Restatement and Revision of Previously Issued Consolidated Financial Statements

3 Months Ended

Mar. 31, 2022

Restatement and Revision of Previously Issued Consolidated Financial Statements

Restatement and Revision of Previously Issued Consolidated Financial Statements

Note 3 – Restatement and Revision of Previously Issued Consolidated Financial Statements

The Company identified errors in its previously issued annual and interim financial statements that required restatements, as well as errors that were determined individually, and in the aggregate, quantitatively and qualitatively immaterial that required revisions.  As such the Company has restated and revised its (i) consolidated financial statements as of and for the year ended December 31, 2021, 2020 and 2019 as filed in the amendment to our Annual Report on Form 10-K for the year ended December 31, 2021 filed on the date hereof; and (ii) consolidated interim financial statements for the three months ended March 31, 2022 and 2021, collectively referred to as the “Restatement” or “Revision”, as illustrated in this note to the consolidated financial statements.

During the three month period ended June 30, 2022, the Company identified areas of restatement errors. Adjustments depicted in the tables below relate to the following:

(a) an error in the accounting treatment regarding the overcapitalization of internally allocated construction related costs related to the development project at 77 Greenwich Street;  

(b) a disclosure error in the classification on the balance sheets of our 77 Greenwich property which was classified as real estate under development in real estate and is now classified as residential condominium units for sale; and

(c) a disclosure error in the classification on the statements of cash flows of our 77 Greenwich property relating to  additions and sales of condominiums where they were reported in the statement of cash flows under cash flows from investing activities when they should have been reported in cash flows from operations.  

During the three month period ended March 31, 2022, the Company identified one revision error. Adjustments depicted in the tables below relate to the following:

(d) an error in the accounting treatment of a property that, upon emergence from bankruptcy, was classified as real estate under development, but was not subsequently reported as an operating property when circumstances at the property changed.

During the year ended December 31, 2021, the Company identified one revision error. Adjustments depicted in the tables below relate to the following:

(e) an error in the accounting treatment regarding certain advertising and marketing costs which were capitalized to construction costs at the development project at 77 Greenwich Street and should have been expensed as incurred.  

CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share amounts)

	As of March 31, 2022
	As Previously		Restatement
	Reported		Impact		As Restated
ASSETS
Real estate, net	$	294,108	$	(227,403)	$	66,705
Residential condominium units for sale		—		214,591		214,591
Cash and cash equivalents		1,381		—		1,381
Restricted cash		14,232		—		14,232
Prepaid expenses and other assets, net		5,007		—		5,007
Investments in unconsolidated joint ventures		18,517		—		18,517
Receivables		60		—		60
Deferred rents receivable		118		—		118
Right-of-use asset		1,224		—		1,224
Intangible assets, net		8,247		—		8,247
Total assets	$	342,894	$	(12,812)	$	330,082
LIABILITIES
Loans payable, net	$	210,768	$	—	$	210,768
Corporate credit facility, net		33,090		—		33,090
Secured line of credit, net		12,750		—		12,750
Note payable		5,863		—		5,863
Accounts payable and accrued expenses		19,876		—		19,876
Lease liability		1,347		—		1,347
Warrant liability		1,515		—		1,515
Total liabilities		285,209		—		285,209
Commitments and Contingencies
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value; 40,000,000 shares authorized; no shares issued and outstanding		—		—		—
Preferred stock, $0.01 par value; 2 shares authorized, no shares issued and outstanding at March 31, 2022		—		—		—
Special stock, $0.01 par value; 1 share authorized, issued and outstanding at March 31, 2022		—		—		—
Common stock, $0.01 par value; 79,999,997 shares authorized; 43,387,563 shares issued at March 31, 2022; 36,836,146 shares outstanding at March 31, 2022		434		—		434
Additional paid-in capital		144,451		—		144,451
Treasury stock (6,551,447 shares at March 31, 2022)		(57,461)		—		(57,461)
Accumulated other comprehensive loss		(1,224)		—		(1,224)
Accumulated deficit		(28,515)		(12,812)		(41,327)
Total stockholders' equity		57,685		(12,812)		44,873
Total liabilities and stockholders' equity	$	342,894	$	(12,812)	$	330,082

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

(In thousands, except per share amounts)

