10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q/A

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-14784

INCOME OPPORTUNITY REALTY INVESTORS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Nevada	75-2615944
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

1800 Valley View Lane, Suite 300, Dallas, Texas 75234

(Address of principal executive offices)

(Zip Code)

(469) 522-4200

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.        xYes         ¨No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). *         ¨Yes         ¨No

* The registrant has not yet been phased into the interactive data requirements

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer   ¨	Accelerated filer	¨
Non-accelerated filer     ¨ (Do not check if smaller reporting company)	Smaller reporting  company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨Yes     xNo

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $.01 par value	4,168,214
(Class)	(Outstanding at August 5, 2011)

EXPLANATORY NOTE

The purpose of this Amendment No. 1 to Income Opportunity Realty Investors, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, filed with the Securities and Exchange Commission on August 15, 2011, is solely to furnish Exhibit 101 to the Form 10-Q and make conforming changes to Item 6. Exhibits.  Exhibit 101 provides the financial statements and related notes from the Form 10-Q formatted in XBRL (eXtensible Business Reporting Language). No other substantive changes have been made to the Form 10-Q. This Amendment does not reflect events that may have occurred subsequent to the original filing date.

ITEM 6. EXHIBITS

The following documents are filed herewith as exhibits or incorporated by reference as indicated:

Exhibit Number	Description
3.0	Articles of Incorporation of Income Opportunity Realty Investors, Inc., (incorporated by reference to Appendix C to the Registrant’s Registration Statement on Form S-4, dated February 12, 1996).
3.1	Bylaws of Income Opportunity Realty Investors, Inc. (incorporated by reference to Appendix D to the Registrant’s Registration Statement on Forms S-4 dated February 12, 1996).
10.0	Advisory Agreement dated as of April 30, 2011 between Income Opportunity Realty Investors, Inc. and Pillar Income Asset Management, Inc. (incorporated by reference to Exhibit 10.3 to the registrant’s current on Form 10-Q for event of May 2, 2011).
31.1	Certification by the Principal Executive Officer pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended (incorporated by reference to Exhibit 31.1 of the Quarterly Report on Form 10-Q filed with the Commission on August 15, 2011).
31.2	Certification by the Principal Financial Officer pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended (incorporated by reference to Exhibit 31.2 of the Quarterly Report on Form 10-Q filed with the Commission on August 15, 2011).
32.1	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (incorporated by reference to Exhibit 32.1 of the Quarterly Report on Form 10-Q filed with the Commission on August 15, 2011).
101	Interactive data files pursuant to Rule 405 of Regulation S-T.

SIGNATURE PAGE

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

	INCOME OPPORTUNITY REALTY INVESTORS, INC.
Date: September 13, 2011	By:	/s/ Daniel J. Moos
		Daniel J. Moos
		President and Chief Executive Officer (Principal Executive Officer)
Date: September 13, 2011	By:	/s/ Gene S. Bertcher
		Gene S. Bertcher
		Executive Vice President and Chief Financial Officer (Principal Financial Officer)

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CONSOLIDATED BALANCE SHEETS PARENTHETICALS (USD $)	Jun. 30, 2011	Dec. 31, 2010
Common Stock, par or stated value	$ 0.01	$ 0.01
Common Stock, shares authorized	10,000,000	10,000,000
Common Stock, shares issued	4,173,675	4,173,675
Treasury stock, at cost	5,461	5,461

