coast had not met certain of the performance requirements in the Award Agreement. During the first quarter of 2018, Palm Coast entered into a Settlement Agreement and Mutual General Release (the “Settlement Agreement”) with the State of Florida. Pursuant to the Settlement Agreement, (1) the Award Agreement was terminated, (2) each of the parties released all claims relating to the Award Agreement that the releasing party may have had against the other party and (3) Palm Coast agreed to pay the State of Florida $1,763,000 as follows: (a) $163,000 during the first quarter of 2018 and (b) 40 quarterly payments of $40,000 each, without interest, on the first business day of each calendar quarter starting on October 1, 2017 and ending on July 1, 2027. Palm Coast timely paid the State of Florida $163,000 during the first quarter of 2018, $40,000 during the second quarter of 2018 and $40,000 during the third quarter of 2018, leaving a balance owed to the State of Florida of $1,520,000 as of January 31, 2018.

In the Company’s consolidated financial statements and as a result of entering into the Settlement Agreement, Palm Coast reduced its previously recorded liability of $3,000,000 and a related $26,000 interest accrual by $1,620,000 to $1,406,000 by recognizing a pre-tax gain of $1,318,000 and recording deferred revenue of $302,000. The $1,318,000 pre-tax gain was determined based on depreciation previously taken on assets acquired with Award Agreement funds that were retained by Palm Coast and was recognized in Other revenues during the first nine months of 2018. The $302,000 deferred revenue will be recognized over the remaining life of these assets (approximately seven years from January 31, 2018), with $61,000 having been recognized during the first nine months of 2018 resulting in a deferred revenue balance of $241,000 as of January 31, 2018. As a result of paying the State of Florida $163,000 during the first quarter of 2018, $40,000 during the second quarter of 2018 and $40,000 during the third quarter of 2018, Palm Coast recognized $41,000 of imputed interest expense and reduced its remaining balance sheet liability of $1,406,000 as of the date of the Settlement Agreement to $1,204,000 as of January 31, 2018. These balance sheet liability numbers are less than the amounts owed to the State of Florida of $1,763,000 as of the date of the Settlement Agreement and $1,520,000 as of January 31, 2018 because they have been adjusted to reflect the present values of these deferred non-interest bearing obligations. In February 2018, the Company, Palm Coast and the State of Florida entered into an agreement with respect to the remaining payment obligations under the Settlement Agreement (see Note 10).

In addition, refer to Note 10 to the consolidated financial statements contained in the 2017 Form 10-K for detail about the Oil and Gas Lease and the Addendum thereto with Thrust Energy, Inc. and Cebolla Roja, LLC. No royalties under the Lease were received during the first nine months of 2018. Revenue from this transaction is being recorded over the lease term and approximately $57,000 and $171,000 was recognized during the third quarter and first nine months of each of 2018 and 2017. At January 31, 2018, there was approximately $133,000 of deferred revenue remaining to be recognized before the end of the lease term in September 2018.

During the first quarter of 2017, a subsidiary of AMREP Southwest sold a single tenant retail commercial building in Rio Rancho, New Mexico, which resulted in a pre-tax gain of $1,496,000 that was recognized in Other revenues during the first nine months of 2018.