	For the Three Months Ended March 31, 2022
	As Previously		Restatement
	Reported		Impact		As Restated
Revenues
Rental revenues	$	1,260	$	—	$	1,260
Other income		16		—		16
Sale of residential condominium units		6,278		(209)		6,069
Total revenues		7,554		(209)		7,345
Operating Expenses
Property operating expenses		548		256		804
Real estate taxes		74		316		390
General and administrative		1,139		363		1,502
Pension related costs		158		—		158
Cost of sale - residential condominium units		6,273		(552)		5,721
Depreciation and amortization		1,003		—		1,003
Total operating expenses		9,195		383		9,578
Operating loss		(1,641)		(592)		(2,233)
Equity in net income from unconsolidated joint ventures		746		—		746
Unrealized loss on warrants		(369)		—		(369)
Interest expense, net		(802)		(1,967)		(2,769)
Interest expense - amortization of deferred finance costs		(402)		(34)		(436)
Loss before taxes		(2,468)		(2,593)		(5,061)
Tax expense		(70)		—		(70)
Net loss attributable to common stockholders	$	(2,538)	$	(2,593)	$	(5,131)
Other comprehensive loss:
Unrealized gain on pension liability		119		—		119
Comprehensive loss attributable to common stockholders	$	(2,419)	$	(2,593)	$	(5,012)
Loss per share - basic and diluted	$	(0.07)	$	(0.07)	$	(0.14)
Weighted average number of common shares - basic and diluted		37,104		37,104		37,104

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

FOR THE THREE MONTHS ENDED MARCH 31, 2022
											Accumulated
				Additional							Other
	Common Stock			Paid-In		Treasury Stock			Accumulated		Comprehensive
	Shares	Amount		Capital		Shares	Amount		Deficit		Loss		Total
As Previously Reported
Balance as of December 31, 2021	43,024	$	430	$	144,282	(6,398)	$	(57,166)	$	(25,977)	$	(1,343)	$	60,226
Net loss attributable to common stockholders	—		—		—	—		—		(2,538)		—		(2,538)
Settlement of stock awards	364		4		—	(153)		(295)		—		—		(291)
Unrealized gain on pension liability	—		—		—	—		—		—		119		119
Stock-based compensation expense	—		—		169	—		—		—		—		169
Balance as of March 31, 2022	43,388	$	434	$	144,451	(6,551)	$	(57,461)	$	(28,515)	$	(1,224)	$	57,685
Restatement Impact
Balance as of December 31, 2021	—	$	—	$	—	—	$	—	$	(10,219)	$	—	$	(10,219)
Net loss attributable to common stockholders	—		—		—	—		—		(2,593)		—		(2,593)
Settlement of stock awards	—		—		—	—		—		—		—		—
Unrealized gain on pension liability	—		—		—	—		—		—		—		—
Stock-based compensation expense	—		—		—	—		—		—		—		—
Balance as of March 31, 2022	—	$	—	$	—	—	$	—	$	(12,812)	$	—	$	(12,812)
As Restated
Balance as of December 31, 2021	43,024	$	430	$	144,282	(6,398)	$	(57,166)	$	(36,196)	$	(1,343)	$	50,007
	—		—		—	—		—		—		—		—
Net loss attributable to common stockholders	—		—		—	—		—		(5,131)		—		(5,131)
Settlement of stock awards	364		4		—	(153)		(295)		—		—		(291)
Unrealized gain on pension liability	—		—		—	—		—		—		119		119
Stock-based compensation expense	—		—		169	—		—		—		—		169
Balance as of March 31, 2022	43,388	$	434	$	144,451	(6,551)	$	(57,461)	$	(41,327)	$	(1,224)	$	44,873

