BLUE RIDGE REAL ESTATE COMPANY SECOND QUARTER REPORT

Transcription

1 BLUE RIDGE REAL ESTATE COMPANY 5 Blue Ridge Court P O Box 707 Blakeslee, PA SECOND QUARTER REPORT As of April 30, 2018 (Unaudited) and October 31, 2017 (Audited) and for the Three and Six Months Ended April 30, 2018 and 2017 (Unaudited) The accompanying unaudited interim financial statements have been prepared by the Company s management. Independent auditors have performed a review of these financial statements.

2 BLUE RIDGE REAL ESTATE COMPANY AND SUBSIDIARIES QUARTERLY REPORT 1) Name of the issuer and its predecessors (if any) The name of the issuer is Blue Ridge Real Estate Company ( Blue Ridge, the Company, we, our, or us ). 2) Address of the issuer s principal executive offices Company Headquarters Blue Ridge Real Estate Company 5 Blue Ridge Court P O Box 707 Blakeslee, PA Phone: (570) Fax: (570) Website: IR Contact Not Applicable 3) Security Information Trading Symbol: BRRE Exact title and class of securities outstanding: Common Stock CUSIP: Par or Stated Value: $0.30 per share Total shares authorized: 6,000,000 as of April 30, 2018 Total shares outstanding: 2,443,488 as of April 30, 2018 Transfer Agent Mailing Address: Shareholder Services: American Stock Transfer & Trust Company, LLC Website: Operations Center help@astfinancial.com th Avenue Fax: (718) Brooklyn, NY American Stock Transfer & Trust Company is a registered transfer agent under the Securities and Exchange Act of 1934, as amended, and is regulated by the Securities and Exchange Commission. List any restrictions on the transfer of security: None. Describe any trading suspension orders issued by the SEC in the past 12 months. None. List any stock split, stock dividend, recapitalization, merger, acquisition, spin-off, or reorganization either currently anticipated or that occurred within the past 12 months: None. 4) Issuance History The Company has not issued any shares of the Company s common stock in exchange for services during the past two fiscal years or any interim period. During the fiscal year ended October 31, 2017, the Company repurchased 224 shares of its common stock. Upon transfer, all shares were cancelled and returned to the status of authorized but unissued. During the six months - 1 -

3 ended April 30, 2018, the Company repurchased 112 shares of its common stock. Upon transfer, all shares were cancelled and returned to the status of authorized but unissued. 5) Financial Statements The following financial statements of the company are included in this Quarterly Report at the pages noted below: Page Balance Sheets as of April 30, 2018 (Unaudited) and October 31, Statements of Operations for the Three and Six Months ended April 30, 2018 and 2017 (Unaudited) 8 Statements of Comprehensive Loss for the Six Months ended April 30, 2018 and 2017 (Unaudited) 9 Statements of Changes in Shareholders Equity for the Six months ended April 30, 2018 (Unaudited) 10 Statements of Cash Flows for the Six Months Ended April 30, 2018 and 2017 (Unaudited) 11 Notes to Financial Statements (Unaudited) 12 Management s Discussion and Analysis 23 6) Describe the Issuer s Business, Products and Services Blue Ridge Real Estate Company, or Blue Ridge, was incorporated in Pennsylvania on August 8, Blue Ridge owns investment properties in Eastern Pennsylvania, New Jersey and Minnesota. Blue Ridge s year end date is October 31 st. Blue Ridge s primary SIC code is Blue Ridge and its wholly-owned subsidiaries, operate through three business segments which consist of Resort Operations, Real Estate Management/Rental Income and Land Resource Management. Our business segments were determined from our internal organization and management reporting, which are based primarily on differences in services we provide. Resort Operations (SIC Code 6512) Resort Operations consists of: amenities surrounding Big Boulder Lake Boulder View Tavern and Boulder Lake Club; the Jack Frost National Golf Course; and The Stretch fishing club. Real Estate Management/Rental Income (SIC Code 6519) Real Estate Management/Rental Income consists of: investment properties leased to others located in Eastern Pennsylvania and Minnesota; services to the trusts that operate resort residential communities; and rental of communication towers and signboards. Land Resource Management (SIC Code 6552) Land Resource Management consists of: land sales; land purchases; timbering operations; a real estate development division; and leasing of land and land improvements. Timbering operations consist of selective timbering on our land holdings. Contracts are entered into for parcels that have had the timber selectively - 2 -