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CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Rental and other property revenues (including $77 and $65 for the three months ended, $153 and $126 for the six months ended 2011 and 2010 respectively from affiliates and related parties)	$ 77	$ 65	$ 159	$ 126
Property operating expenses (including $2 and $0 for the three months ended, $4 and $0 for the six months ended 2011 and 2010 respectively from affiliates and related parties)	(11)	35	46	87
General and administrative (including $61 and $53 for the three months ended, $116 and $62 for the six months ended 2011 and 2010 respectively from affiliates and related parties)	181	123	278	179
Provision on impairment of real estate assets	1,474	0	1,474	0
Advisory fee to affiliates	211	216	431	434
Total operating expenses	1,855	374	2,229	700
Operating loss	(1,778)	(309)	(2,070)	(574)
Interest income from related party notes receivable	723	621	1,017	1,330
Mortgage and loan interest	(420)	(330)	(729)	(663)
Earnings from unconsolidated subsidiaries and investees	(50)	0	(50)	(3)
Total other income (expenses)	253	291	238	670
Income (loss) before gain on land sales, non-controlling interest, and taxes	(1,525)	(18)	(1,832)	96
Income (loss) from continuing operations before tax	(1,525)	(18)	(1,832)	96
Income tax benefit		0		48
Net income (loss)	$ (1,525)	$ (18)	$ (1,832)	$ 144
Income (Loss) from Continuing Operations, Per Basic Share	$ (0.37)	$ 0.00	$ (0.44)	$ 0.03
Earnings per share - basic -Net income (loss) applicable to common shares	$ (0.37)	$ 0.00	$ (0.44)	$ 0.03
Earnings per share - diluted - Income (loss) from continuing operations	$ (0.37)	$ 0.00	$ (0.44)	$ 0.03
Earnings per share - diluted - Net income (loss) applicable to common shares	$ (0.37)	$ 0.00	$ (0.44)	$ 0.03
Weighted average common share used in computing earnings per share	4,168,214	4,168,214	4,168,214	4,168,214
Weighted average common share used in computing diluted earnings per share	4,168,214	4,168,214	4,168,214	4,168,214

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Document and Entity Information	3 Months Ended
	Jun. 30, 2011	Aug. 05, 2011
Document and Entity Information
Entity Registrant Name	INCOME OPPORTUNITY REALTY INVESTORS INC /TX/
Document Type	10-Q
Document Period End Date	Jun. 30, 2011
Amendment Flag	false
Entity Central Index Key	0000949961
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		4,168,214
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2

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RECEIVABLE FROM AND PAYABLE TO AFFILIATES

3 Months Ended

Jun. 30, 2011

RECEIVABLE FROM AND PAYABLE TO AFFILIATES

RECEIVABLE FROM AND PAYABLE TO AFFILIATES

NOTE 6. RECEIVABLE FROM AND PAYABLE TO AFFILIATES

From time to time, IOT and its affiliates and related parties have made unsecured advances to each other which include transactions involving the purchase, sale, and financing of property.  In addition, we have a cash management agreement with our advisor.  The agreement provides for excess cash to be invested in and managed by our advisor Pillar, an affiliated entity.  The table below reflects the various transactions between IOT, Pillar, Prime, and TCI (dollars in thousands): 

		TCI		Prime			Pillar			Total
Balance, December 31, 2010		$	48,598	$	-		$	-		$	48,598
	Cash transfers		-		2,409			(66	)		2,343
	Advisory fees		-		(293	)		(138	)		(431	)
	Cost reimbursements		-		(116	)		-			(116	)
	Expenses paid by advisor		-		73			108			181
	Financing (mortgage payments)		-		718			-			718
	Interest income		377		640			-			1,017
	POA fees		-		(2	)		-			(2	)
	Property transfers		-		-			(1	)		(1	)
	Purchase of obligation		3,332		(3,429	)		97			-
Balance, June 30, 2011		$	52,307	$	-		$	-		$	52,307

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REAL ESTATE ACTIVITY

3 Months Ended

Jun. 30, 2011

REAL ESTATE ACTIVITY

REAL ESTATE ACTIVITY

NOTE 2. REAL ESTATE ACTIVITY

Our properties consist of 203.3 acres of land held for future development or sale.