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	For the Three Months Ended March 31, 2022
	As Previously		Restatement
	Reported		Impact		As Restated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss attributable to common stockholders	$	(2,538)	$	(2,593)	$	(5,131)
Adjustments to reconcile net loss attributable to common stockholders to net cash (used in) provided by operating activities:
Depreciation and amortization and amortization of deferred finance costs		1,405		34		1,439
Stock-based compensation expense		123		—		123
Deferred rents receivable		(4)				(4)
Other non-cash adjustments - pension expense		119		—		119
Unrealized loss on warrants		369		—		369
Equity in net loss from unconsolidated joint ventures		(746)		—		(746)
Distributions from unconsolidated joint ventures		168		—		168
(Increase) decrease in operating assets:
Residential condominium units for sale		(5)		3,553		3,548
Receivables		24		—		24
Prepaid expenses and other assets, net		(1,008)		—		(1,008)
Increase in operating liabilities:
Accounts payable and accrued expenses		1,474		—		1,474
Net cash (used in) provided by operating activities		(619)		994		375
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate		(4,704)		4,640		(64)
Net proceeds from the sale of residential condominium units		5,634		(5,634)		—
Net cash provided by (used in) investing activities		930		(994)		(64)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans and corporate credit facility		2,390		—		2,390
Repayment of loans		(11,642)		—		(11,642)
Settlement of stock awards		(291)		—		(291)
Net cash used in financing activities		(9,543)		—		(9,543)
NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		(9,232)		—		(9,232)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD		24,845		—		24,845
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	$	15,613	$	—	$	15,613
CASH AND CASH EQUIVALENTS, BEGINNING PERIOD	$	4,310	$	—	$	4,310
RESTRICTED CASH, BEGINNING OF PERIOD		20,535		—		20,535
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD	$	24,845	$	—	$	24,845
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	1,381	$	—	$	1,381
RESTRICTED CASH, END OF PERIOD		14,232		—		14,232
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	$	15,613	$	—	$	15,613
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for: Interest	$	3,050	$	—	$	3,050
Cash paid during the period for: Taxes	$	66	$	—	$	66
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Accrued development costs included in accounts payable and accrued expenses	$	9,332	$	(9,332)	$	—
Capitalized amortization of deferred financing costs and warrants	$	617	$	(34)	$	583
Capitalized stock-based compensation expense	$	46	$	(28)	$	18

CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share amounts)

	As of March 31, 2021
	As Previously		Restatement
	Reported		Impact		As Restated
ASSETS
Real estate, net	$	289,294	$	(219,941)	$	69,353
Residential condominium units for sale		—		213,223		213,223
Cash and cash equivalents		5,034		—		5,034
Restricted cash		6,694		—		6,694
Prepaid expenses and other assets, net		3,343		—		3,343
Investments in unconsolidated joint ventures		18,814		—		18,814
Receivables		919		—		919
Deferred rents receivable		102		—		102
Right-of-use asset		1,478		—		1,478
Intangible assets, net		8,987		—		8,987
Total assets	$	334,665	$	(6,718)	$	327,947
LIABILITIES
Loans payable, net	$	207,317	$	—	$	207,317
Corporate credit facility, net		32,104		—		32,104
Secured line of credit, net		8,950		—		8,950
Note payable		5,863		—		5,863
Accounts payable and accrued expenses		14,368		—		14,368
Lease liability		1,626		—		1,626
Warrant liability		3,196		—		3,196
Total liabilities		273,424		—		273,424
Commitments and Contingencies
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value; 40,000,000 shares authorized; no shares issued and outstanding		—		—		—
Preferred stock, $0.01 par value; 2 shares authorized, no shares issued and outstanding at March 31, 2021		—		—		—
Special stock, $0.01 par value; 1 share authorized, issued and outstanding at March 31, 2021		—		—		—
Common stock, $0.01 par value; 79,999,997 shares authorized; 38,840,508 shares issued at March 31, 2021; 32,442,633 shares outstanding at March 31, 2021		388		—		388
Additional paid-in capital		136,151		—		136,151
Treasury stock (6,397,875 shares at March 31, 2021)		(57,166)		—		(57,166)
Accumulated other comprehensive loss		(2,040)		—		(2,040)
Accumulated deficit		(16,092)		(6,718)		(22,810)
Total stockholders' equity		61,241		(6,718)		54,523
Total liabilities and stockholders' equity	$	334,665	$	(6,718)	$	327,947

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

(In thousands, except per share amounts)

	For the Three Months Ended March 31, 2021
	As Previously		Revision
	Reported		Impact		As Revised
Revenues
Rental revenues	$	299	$	148	$	447
Other income		46		—		46
Total revenues		345		148		493
Operating Expenses
Property operating expenses		1,655		252		1,907
Real estate taxes		20		59		79
General and administrative		1,203		40		1,243
Pension related costs		163		—		163
Depreciation and amortization		715		285		1,000
Total operating expenses		3,756		636		4,392
Operating loss		(3,411)		(488)		(3,899)
Equity in net loss from unconsolidated joint ventures		(372)		—		(372)
Unrealized loss on warrants		(1,977)		—		(1,977)
Interest expense, net		(601)		(274)		(875)
Interest expense - amortization of deferred finance costs		(193)		(68)		(261)
Loss before taxes		(6,554)		(830)		(7,384)
Tax expense		(35)		—		(35)
Net loss attributable to common stockholders	$	(6,589)	$	(830)	$	(7,419)
Other comprehensive loss:
Unrealized gain on pension liability		119		—		119
Comprehensive loss attributable to common stockholders	$	(6,470)	$	(830)	$	(7,300)
Loss per share - basic and diluted	$	(0.20)	$	(0.03)	$	(0.23)
Weighted average number of common shares - basic and diluted		32,591		32,591		32,591