4 marked. The real estate development division is responsible for the residential land development activities which include overseeing the construction of single and multi-family homes and development of infrastructure. 7) Describe the Issuer s Facilities At April 30, 2018, the properties of Blue Ridge and its subsidiaries consisted of 9,693 total acres of land owned by Blue Ridge, Northeast Land Company, Flower Fields Motel, LLC, Blue Ridge WNJ, LLC and Blue Ridge WMN, LLC. 9,690 acres of land are located in the Pocono Mountains, along with 3 acres in various other states. Of this acreage, 7,974 acres were held for investment, 1,433 acres were held for development, 284 acres were held for sale and 2 acres were held for discontinued operations. Income is derived from these lands through leases, selective timbering by third parties, sales and other dispositions. These properties included the Jack Frost National Golf Course, Boulder View Tavern, Boulder Lake Club, a commercial property comprised of 3 acres of vacant land, two retail stores leased to affiliates of Walgreen Company, one single family home held for investment, two sewage treatment facilities, a members-only flyfishing club, a corporate headquarters building and other miscellaneous facilities. The majority of the Company s property located in the Pocono Mountains is leased to various hunting clubs. Blue Ridge owns and leases to its wholly-owned subsidiary, Jack Frost National Golf Course, Inc., an 18-hole golf facility known as Jack Frost National Golf Club, which is located on 203 acres near White Haven, Carbon County, Pennsylvania. The golf course is managed by Billy Casper Golf, LLC, an unaffiliated third-party operator. Blue Ridge owns the Boulder View Tavern, which consists of 8,800 square feet and is located on the eastern shore of Big Boulder Lake, Kidder Township, Carbon County, Pennsylvania. Lake Mountain, LLC, a wholly owned subsidiary of Blue Ridge Real Estate Company, leases and operates the facility. The restaurant has dining capacity for 200 patrons. Blue Ridge owns the Boulder Lake Club located in Kidder Township, Carbon County, Pennsylvania, which includes the 175-acre Big Boulder Lake, swimming pool, tennis courts, boat docks and accompanying buildings. Lake Mountain, LLC, a wholly owned subsidiary of Blue Ridge Real Estate Company, leases and operates the facility. Blue Ridge owns one single family home held for investment. Blue Ridge owns a sewage treatment facility that serves the resort housing at the Jack Frost Mountain Ski Area. The facility has the capacity of treating up to 400,000 gallons of wastewater per day. Blue Ridge owns a sewage treatment facility that serves the resort housing at the Big Boulder Ski Area. The facility has the capacity of treating 225,000 gallons of wastewater per day. Blue Ridge owns The Stretch, an exclusive members-only fly-fishing club, located along a two-mile stretch of the Tunkhannock Creek in Blakeslee, Pennsylvania. Blue Ridge owns its corporate headquarters building which is located at 5 Blue Ridge Court in Blakeslee, Pennsylvania. Northeast Land Company owns 89 acres of vacant land located in the Pocono Mountains, of which 3 acres are held for investment and 86 acres of land are held for development