The properties that we have sold in prior periods to a related party under common control and have deferred the recognition of the sale are treated as “subject to sales contract” on the Consolidated Balance Sheets and are listed in detail in Schedule III, “Real Estate and Accumulated Depreciation” in the Company’s Annual Report on Form 10-K.  These properties were sold to a related party in order to help facilitate an appropriate debt or organizational restructure and may or may not be transferred back to the seller upon resolution.  These properties have mortgages that are secured by the property and many have corporate guarantees.  According to the loan documents, we are currently in default on these mortgages primarily due to lack of payment although we are actively involved in discussions with every lender in order to settle or cure the default situation.  We have reviewed each asset and taken impairment to the extent we feel the value of the property was less than our current basis.

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RELATED PARTY TRANSACTIONS

3 Months Ended

Jun. 30, 2011

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

NOTE 8. RELATED PARTY TRANSACTIONS

We have historically engaged in and will continue to engage in certain business transactions with related parties, including but not limited to asset acquisitions and dispositions.  Transactions involving related parties cannot be presumed to be carried out on an arm’s length basis due to the absence of free market forces that naturally exist in business dealings between two or more unrelated entities.  Related party transactions may not always be favorable to our business and may include terms, conditions and agreements that are not necessarily beneficial to or in the best interest of our company.

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COMMITMENTS AND CONTINGENCIES

3 Months Ended

Jun. 30, 2011

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

NOTE 9. COMMITMENTS AND CONTINGENCIES

Litigation. IOT is involved in various lawsuits arising in the ordinary course of business.  Management is of the opinion that the outcome of these lawsuits will have no material impact on the Company’s financial condition, results of operations or liquidity.

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OPERATING SEGMENTS

3 Months Ended

Jun. 30, 2011

OPERATING SEGMENTS

OPERATING SEGMENTS

NOTE 7. OPERATING SEGMENTS

Our segments are based on our method of internal reporting which classifies our operations by property type.  Our segments are land and other.  Presented below is the operating segment information for the three and six months ended June 30, 2011 and 2010 (dollars in thousands):

For the Three Months Ended June 30, 2011	Land			Other			Total
Operating revenue	$	77		$	-		$	77
Operating expenses		(13	)		2			(11	)
Depreciation and amortization		-			-			-
Mortgage and loan interest		420			-			420
Interest income		-			723			723
Gain on land sales		-			-			-
Segment operating income (loss)	$	(330	)	$	721		$	391
Capital expenditures		-			-			-
Assets		28,087			-			28,087
For the Three Months Ended June, 2010	Land			Other			Total
Operating revenue	$	65		$	-		$	65
Operating expenses		38			(3	)		35
Depreciation and amortization		-			-			-
Mortgage and loan interest		330			-			330
Interest income		-			621			621
Gain on land sales		-			-			-
Segment operating income (loss)	$	(303	)	$	624		$	321
Capital expenditures		-			-			-
Assets		29,561			-			29,561

The table below reconciles the segment information to the corresponding amounts in the Statements of Operations:

	For the Three Months Ended
	June 30,
	2011			2010
Segment operating income	$	391		$	321
Other non-segment items of income (expense)
General and administrative		(181	)		(123	)
Advisory fee		(211	)		(216	)
Provision on impairment		(1,474	)
Equity in earnings of investees		(50	)		-
Deferred tax benefit		-			-
Loss from continuing operations	$	(1,525	)	$	(18	)

The table below reconciles the segment assets to total assets:

	June 30,
	2011		2010
Segment assets	$	28,087	$	29,561
Investments in real estate partnerships		39		89
Other assets and receivables		88,506		87,437
Total assets	$	116,632	$	117,087

For the Six Months Ended June 30, 2011	Land			Other		Total
Operating revenue	$	159		$	-	$	159
Operating expenses		39			7		46
Depreciation and amortization		-			-		-
Mortgage and loan interest		729			-		729
Interest income		-			1,017		1,017
Gain on land sales		-			-		-
Segment operating income (loss)	$	(609	)	$	1,010	$	401
Capital expenditures		-			-		-
Assets		28,087			-		28,087
For the Six Months Ended June 30, 2010	Land			Other		Total
Operating revenue	$	126		$	-	$	126
Operating expenses		86			1		87
Depreciation and amortization		-			-		-
Mortgage and loan interest		663			-		663
Interest income		-			1,330		1,330
Gain on land sales		-			-		-
Segment operating income (loss)	$	(623	)	$	1,329	$	706
Capital expenditures		-			-		-
Assets		29,561			-		29,561