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

FOR THE THREE MONTHS ENDED MARCH 31, 2021
											Accumulated
				Additional							Other
	Common Stock			Paid-In		Treasury Stock			Accumulated		Comprehensive
	Shares	Amount		Capital		Shares	Amount		Deficit		Loss		Total
As Previously Reported
Balance as of December 31, 2020	38,345	$	383	$	135,978	(6,173)	$	(56,791)	$	(9,503)	$	(2,159)	$	67,908
Net loss attributable to common stockholders	—		—		—	—		—		(6,589)		—		(6,589)
Settlement of stock awards	496		5		—	(225)		(375)		—		—		(370)
Unrealized gain on pension liability	—		—		—	—		—		—		119		119
Stock-based compensation expense	—		—		173	—		—		—		—		173
Balance as of March 31, 2021	38,841	$	388	$	136,151	(6,398)	$	(57,166)	$	(16,092)	$	(2,040)	$	61,241
Revision Impact
Balance as of December 31, 2020	—	$	—	$	—	—	$	—	$	(5,888)	$	—	$	(5,888)
Net loss attributable to common stockholders	—		—		—	—		—		(830)		—		(830)
Settlement of stock awards	—		—		—	—		—		—		—		—
Unrealized gain on pension liability	—		—		—	—		—		—		—		—
Stock-based compensation expense	—		—		—	—		—		—		—		—
Balance as of March 31, 2021	—	$	—	$	—	—	$	—	$	(6,718)	$	—	$	(6,718)
As Revised
Balance as of December 31, 2020	38,345	$	383	$	135,978	(6,173)	$	(56,791)	$	(15,391)	$	(2,159)	$	62,020
Net loss attributable to common stockholders	—		—		—	—		—		(7,419)		—		(7,419)
Settlement of stock awards	496		5		—	(225)		(375)		—		—		(370)
Unrealized gain on pension liability	—		—		—	—		—		—		119		119
Stock-based compensation expense	—		—		173	—		—		—		—		173
Balance as of March 31, 2021	38,841	$	388	$	136,151	(6,398)	$	(57,166)	$	(22,810)	$	(2,040)	$	54,523

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	For the Three Months Ended March 31, 2021
	As Previously		Restatement
	Reported		Impact		As Restated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss attributable to common stockholders	$	(6,589)	$	(830)	$	(7,419)
Adjustments to reconcile net loss attributable to common stockholders to net cash used in operating activities:
Depreciation and amortization and amortization of deferred finance costs		908		353		1,261
Stock-based compensation expense		133		—		133
Deferred rents receivable		(12)		—		(12)
Other non-cash adjustments - pension expense		119		—		119
Unrealized loss on warrants		1,977		—		1,977
Equity in net loss from unconsolidated joint ventures		372		—		372
Distributions from unconsolidated joint ventures		194		—		194
(Increase) decrease in operating assets:
Residential condominium units for sale		—		(11,672)		(11,672)
Receivables		47		—		47
Prepaid expenses and other assets, net		(371)		—		(371)
Increase in operating liabilities:
Accounts payable and accrued expenses		1,294		—		1,294
Net cash used in operating activities		(1,928)		(12,149)		(14,077)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate		(12,202)		12,149		(53)
Net cash used in investing activities		(12,202)		12,149		(53)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans and corporate credit facility		8,980		—		8,980
Proceeds from secured line of credit		1,200		—		1,200
Payment of finance costs		(21)		—		(21)
Settlement of stock awards		(370)		—		(370)
Net cash provided by financing activities		9,789		—		9,789
NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		(4,341)		—		(4,341)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD		16,069		—		16,069
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	$	11,728	$	—	$	11,728
CASH AND CASH EQUIVALENTS, BEGINNING PERIOD	$	6,515	$	—	$	6,515
RESTRICTED CASH, BEGINNING OF PERIOD		9,554		—		9,554
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD	$	16,069	$	—	$	16,069
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	5,034	$	—	$	5,034
RESTRICTED CASH, END OF PERIOD		6,694		—		6,694
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	$	11,728	$	—	$	11,728
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for: Interest	$	4,130	$	—	$	4,130
Cash paid during the period for: Taxes	$	46	$	—	$	46
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Accrued development costs included in accounts payable and accrued expenses	$	7,496	$	(7,496)	$	—
Capitalized amortization of deferred financing costs and warrants	$	760	$	(68)	$	692
Capitalized stock-based compensation expense	$	39	$	(2)	$	37