See Notes to Accompanying Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Summary of Significant Accounting Policies:
Beginning March 2020 and continuing through April 2022, we experienced
an increase in late payments due to the impact of COVID-19 and the related reductions in economic activity from ongoing government mandated
business regulations. The effects of COVID-19 on our tenants have been reflected in our allowance for credit losses for accounts receivable.
In limited circumstances, we have agreed to rent deferrals for certain tenants. We also continue to experience volatility in the valuation
of our equity investments through April 30, 2022.
Looking ahead, the full impact of COVID-19 and continuing government
regulation on our business is unknown and highly unpredictable. Our past results may not be indicative of our future performance and historical
trends in revenues, income from operations, net income, earnings per share, cash provided by operating activities, among others, may differ
materially. For example, to the extent the pandemic continues to disrupt economic activity nationally and in New York, NY, like other
businesses, it could adversely affect our business operations and financial results through prolonged decreases in revenue, credit deterioration
of our tenants, depressed economic activity, or declines in capital markets. In addition, many of our expenses are less variable in nature
and may not correlate to changes in revenues. The extent of the impact will depend on a number of factors, including the duration and
severity of the pandemic; distribution of vaccines; and the macroeconomic impact of government measures to contain the spread of the virus
and related government regulations.
Basis of Presentation
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 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 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.
The interim financial statements are prepared pursuant to the instructions
for reporting on Form 10-Q and Article 8 of Regulations S-X of the SEC Rules and Regulations. The July 31, 2021 consolidated balance sheet
was derived from audited financial statements but does not include all disclosures required by GAAP. The interim financial statements
and notes thereto should be read in conjunction with the financial statements and notes included in the Company's latest Form 10-K Annual
Report for the fiscal year ended July 31, 2021. In the opinion of management, the interim financial statements reflect all adjustments
of a normal recurring nature necessary for a fair statement of the results for interim periods. The results of operations for the current
period are not necessarily indicative of the results for the entire fiscal year ending July 31, 2022 or any other period.
As of April 30, 2022, the economic impacts of COVID-19 continue to
evolve. As a result, many of our estimates and assumptions required increased judgment and carry a higher degree of variability and volatility.
As additional information becomes available, our estimates may change materially in future periods.
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 write-off receivables to bad debt expense 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 business and economic impacts caused by COVID-19. The continued volatility in
market conditions and evolving shifts in credit trends are difficult to predict causing variability and volatility that may have a material
effect on our allowance for uncollectible accounts receivables in future periods.
As of April 30, 2022 and July 31, 2021, and primarily because of the
economic effects of COVID-19, the Company recorded an allowance for uncollectible receivables in the amount of $399,000 and $318,000,
respectively, as an offset to receivables.
Activity in the allowance for uncollectible receivables
and bad debt expense for each period follows:
| |
Allowance for | | |
| | |
| | |
| | |
| |
| |
Uncollectible | | |
| | |
| | |
| | |
| |
| |
Accounts Receivable | | |
Bad Debt Expense | |
| |
Period Ended | | |
Three Months Ended | | |
Nine Months Ended | |
| |
April 30 | | |
July 31 | | |
April 30 | | |
April 30 | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Beginning balance | |
$ | 318,000 | | |
$ | 82,000 | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | |
Charge-offs | |
| – | | |
| – | | |
| – | | |
| – | | |
| 133,350 | | |
| – | |
Reserve adjustments | |
| 81,000 | | |
| 236,000 | | |
| (5,000 | ) | |
| 135,000 | | |
| 81,000 | | |
| 209,000 | |
Ending balance | |
$ | 399,000 | | |
$ | 318,000 | | |
$ | (5,000 | ) | |
$ | 135,000 | | |
$ | 214,350 | | |
$ | 209,000 | |
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 |
|
18-40 years |
Improvements to leased property |
|
3-10 years |
Fixtures and equipment |
|
7-12 years |
Other |
|
3-5 years |
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.
During the nine months ended April 30, 2022, the
Company had expenditures of $92,941 for steel work at its Jowein building in Brooklyn, New York.