The table below reconciles the segment information to the corresponding amounts in the Statements of Operations:

	For the Six Months Ended
	June 30,
	2011			2010
Segment operating income	$	401		$	706
Other non-segment items of income (expense)
General and administrative		(278	)		(179	)
Advisory fee		(431	)		(434	)
Provision on impairment		(1,474	)
Equity in earnings of investees		(50	)		3
Deferred tax benefit		-			48
Income (loss) from continuing operations	$	(1,832	)	$	144

The table below reconciles the segment assets to total assets:

	June 30,
	2011		2010
Segment assets	$	28,087	$	29,561
Investments in real estate partnerships		39		89
Other assets and receivables		88,506		87,437
Total assets	$	116,632	$	117,087

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CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (USD $)	Total	Common Stock Shares	Common Stock Amount	Treasury Stock	Paid-in capital	Retained Earnings
Balance, at Dec. 31, 2010	73,532	4,173,675	42	(39)	61,955	11,574
Net loss	$ (1,832)	$ 0	$ 0	$ 0	$ 0	$ (1,832)
Balance, at Jun. 30, 2011	71,700	4,173,675	42	(39)	61,955	9,742

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DISCONTINUED OPERATIONS

3 Months Ended

Jun. 30, 2011

DISCONTINUED OPERATIONS

DISCONTINUED OPERATIONS

NOTE 3. DISCONTINUED OPERATIONS

We apply the provisions of ASC Topic 360, “Property, Plant and Equipment”, which requires that long-lived assets that are to be disposed of by sale be measured at the lesser of (1) book value or (2) fair value less cost to sell.  In addition, it requires that one accounting model be used for long-lived assets to be disposed of by sale and broadens the presentation of discontinued operations to include more disposal transactions.

As of June 30, 2011, there were no properties held for sale or sold during the six months ended June 30, 2011.

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NOTES AND INTEREST RECEIVABLE FROM AFFILIATE

3 Months Ended

Jun. 30, 2011

NOTES AND INTEREST RECEIVABLE FROM AFFILIATE

NOTES AND INTEREST RECEIVABLE FROM AFFILIATE

NOTE 4. NOTES AND INTEREST RECEIVABLE FROM AFFILIATE

Junior Mortgage Loans.    Junior mortgage loans are loans secured by mortgages that are subordinate to one or more prior liens on the underlying real estate. Recourse on the loans ordinarily includes the real estate which secures the loan, other collateral and personal guarantees of the borrower.

At June 30, 2011, we had junior mortgage loans and accrued interest receivable from affiliates, net of allowances, totaling $34.0 million.  The loans mature at various dates through December 2027 with interest rates ranging from prime + 2% to 5.25%.   Payments are due from surplus cash flow or sale or refinancing of the underlying properties. These notes are cross-collateralized to the extent that any surplus cash available from the sale or refinance of any of the properties underlying these notes will be used to repay outstanding interest and principal for the remaining notes.  The allowance on the notes was a purchase allowance that was netted against the notes when acquired (dollars in thousands):