5 Flower Fields Motel, LLC owns approximately 3 acres of vacant commercial property located along Route 611 in Tannersville, Pennsylvania. The property was the former location of a motel and two cottage buildings which were demolished during the summer of Blue Ridge WNJ, LLC owns and leases to Walgreen Eastern Co., Inc., a retail store in Toms River, New Jersey. The property consists of a free-standing Walgreens store, including 2 acres of land, with approximately 14,820 square feet of leasable space. Blue Ridge WMN, LLC owns and leases to Walgreen Co., Inc., a retail store located in White Bear Lake, Minnesota. The property consists of a free-standing Walgreens store, including 2 acres of land, with approximately 14,820 square feet of leasable space. 8) Officers, Directors, and Control Persons A. Names of Officers, Directors, and Control Persons. The following sets forth the names of each of the executive officers, directors, general partners and control persons (control persons are beneficial owners of more than five percent (5%) of any class of the Company s equity securities) of the Company as of the date of this information statement. Bruce Beaty Paul A. Biddelman Raymond Edwards David Domb Cynthia A. Van Horn KRSX Merge, LLC 3333 New Hyde Park Road, Suite 100 New Hyde Park, NY Chairman of the Board, President and Chief Executive Officer Director Director Director Chief Financial Officer and Treasurer Principal Stockholder B. Legal/Disciplinary History. 1. There have been no criminal actions against any of the above members. 2. There has been no order, judgment, or decree by a court against any of the above members. 3. There have been no findings or judgment from the SEC, CFTC or state securities regulator against any of the above members. 4. There has been no order barring, suspending, or otherwise limiting any of the above persons involvement in any type of business or securities activities. C. Beneficial Shareholders. The following company holds more than 10% of Blue Ridge common shares. The information is accurate as of the issuance date of this report. Name of Beneficial Owner KRSX Merge, LLC Conor C. Flynn, Director Glenn G. Cohen, Director Ross Cooper, Director 3333 New Hyde Park Road, Suite 100 New Hyde Park, NY Number of Shares Beneficially Owned (1) 1,425,

6 (1) Shares are beneficially owned when a person, directly or indirectly, has or shares the voting power thereof (that is, the power to vote, or direct the voting, of such shares) and investment power thereof (that is, the power to dispose, or to direct the disposition, of such shares). 9) Third Party Providers Legal Counsel Joanne R. Soslow, Esquire Morgan, Lewis & Bockius 1701 Market Street (215) Accountant or Auditor Kevin Foley, CPA Kronick Kalada Berdy & Co. 190 Lathrop Street Kingston, PA (570) Investor Relations Consultant Not Applicable Other Advisor: Not Applicable - 5 -

7 10) Issuer Certification I, Bruce Beaty certify that: 1. I have reviewed this quarterly disclosure statement of Blue Ridge Real Estate Company; 2. Based on my knowledge, this disclosure statement does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this disclosure statement; and 3. Based on my knowledge, the financial statements, and other financial information included or incorporated by reference in this disclosure statement, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this disclosure statement. Date: June 14, 2018 /s/ Bruce Beaty Bruce Beaty Chief Executive Officer and President I, Cynthia A. Van Horn certify that: 1. I have reviewed this quarterly disclosure statement of Blue Ridge Real Estate Company; 2. Based on my knowledge, this disclosure statement does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this disclosure statement; and 3. Based on my knowledge, the financial statements, and other financial information included or incorporated by reference in this disclosure statement, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this disclosure statement. Date: June 14, 2018 /s/ Cynthia A. Van Horn Cynthia A. Van Horn Chief Financial Officer and Treasurer (Principal Financial Officer) - 6 -

8 BALANCE SHEETS BLUE RIDGE REAL ESTATE COMPANY and SUBSIDIARIES (Unaudited) ASSETS 04/30/18 10/31/17 Land and land development costs (1,433 acres per land ledger) $6,863,546 $6,863,526 Land improvements, buildings and equipment, net 5,975,249 6,197,874 Land held for investment, principally unimproved (7,974 acres per land ledger) 3,139,109 3,139,109 Long-lived assets held for sale (284 acres per land ledger) 65,657 65,657 Cash and cash equivalents 1,949,662 3,130,601 Marketable securities available for sale 4,010,879 4,440,954 Cash held in escrow Prepaid expenses and other assets 375, ,640 Deferred tax asset 1,089, ,484 Accounts and notes receivable 177,291 43,936 Assets of discontinued operations (includes 2 acres land per land ledger) 4,670,646 4,740,468 Total assets $28,317,262 $30,017,754 LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES: Debt $3,450,642 $3,525,834 Accounts payable 293, ,690 Accrued liabilities 273,248 1,177,317 Deferred income 498, ,024 Accrued pension expense 3,390,246 3,256,648 Liabilities of discontinued operations 3,117,732 3,188,893 Total liabilities 11,023,870 11,484,406 SHAREHOLDERS' EQUITY: Capital stock, without par value, stated value $0.30 per share, Blue Ridge authorized 6,000,000 shares, issued and outstanding 2,443,488 and 2,443,600, respectively 733, ,080 Capital in excess of stated value 18,252,368 18,253,174 Earnings retained in the business 626,654 1,464,008 Accumulated other comprehensive loss (2,318,676) (1,916,914) Total shareholders' equity 17,293,392 18,533,348 Total liabilities and shareholders equity $28,317,262 $30,017,754 See accompanying notes to unaudited financial statements