During this period, the Company also had expenditures of $161,337 for renovations at its 9 Bond Street building in Brooklyn, New York,
and $1,050,680 at its Fishkill, New York building including:
| 1) | $241,587 to resurface the parking lot. The total cost was $342,316 and was completed in August 2021. |
| 2) | $240,908 for canopy work. |
| 3) | $421,919 for elevator modernization. The total cost is $892,000 and is anticipated to be completed in May 2023. |
| 5) | Storefront and sidewalk expenditures of $60,617. |
During the nine months ended April 30, 2021, the
Company had expenditures of:
| 1) | $963,754 at its Fishkill, New York building; including $351,810 for a second lobby, $593,702 for façade work, and $18,242
for various other improvements. |
| 2) | $241,240 for stairwell and sidewalk upgrades at its Jamaica, New York building. |
| 3) | $576,454 at its Jowein building in Brooklyn, New York; including $428,509 for new tenant improvements and $147,945 for roof work. |
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
through operations plus estimated disposition proceeds. Events or changes in circumstances that may occur 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. 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 April 30, 2022 and July 31, 2021, the Company has determined
there was no impairment of its property and equipment.
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 4 to 21 years,
using the straight-line method. If a lease is terminated early, such costs are expensed.
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.
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. 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
The computation of the annual expected effective tax rate at each interim
period requires certain estimates and assumptions including, but not limited to, the expected operating income for the year and future
periods, projections of the proportion of income (or loss), and permanent and temporary differences. The accounting estimates used to
compute the provision for income taxes may change as new events occur, more experience is acquired, or as additional information is obtained.
The evolving facts and circumstances surrounding COVID-19 could result in the application of different provisions of tax laws and cause
our estimated annual effective tax rate to change significantly through the remainder of the year. To the extent the estimated annual
effective tax rate changes during a quarter, the effect of the change on prior quarters is included in tax expense for the current quarter.
The Company had a federal net operating loss carryforward approximating
$10,316,000 as of July 31, 2021 available to offset future taxable income. As of July 31, 2021, the Company had unused state and
city net operating loss carryforwards of approximately $12,356,000 for state and $10,321,000 for city, available to offset future
state and city taxable income. The net operating loss carryforwards will begin to expire, if not used, in 2035.
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, 2016,
changes in the law required the state capital-based tax will be phased out over a 7-year period. 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.
Recently adopted accounting standards:
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 for the year ended July 31, 2020. Rent deferrals included in receivables were $280,000 and $364,963 as of April 30, 2022
and July 31, 2021, respectively.
2.Income Per Share of Common Stock:
Income per share has been computed by dividing the net income for the
periods by the weighted average number of shares of common stock outstanding during the periods, adjusted for the purchase of treasury
stock. Shares used in computing income per share were 2,015,780 for the three and nine months ended April 30, 2022 and 2021,
respectively.
3.Marketable Securities:
The Company’s marketable securities consist of investments in
equity securities. 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 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 April 30, 2022 and July 31,
2021.
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 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.
Fair value measurements at reporting date
| |
Total | | |
| | |
| | |
| | |
Total | | |
| | |
| | |
| |
| |
April 30, | | |
| | |
| | |
| | |
July 31, | | |
| | |
| | |
| |
Description | |
2022 | | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
2021 | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
Assets: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Marketable securities | |
$ | 3,374,954 | | |
$ | 3,374,954 | | |
$ | – | | |
$ | – | | |
$ | 3,901,093 | | |
$ | 3,901,093 | | |
$ | – | | |
$ | – | |
As of April 30, 2022 and July 31, 2021, the Company's
marketable securities were classified as follows:
| |
April 30, 2022 | | |
July 31, 2021 | |
| |
| | |
Gross | | |
Gross | | |
| | |
| | |
Gross | | |
Gross | | |
| |
| |
| | |
Unrealized | | |
Unrealized | | |
Fair | | |
| | |
Unrealized | | |
Unrealized | | |
Fair | |
| |
Cost | | |
Gains | | |
Losses | | |
Value | | |
Cost | | |
Gains | | |
Losses | | |
Value | |
Mutual funds | |
$ | 962,518 | | |
$ | 361,703 | | |
$ | – | | |
$ | 1,324,221 | | |
$ | 984,869 | | |
$ | 619,972 | | |
$ | – | | |
$ | 1,604,841 | |
Equity securities | |
| 1,150,072 | | |
| 900,661 | | |
| – | | |
| 2,050,733 | | |
| 1,355,961 | | |
| 940,291 | | |
| – | | |
| 2,296,252 | |
| |
$ | 2,112,590 | | |
$ | 1,262,364 | | |
$ | – | | |
$ | 3,374,954 | | |
$ | 2,340,830 | | |
$ | 1,560,263 | | |
$ | – | | |
$ | 3,901,093 | |
Investment income consists of the following:
| |
Three Months Ended | | |
Nine Months Ended | |
| |
April 30 | | |
April 30 | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Interest income | |
$ | 2 | | |
$ | 271 | | |
$ | 3 | | |
$ | 565 | |
Dividend income | |
| 3,465 | | |
| 7,689 | | |
| 160,553 | | |
| 90,380 | |
Gain on sale of marketable securities | |
| – | | |
| – | | |
| 48,213 | | |
| 83,176 | |
Total | |
$ | 3,467 | | |
$ | 7,960 | | |
$ | 208,769 | | |
$ | 174,121 | |
4.Financial Instruments and Credit Risk Concentrations:
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.