Borrower		Date	Rate	Amount	Security
Performing loans:
	Transcontinental Realty Investors, Inc. (Centura Land)	09/14	prime+2%	$          6,900	10 acres of Centura Land
	Unified Housing Foundation, Inc. (Lakeshore Villas)	12/27	5.25%	2,000	Unsecured
	Unified Housing Foundation, Inc. (Lakeshore Villas)	12/27	5.25%	6,363	Membership interest in Housing for Seniors of Humble, LLC
	United Housing Foundation, Inc. (Cliffs of El Dorado)	12/27	5.25%	2,990	100% Interest in Unified Housing of McKinney, LLC
	United Housing Foundation, Inc. (Echo Station)	12/27	5.25%	1,481	100% Interest in Unified Housing of Temple, LLC
	United Housing Foundation, Inc. (Limestone Canyon)	07/15	5.25%	3,057	100% Interest in Unified Housing of Austin, LLC
	United Housing Foundation, Inc. (Limestone Ranch)	07/15	5.25%	2,250	100% Interest in Unified Housing of Vista Ridge, LLC
	United Housing Foundation, Inc. (Parkside Crossing)	12/27	5.25%	1,936	100% Interest in Unified Housing of Parkside Crossing, LLC
	United Housing Foundation, Inc. (Sendero Ridge)	07/15	5.25%	5,174	100% Interest in Unified Housing of Sendero Ridge, LLC
	United Housing Foundation, Inc. (Timbers of Terrell)	12/27	5.25%	1,323	100% Interest in Unified Housing of Terrell, LLC
	United Housing Foundation, Inc. (Tivoli)	12/27	5.25%	1,826	100% Interest in Unified Housing of Tivoli, LLC
	Accrued interest			520
Total Performing				$        35,820
	Allowance for estimated losses			(1,826)
Total				$        33,994
All are related party notes.

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NOTES AND INTEREST PAYABLE

3 Months Ended

Jun. 30, 2011

NOTES AND INTEREST PAYABLE

NOTES AND INTEREST PAYABLE

NOTE 5. NOTES AND INTEREST PAYABLE

The following table lists the mortgage notes payable as of June 30, 2011 (dollars in thousands):

Project	Maturity	Principal Balance
Centura Land	09/18/14	$	6,900
Eagle Crest	11/01/11		2,367
Three Hickory	06/01/20		5
Mercer Crossing/Travelers Land  *	08/10/11		27,635
Accrued interest			1,057
		$	37,964

* This mortgage note represents the allocation of a note with an aggregate outstanding balance of $36.0 million as of June 30, 2011.  The remaining balance of this note of $8.4 million is held on the books of Transcontinental Realty Investors, Inc., an affiliated entity.  As a joint grantor of the mortgage loan, we have joint and several liability of the obligations and liabilities of the loan in its entirety, which include, but are not limited to, payment of all unpaid and accrued interest and principal for the entire outstanding loan balance.  Since April 11, 2010, interest has accrued on the loan. On April 28, 2011, an agreement was made with the lender to make monthly payments of $150,000 until October 5, 2011 when the balance is due in full.  Upon reconciliation of the balance due to the lender, an adjustment was made to re-allocate the loan balance between TCI and IOT.

The properties that we have sold in prior periods to a related party under common control and have deferred the recognition of the sale are treated as “subject to sales contract” on the Consolidated Balance Sheets and are listed in detail in Schedule III, “Real Estate and Accumulated Depreciation” in the Company’s Annual Report on Form 10-K.  These properties were sold to a related party in order to help facilitate an appropriate debt or organizational restructure and may or may not be transferred back to the seller upon resolution.  These properties have mortgages that are secured by the property and many have corporate guarantees.  According to the loan documents, we are currently in default on these mortgages primarily due to lack of payment although we are actively involved in discussions with every lender in order to settle or cure the default situation.  We have reviewed each asset and taken impairment to the extent we feel the value of the property was less than our current basis.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Depreciation and amortization	$ 0	$ 3
Earnings from unconsolidated subsidiaries and investees	50	(3)
Provision on impairment of real estate assets	1,474	0
Accrued interest receivable	0	(500)
Other assets	61	(141)
Accrued interest payable	948	94
Other liabilities	25	(10)
Net cash provided by (used in) operating activities	726	(413)
Proceeds from notes receivable	2,585	2,371
Affiliate receivable	(3,709)	(1,728)
Net cash provided by (used in) investing activities	(1,124)	643
Payments on notes payable	414	(234)
Deferred financing costs	6	5
Net cash provided by (used in) financing activities	420	(229)
Net increase in cash and cash equivalents	22	1
Cash and cash equivalents, beginning of period	20	2
Cash and cash equivalents, end of period	42	3
Cash paid for interest	716	652
Cash received for income taxes	$ 0	$ 48