9 BLUE RIDGE REAL ESTATE COMPANY and SUBSIDIARIES STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 2018 and 2017 (UNAUDITED) Three Months Ended Six Months Ended 04/30/18 04/30/17 04/30/18 04/30/17 Revenues: Resort operations revenue $490,569 $494,222 $927,555 $910,773 Real estate management revenue 170, , , ,202 Land resource management revenue 242, , , ,507 Rental income revenue 138, , , ,437 Total revenues 1,042,082 1,155,617 1,805,970 2,327,919 Costs and expenses: Resort operations costs 658, ,616 1,308,314 1,266,351 Real estate management costs 148, , , ,180 Land resource management costs 176, , , ,687 Rental income costs 47,250 52,164 98, ,215 General and administration expense 452, , ,543 1,068,165 Total costs and expenses 1,483,137 1,777,971 3,015,426 3,523,598 Operating loss from continuing operations before other income and (expense) (441,055) (622,354) (1,209,456) (1,195,679) Other income and (expense): Interest and other income ,156 Interest expense (59,358) (60,895) (119,378) (122,649) Interest and dividends on marketable securities, net 45,752 41,907 94,708 82,457 Gain (loss) on disposition of marketable securities 859 (13,128) (4,286) (13,133) Total other income and (expense) (12,723) (32,116) (28,852) (52,169) Loss from continuing operations before income taxes (453,778) (654,470) (1,238,308) (1,247,848) Benefit for income taxes on continuing operations, net of $210,000 deferred tax expense for the six months ended 4/30/18 from enacted Tax Act rate reduction (106,000) (223,000) (79,000) (425,000) Loss before discontinued operations (347,778) (431,470) (1,159,308) (822,848) Income (loss) from discontinued operations before income taxes 701 (1,619) 799 (3,801) Benefit for income taxes on discontinued operations 0 (1,000) 0 (1,000) Net loss ($347,077) ($432,089) ($1,158,509) ($825,649) Basic loss per weighted average share: Loss before discontinued operations ($0.14) ($0.18) ($0.47) ($0.34) Income (loss) from discontinued operations Total basic loss per weighted average share ($0.14) ($0.18) ($0.47) ($0.34) See accompanying notes to unaudited financial statements

10 BLUE RIDGE REAL ESTATE COMPANY and SUBSIDIARIES STATEMENTS OF COMPREHENSIVE LOSS FOR THE SIX MONTHS ENDED APRIL 30, 2018 AND 2017 (UNAUDITED) Net loss ($1,158,509) ($825,649) Other comprehensive income (loss), net of tax Unrealized loss on securities Unrealized holding losses arising during the period (137,569) (20,241) Reclassification adjustment for net losses included in net loss 4,286 13,133 Deferred tax benefit 52,676 2,886 Net unrealized loss on securities, net of the deferred tax benefit (80,607) (4,222) Defined benefit pension Deferred actuarial loss, net of deferred tax expense 0 0 Other comprehensive loss (80,607) (4,222) Total comprehensive loss ($1,239,116) ($829,871) See accompanying notes to unaudited financial statements