Five tenants accounted for approximately 70% and 66% of receivables
as of April 30, 2022 and July 31, 2021, respectively. During the nine months ended April 30, 2022 and 2021, two tenants accounted
for 31% and 30% of total rental revenue, respectively.
5.Long-Term Debt – Mortgages:
| |
Current | |
| |
| | |
| |
| |
Annual | |
Final | |
| | |
| |
| |
Interest | |
Payment | |
April 30, | | |
July 31, | |
| |
Rate | |
Date | |
2022 | | |
2021 | |
(1) Bond St. building, Brooklyn, NY | |
4.375% | |
12/1/2024 | |
$ | 3,028,313 | | |
$ | 3,817,450 | |
(2) Fishkill building | |
3.98% | |
4/1/2025 | |
| 3,727,416 | | |
| 3,832,182 | |
Deferred financing costs | |
| |
| |
| (102,271 | ) | |
| (130,855 | ) |
Net | |
| |
| |
$ | 6,653,458 | | |
$ | 7,518,777 | |
(1) In November 2019, the Company refinanced the remaining balance
of a $6,000,000, 3.54% interest rate loan with another bank for $5,255,920 plus an additional $144,080 for a total of $5,400,000.
The interest rate on the new loan is fixed at 4.375%. The loan is self-liquidating over a period of five years and secured
by the Nine Bond Street land and building in Brooklyn, New York.
(2) In March 2020, the Company obtained a loan with a bank in
the amount of $4,000,000 to finance renovations and brokerage commissions relating to space leased to a community college at the
Fishkill, New York building. The loan is secured by the Fishkill, New York land and building; amortized over a 20-year period with
an interest rate of 3.98% and is due in five years.
6.Note Payable:
In April 2020, the Company obtained a $722,726 loan, with an interest
rate of .98% per annum, issued by a bank through the Small Business Administration’s (“SBA”) Paycheck Protection Program
(“PPP”) under Division A. Title I of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act’’).
On May 26, 2021, the SBA authorized full forgiveness of the Company’s PPP loan in the amount of $722,726, plus accrued interest.
Such proceeds were recorded as a full reduction of the note payable and extinguishment of debt income in the year ending July 31,
2021.
7.Operating Leases:
Lessor
The Company leases office and retail space to tenants under operating
leases in commercial buildings. The rental terms range from approximately 5 to 49 years. The leases provide for the
payment of fixed base rent payable monthly in advance as well as reimbursements of real estate taxes and common area costs. The Company
has elected to account for lease revenues and the reimbursements of common area costs as a single component included as rental income
in our consolidated statements of operations.