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ORGANIZATION AND BASIS OF PRESENTATION

3 Months Ended

Jun. 30, 2011

ORGANIZATION AND BASIS OF PRESENTATION

ORGANIZATION AND BASIS OF PRESENTATION

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION

Organization

As used herein, the terms “IOT,” “the Company,” “we,” “our,” “us” refer to Income Opportunity Realty Investors, Inc., a Nevada corporation, individually or together with its subsidiaries.  Income Opportunity Realty Investors, Inc. is the successor to a California business trust organized on December 14, 1984, which commenced operations on April 10, 1985.  The Company is headquartered in Dallas, Texas and its common stock trades on the American Stock Exchange under the symbol “AMEX: IOT”.

Transcontinental Realty Investors, Inc. (“TCI”) owns approximately 85.2% of the Company’s common stock.  Effective July 17, 2009, IOT’s financial results were consolidated with those of American Realty Investors, Inc. (“ARL”) and TCI and their subsidiaries.  IOT is a “C” Corporation for U.S. federal income tax purposes and files an annual consolidated income tax return with ARL.  ARL is the common parent for the consolidated group.

IOT invests in real estate through direct ownership, leases and partnerships and it also invests in mortgage loans on real estate.   Prior to April 30, 2011, Prime Income Asset Management, LLC (“Prime”) was the Company’s external Advisor and Cash Manager.  Prime also served as an Advisor and Cash Manager to ARL and TCI. Effective April 30, 2011, Pillar Income Asset Management, Inc. (“Pillar”) became the Company’s external Advisor and Cash Manager under the same terms as the previous agreement with Prime. Pillar also serves as an Advisor and Cash Manager to ARL and TCI.  Prior to December 31, 2010, Triad Realty Services, L.P. (“Triad”) managed the Company’s commercial properties and Regis Realty I, LLC (“Regis Realty”) provided brokerage services.  Triad and Regis Realty are affiliates of Prime.  Effective January 1, 2011, Regis Realty Prime, LLC (“Regis”), an affiliate of Prime, manages our commercial properties and provides brokerage services under the same terms as the previous agreements with Triad and Regis Realty, for a term of five years. IOT engages third-party companies to lease and manage its apartment properties.  We have no employees.

Our primary business is investing in real estate.  Land held for development or sale is our sole operating segment.  As of June 30, 2011, our land consisted of 203.3 acres.  There is a warehouse located on one of the land parcels that is used for storage.  All of our land holdings are located in Texas. The principal source of revenue for the Company is interest income on over $35.8 million of note receivables due from affiliated and/or related parties.

Basis of presentation

The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States, or GAAP, have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading.  In the opinion of management, all adjustments (consisting of normal recurring matters) considered necessary for a fair presentation have been included.  The results of operations for the six months ended June 30, 2011 are not necessarily indicative of the results that may be expected for other interim periods or for the full fiscal year.

The year-end Balance Sheet at December 31, 2010, was derived from the audited financial statements at that date, but does not include all of the information and disclosures required by GAAP for complete financial statements.  For further information, refer to the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.  Certain 2010 financial statement amounts have been reclassified to conform to the 2011 presentation, including adjustments for discontinued operations.