11 BLUE RIDGE REAL ESTATE COMPANY and SUBSIDIARIES STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY FOR THE SIX MONTHS ENDED APRIL 30, 2018 (UNAUDITED) Capital Stock (1) Capital in Excess of Earnings Retained in Accumulated Other Comprehensive Shares Amount Stated Par the Business Loss Total Balance, October 31, ,443,600 $733,080 $18,253,174 $1,464,008 ($1,916,914) $18,533,348 Cancellation of shares purchased in buy back program (112) (34) (806) (840) Net loss (1,158,509) (1,158,509) Other comprehensive loss (80,607) (80,607) Deferred tax remeasurement on pension Adoption of ASU ,155 (321,155) Balance, April 30, ,443,488 $733,046 $18,252,368 $626,654 ($2,318,676) $17,293,392 (1) Capital stock, at stated value of $0.30 per share See accompanying notes to unaudited financial statements

12 BLUE RIDGE REAL ESTATE COMPANY and SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED APRIL 30, 2018 AND 2017 (UNAUDITED) 04/30/18 04/30/17 Cash Flows (Used In) Provided By Operating Activities: Net loss ($1,158,509) ($825,649) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 349, ,886 Amortization of investment premiums ,615 Loss on marketable securities 4,286 13,133 Impairment 0 37,000 Net book value of properties sold 0 128,641 Deferred income taxes (79,000) (426,000) Changes in operating assets and liabilities: Accounts receivable (133,355) (199,927) Prepaid expenses and other assets 62, ,580 Land and land development costs (20) 0 Long-lived assets held for sale 0 18,233 Accounts payable and accrued liabilities (684,720) 559,245 Deferred income 369, ,196 Net cash (used in) provided by operating activities (1,269,336) 62,953 Cash Flows Provided By (Used In) Investing Activities: Purchases of marketable securities (1,763,012) (689,210) Proceeds from maturities and sales of marketable securities 2,054,926 1,646,704 Additions to properties (57,525) (203,173) Net cash provided by investing activities 234, ,321 Cash Flows Provided By (Used In) Financing Activities: Proceeds from debt 0 126,776 Payments of debt (145,152) (185,462) Purchase of common stock (840) 0 Net cash used in financing activities (145,992) (58,686) Net (decrease) increase in cash and cash equivalents (1,180,939) 758,588 Cash and cash equivalents, beginning of period 3,130,601 1,657,990 Cash and cash equivalents, ending of period $1,949,662 $2,416,578 See accompanying notes to unaudited financial statements

13 1. Basis of Presentation: NOTES TO UNAUDITED FINANCIAL STATEMENTS The accompanying unaudited financial statements include the accounts of Blue Ridge Real Estate Company and its wholly-owned subsidiaries (Northeast Land Company, Boulder Creek Resort Company, Moseywood Construction Company, Jack Frost National Golf Course, Inc., BRRE Holdings, Inc., Flower Fields Motel, LLC, Blue Ridge WNJ, LLC, Blue Ridge WMN, LLC and Lake Mountain, LLC) (collectively Blue Ridge ). The balance sheet as of October 31, 2017, which has been derived from audited financial statements, and the financial statements as of and for the three and six-month periods ended April 30, 2018 and 2017, which are unaudited, are prepared in accordance with accounting principles generally accepted in the United States of America ( GAAP ) for interim financial information. They do not include all information and footnotes required by GAAP for complete financial statements. Accordingly, these financial statements should be read in conjunction with the combined financial statements and notes thereto contained in the Company s 2017 Annual Report filed with OTC Markets on January 29, In the opinion of management, the accompanying financial statements reflect all adjustments (which are of a normal recurring nature) necessary for a fair statement of the results for the interim periods. All significant intercompany accounts and transactions are eliminated. Due to intermittent revenues from land resource management, the results of operations for any interim period are not necessarily indicative of the results expected for the full fiscal year. 2. Significant Accounting Policies Use of Estimates and Assumptions: The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. For example, unexpected changes in market conditions or a continued or further downturn in the economy could adversely affect actual results. Estimates are used in accounting for, among other things, land development costs, asset fair value calculations, accounts, marketable securities and accounts and notes receivables, legal liability, insurance liability, depreciation, employee benefits, taxes, and contingencies. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the financial statements in the period in which the revisions are determined. Management believes that its accounting policies regarding revenue recognition, land development costs, long lived assets, deferred income and income taxes among others, affect its more significant judgments and estimates used in the preparation of its financial statements. For a description of these critical accounting policies and estimates, see Management s Discussion and Analysis of Financial Condition and Results of Operations. There were no significant changes in the Company s critical accounting policies or estimates since the Company s fiscal year ended October 31, 2017 ( Fiscal 2017 ). Material subsequent events are evaluated and disclosed through the issuance date of this Quarterly Report. Statements of Cash Flows: For purposes of reporting cash flows, the Company considers cash equivalents to be all highly liquid investments with maturities of three months or less when acquired. Cash Concentration of Credit Risk: Financial instruments which potentially subject the Company to concentration of credit risk consist principally of temporary cash investments. The Company s temporary cash investments are held by financial institutions. The Company has not experienced any losses related to these investments. At April 30, 2018, the Company had $0 working cash on deposit in excess of the FDIC insured limit of $250,000, however, the Company also had $1,324,239 invested in money market funds at April 30, 2018, which are not insured by the FDIC