The following table disaggregates the Company's
revenues by lease and non-lease components:
| |
Three Months Ended | | |
Nine Months Ended | |
| |
April 30 | | |
April 30 | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Base rent - fixed | |
$ | 4,995,037 | | |
$ | 4,643,772 | | |
$ | 14,545,998 | | |
$ | 13,705,903 | |
Reimbursements of common area costs | |
| 233,016 | | |
| 245,744 | | |
| 588,929 | | |
| 552,439 | |
Non-lease components (real estate taxes) | |
| 256,029 | | |
| 272,372 | | |
| 757,051 | | |
| 785,407 | |
Rental income | |
$ | 5,484,082 | | |
$ | 5,161,888 | | |
$ | 15,891,978 | | |
$ | 15,043,749 | |
Future minimum non-cancelable rental income for
leases with initial or remaining terms of one year or more is as follows:
| |
As of April 30, 2022 | |
| |
Company | | |
| | |
| |
| |
Owned | | |
Leased | | |
| |
Fiscal Year | |
Property | | |
Property | | |
Total | |
For the remainder of 2022 | |
$ | 3,576,791 | | |
$ | 1,659,578 | | |
$ | 5,236,369 | |
2023 | |
| 9,933,651 | | |
| 3,484,190 | | |
| 13,417,841 | |
2024 | |
| 7,814,976 | | |
| 3,026,387 | | |
| 10,841,363 | |
2025 | |
| 7,465,714 | | |
| 2,643,176 | | |
| 10,108,890 | |
2026 | |
| 6,616,668 | | |
| 2,508,693 | | |
| 9,125,361 | |
2027 | |
| 5,908,609 | | |
| 2,366,238 | | |
| 8,274,847 | |
After 2027 | |
| 28,420,420 | | |
| 5,116,243 | | |
| 33,536,663 | |
Total | |
$ | 69,736,829 | | |
$ | 20,804,505 | | |
$ | 90,541,334 | |
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.
Operating lease costs for leased real property was exceeded by sublease
rental income from the Company’s real estate operations as follows:
| |
Three Months Ended April 30 | | |
Nine Months Ended April 30 | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Sublease income | |
$ | 1,813,958 | | |
$ | 1,900,150 | | |
$ | 5,411,096 | | |
$ | 5,368,431 | |
Operating lease cost | |
| (832,715 | ) | |
| (832,713 | ) | |
| (2,498,135 | ) | |
| (2,498,133 | ) |
Excess of sublease income over lease cost | |
$ | 981,243 | | |
$ | 1,067,437 | | |
$ | 2,912,961 | | |
$ | 2,870,298 | |
| |
Three Months Ended April 30 | | |
Nine Months Ended April 30 | |
Other information: | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Operating cash flows from operating leases | |
$ | 529,788 | | |
$ | 507,182 | | |
$ | 1,585,075 | | |
$ | 1,496,795 | |
The following is a maturity analysis of the annual undiscounted cash flows of the operating lease liabilities as of April 30, 2022:
| |
Operating | |
Period Ended April 30, | |
Leases | |
2023 | |
$ | 2,128,723 | |
2024 | |
| 2,145,753 | |
2025 | |
| 2,163,029 | |
2026 | |
| 2,201,559 | |
2027 | |
| 2,269,387 | |
Thereafter | |
| 23,624,495 | |
Total undiscounted cash flows | |
| 34,532,946 | |
Less: present value discount | |
| (7,689,099 | ) |
Total Lease Liabilities | |
$ | 26,843,847 | |
As of April 30, 2022, our operating leases had a weighted average remaining
lease term of 16.87 years and a weighted average discount rate of 2.86%.
8. Employees' Retirement Plan:
The Company sponsors a noncontributory Money Purchase Plan covering
substantially all its non-union employees. Operations were charged $112,469 and $337,500 as contributions to the Plan for the
three and nine months ended April 30, 2022, respectively, and $109,760 and $329,743 as contributions to the plan for the three
and nine months ended April 30, 2021, respectively.
Multi-employer plan:
The Company contributes to a union sponsored multi-employer pension
plan covering its union employees. Company contributions to the pension plan were $29,740 and $67,239 for the three and nine
months ended April 30, 2022, respectively, and $17,925 and $48,498 for the three and nine months ended April 30, 2021, respectively.
Contributions and costs are determined in accordance with the provisions of negotiated labor contracts or terms of the plan. The Company
also contributes to a union sponsored health benefit plan.