Principles of consolidation

The accompanying Consolidated Financial Statements include our accounts, our subsidiaries, generally all of which are wholly-owned, and all entities in which we have a controlling interest.  Arrangements that are not controlled through voting or similar rights are accounted for as a Variable Interest Entity (“VIE”), in accordance with the provisions and guidance of ASC Topic 810 “Consolidation”, whereby we have determined that we are a primary beneficiary of the VIE and meet certain criteria of a sole general partner or managing member as identified in accordance with Emerging Issues Task Force (“EITF”) Issue 04-5, Investor’s Accounting for an Investment in a Limited Partnership when the Investor is the Sole General Partner and the Limited Partners have Certain Rights (“EITF 04-5”).  VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders as a group lack adequate decision making ability, the obligation to absorb expected losses or residual returns of the entity, or have voting rights that are not proportional to their economic interests.  The primary beneficiary generally is the entity that provides financial support and bears a majority of the financial risks, authorizes certain capital transactions, or makes operating decisions that materially affect the entity’s financial results.  All significant intercompany balances and transactions have been eliminated in consolidation.

  In determining whether we are the primary beneficiary of a VIE, we consider qualitative and quantitative factors, including, but not limited to: the amount and characteristics of our investment; the obligation or likelihood for us or other investors to provide financial support; our and the other investors’ ability to control or significantly influence key decisions for the VIE; and the similarity with and significance to the business activities of us and the other investors.  Significant judgments related to these determinations include estimates about the current future fair values and performance of real estate held by these VIEs and general market conditions.  As of June 30, 2011, IOT was not the primary beneficiary of a VIE.

For entities in which we have less than a controlling financial interest or entities where we are not deemed to be the primary beneficiary, the entities are accounted for using the equity method of accounting.  Accordingly, our share of the net earnings or losses of these entities is included in net income.  Our investment in TCI Eton Square, LP is accounted for under the equity method.

Real estate, depreciation, and impairment

Real estate assets are stated at the lower of depreciated cost or fair value, if deemed impaired. Major replacements and betterments are capitalized and depreciated over their estimated useful lives.  Depreciation is computed on a straight-line basis over the useful lives of the properties (buildings and improvements – 10-40 years; furniture, fixtures and equipment – 5-10 years).  We continually evaluate the recoverability of the carrying value of our real estate assets using the methodology prescribed in ASC Topic 360, “Property, Plant and Equipment”.  Factors considered by management in evaluating impairment of our existing real estate assets held for investment include significant declines in property operating profits, annually recurring property operating losses and other significant adverse changes in general market conditions that are considered permanent in nature.  Under ASC Topic 360, a real estate asset held for investment is not considered impaired if the undiscounted, estimated future cash flows of an asset (both the annual estimated cash flow from future operations and the estimated cash flow from the theoretical sale of the asset) over its estimated holding period are in excess of the asset’s net book value at the balance sheet date.  If any real estate asset held for investment is considered impaired, a loss is provided to reduce the carrying value of the asset to its estimated fair value.

Real estate held for sale

We periodically classify real estate assets as “held for sale”.  An asset is classified as held for sale after the approval of our board of directors and after an active program to sell the asset has commenced.  Upon the classification of a real estate asset as held for sale, the carrying value of the asset is reduced to the lower of its net book value or its estimated fair value, less costs to sell the asset.  Subsequent to the classification of assets as held for sale, no further depreciation expense is recorded.  Real estate assets held for sale are stated separately on the accompanying Consolidated Balance Sheets.  Upon a decision to no longer market as an asset for sale, the asset is classified as an operating asset and depreciation expense is reinstated.  The operating results of real estate assets held for sale and sold are reported as discontinued operations in the accompanying statements of operations.  Income from discontinued operations includes the revenues and expenses, including depreciation and interest expense, associated with the assets.  This classification of operating results as discontinued operations applies retroactively for all periods presented.  Additionally, gains and losses on assets designated as held for sale are classified as part of discontinued operations.

Cost capitalization

Costs related to planning, developing, leasing and constructing a property are capitalized and classified as Real Estate in the Consolidated Balance Sheets.  We capitalize interest to qualifying assets under development based on average accumulated expenditures outstanding during the period.  In capitalizing interest to qualifying assets, we first use the interest incurred on specific project debt, if any, and next use the weighted average interest rate of non-project specific debt.

We capitalize interest, real estate taxes and certain operating expenses until building construction is substantially complete and the building is ready for its intended use, but no later than one year from the cessation of major construction activity.