Contingent Liability for Pension Plan:
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 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, 2020 |
Certified zone status: |
|
Critical and declining status |
Status determination date: |
|
January 1, 2020 |
Plan used extended amortization provisions in status calculation: |
|
Yes |
Minimum required contribution: |
|
Yes |
Employer contributing greater than 5% of Plan contributions for year ended
December 31, 2020: |
|
Yes |
Rehabilitation plan implemented: |
|
Yes |
Employer subject to surcharge: |
|
Yes |
Contract expiration date: |
|
November 30, 2022 |
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 9% increase over the prior year
total contribution rate. Effective December 1, 2021 through the contract expiration date of November 30, 2022, the Company’s contribution
rate is 19.66% of each covered employee’s pay. The contract with a union covers rates of pay, hours of employment and other
conditions of employment for approximately 23% of the Company’s 31 employees. The Company considers that its labor relations with
its employees and union are good.
9.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
statement of cash flows:
| |
April 30 | |
| |
2022 | | |
2021 | |
Cash and cash equivalents | |
$ | 1,909,732 | | |
$ | 2,315,885 | |
Restricted cash, tenant security deposits | |
| 968,262 | | |
| 763,094 | |
Restricted cash, escrow | |
| 71,720 | | |
| 71,674 | |
Restricted cash, other | |
| 27,140 | | |
| 27,140 | |
| |
$ | 2,976,854 | | |
$ | 3,177,793 | |
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: | |
Nine Months Ended | |
| |
April 30 | |
| |
2022 | | |
2021 | |
Cash Flow Information | |
| | | |
| | |
Interest paid, net of capitalized interest of $61,299 (2022) and $42,846 (2021) | |
$ | 195,951 | | |
$ | 252,453 | |
Income taxes paid (refunded) | |
| – | | |
| (23,040 | ) |
10.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 162,517 shares at April 30, 2022
and at July 31, 2021.
11.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 located at Jamaica Avenue at 169th Street, Jamaica, New York. Another lease is for premises
located at 504-506 Fulton Street, Brooklyn, New York.
Rent payments and expense relating to these two
operating leases with Landlord follow:
| |
Rent Payments | | |
Rent Payments | | |
Rent Expense | | |
Rent Expense | |
| |
Three Months Ended | | |
Nine Months Ended | | |
Three Months Ended | | |
Nine Months Ended | |
| |
April 30 | | |
April 30 | | |
April 30 | | |
April 30 | |
Property | |
2022 | | |
2021 | | |
2022 | | |
2021 | | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Jamaica Avenue at 169th Street | |
$ | 156,250 | | |
$ | 156,250 | | |
$ | 468,750 | | |
$ | 468,750 | | |
$ | 379,359 | | |
$ | 379,359 | | |
$ | 1,138,078 | | |
$ | 1,138,078 | |
504-506 Fulton Street | |
| 90,564 | | |
| 90,564 | | |
| 271,692 | | |
| 271,692 | | |
| 87,609 | | |
| 87,609 | | |
| 262,828 | | |
| 262,828 | |
Total | |
$ | 246,814 | | |
$ | 246,814 | | |
$ | 740.442 | | |
$ | 740,442 | | |
$ | 466,968 | | |
$ | 466,968 | | |
$ | 1,400,906 | | |
$ | 1,400,906 | |
The following summarizes assets and liabilities
related to these two operating leases:
| |
Right-Of-Use | | |
| | |
|
| |
Assets | | |
Liabilities | | |
|
| |
April 30 | | |
July 31 | | |
April 30 | | |
July 31 | | |
|
Property | |
2022 | | |
2021 | | |
2022 | | |
2021 | | |
Expiration Date |
Jamaica Avenue at 169th Street | |
$ | 11,793,423 | | |
$ | 12,842,642 | | |
$ | 4,579,558 | | |
$ | 4,959,450 | | |
May 31, 2030 |
504-506 Fulton Street | |
| 2,650,730 | | |
| 2,831,134 | | |
| 2,757,042 | | |
| 2,946,306 | | |
April 30, 2031 |
Total | |
$ | 14,444,153 | | |
$ | 15,673,776 | | |
$ | 7,336,600 | | |
$ | 7,905,756 | | |
|
Upon termination of the Jamaica, New York lease in 2030, all premises
included in operating lease right-of-use assets plus leasehold improvements will be turned over to the Landlord.
12.Contingencies:
There are various 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 has not been determined at this time.
Item 2.
J. W. MAYS, INC.