We capitalize leasing costs which include commissions paid to outside brokers, legal costs incurred to negotiate and document a lease agreement and any internal costs that may be applicable.  We allocate these costs to individual tenant leases and amortize them over the related lease term.

Fair value measurement

We apply the guidance in ASC Topic 820, “Fair Value Measurements and Disclosures”, to the valuation of real estate assets.  These provisions define fair value as the price that would be received to sell an asset or paid to transfer a liability in a transaction between market participants at the measurement date, establish a hierarchy that prioritizes the information used in developing fair value estimates and require disclosure of fair value measurements by level within the fair value hierarchy.  The hierarchy gives the highest priority to quoted prices in active markets (Level 1 measurements) and the lowest priority to unobservable data (Level 3 measurements), such as the reporting entity’s own data.

The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date and includes three levels defined as follows:

Level 1 –	Unadjusted quoted prices for identical and unrestricted assets or liabilities in active markets.
Level 2 –	Quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 –	Unobservable inputs that are significant to the fair value measurement.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Newly issued accounting pronouncements

We have considered all other newly issued accounting guidance that is applicable to our operations and the preparation of our statements, including that which we have not yet adopted.  We do not believe that any such guidance will have a material effect on our financial position or results of operation.

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SUBSEQUENT EVENTS

3 Months Ended

Jun. 30, 2011

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

NOTE 10. SUBSEQUENT EVENTS

On July 5, 2011, a warehouse and 13.0 acres of land known as Eagle Crest located in Farmers Branch, Texas, which was sold to a related party and treated on the books as “subject to sales contract”, was transferred to the lender for credit against the loan balance. Any impairment necessary related to the inability to recover our original investment has been realized in 2011 and the sale that was deferred will be recognized in the third quarter, when ownership transferred to a third party.

On July 5, 2011, Three Hickory land located in Farmers Branch, Texas, which was sold to a related party and treated on the books as “subject to sales contract”, was transferred to the lender for credit against the loan balance. Any impairment necessary related to the inability to recover our original investment has been realized in 2011 and the sale that was deferred will be recognized in the third quarter, when ownership transferred to a third party.

On August 2, 2011, Centura land located in Dallas, Texas, which was sold to a related party and treated on the books as “subject to sales contract”, was transferred to the lender for credit against the loan balance. Any impairment necessary related to the inability to recover our original investment has been realized in 2011 and the sale that was deferred will be recognized in the third quarter, when ownership transferred to a third party.

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CONSOLIDATED BALANCE SHEETS (USD $)	Jun. 30, 2011	Dec. 31, 2010
Real estate land holdings, at cost	$ 24,511	$ 24,511
Real estate subject to sales contracts, at cost	3,576	5,050
Total real estate	28,087	29,561
Notes and interest receivable from related parties	35,820	38,405
Less allowance for doubtful accounts	(1,826)	(1,826)
Total notes and interest receivable	33,994	36,579
Cash and cash equivalents	42	20
Investments in unconsolidated subsidiaries and investees, subject to sales contract	39	89
Receivable and accrued interest from related parties	52,307	48,598
Other assets	2,163	2,240
Total assets	116,632	117,087
Notes and interest payable	35,577	34,214
Notes and interest payable related to subject to sales contracts	2,387	2,390
Deferred revenue (from sales to related parties)	6,550	6,550
Accounts payable and other liabilities (including $1 in 2011 and $1 in 2010 to affiliated and related parties)	418	401
Total Liabilities	44,932	43,555
Commitments and contingencies	0	0
Common stock, $.01 par value, authorized 10,000,000 shares; issued 4,173,675 shares in 2011 and 2010	42	42
Treasury stock at cost, 5,461 in 2011 and 2010	(39)	(39)
Paid-in capital	61,955	61,955
Retained earnings	9,742	11,574
Total shareholders' equity	71,700	73,532
Total liabilities and shareholders' equity	$ 116,632	$ 117,087