14 Cash Held in Escrow: Cash held in escrow consists mainly of funds held in a real estate escrow account. Marketable Securities: Marketable securities consist of debt securities (3 positions of corporate bonds), investments in preferred stocks (51 positions of financial services, insurance and real estate investment trusts) and two certificates of deposit at April 30, The debt securities are stated at cost which approximates fair value and are considered available for sale. Investments in preferred stocks are stated at fair value. Debt securities and investments in preferred stocks are not purchased with the intent of selling in the near term. However, from time to time, the Company may decide to sell certain securities for liquidity, tax planning and other business purposes. The cost of securities sold is determined by the specific identification method. Debt investments are adjusted for amortization of premiums and accretion of discounts and recognized as an adjustment of interest income. Unrealized gains and losses on investments in preferred stocks are recorded monthly. Interest and dividends on marketable securities are recognized as income when earned. Contractual maturities on the debt securities range from 1 to 10 months. Reclassification: Certain reclassifications have been made to prior year s financial information to conform to the April 30, 2018 presentation. New Accounting Pronouncements: In May 2014, the Financial Accounting Standards Board ( FASB ) issued Accounting Standards Update ( ASU ) No , Revenue from Contracts with Customers ( ASU ), which provides guidance for revenue recognition. ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets and supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance. ASU also supersedes some cost guidance included in Subtopic , Revenue Recognition-Construction-Type and Production-Type Contracts. The standard s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which a company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under the current guidance. These judgments and estimates include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price, and allocating the transaction price to each separate performance obligation. In August 2015, the FASB issued ASU Revenue from Contracts with Customers ( ASU ), which delays the effective date of ASU by one year. ASU , as amended by ASU , ASU Revenue from Contracts with Customers (Topic 606): Principal Versus Agent Consideration (Reporting Revenue Gross versus Net); ASU Revenue from Contracts with Customers (Topic 606): identifying Performance Obligations and Licensing; ASU Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients and ASU Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers are effective for us beginning November 1, 2018, and, at that time, we may adopt the new standard under the full retrospective approach or the modified retrospective approach. We are currently evaluating the method of adoption and the impact the adoption of these pronouncements will have on our financial statements and disclosures. In January 2016, the FASB issued ASU No , Financial Instruments Recognition and Measurement of Financial Assets and Financial Liabilities, which requires equity investments to be measured at fair value with changes in fair value recognized in net income, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset and eliminates the requirement to disclose the fair value of the financial instruments measured at amortized cost. ASU No is effective for us beginning November 1, 2019, and, at that time, we will adopt the new standard. We are currently evaluating the impact that the adoption of ASU may have on our financial statements and disclosures

15 In February 2016, the FASB issued ASU No , Leases ( ASU ), which requires an entity to recognize assets and liabilities on the balance sheet for the rights and obligations created by leased assets and provide additional disclosures. ASU is effective for us beginning November 1, 2019, and, at that time, we will adopt the new standard using a modified retrospective approach. We are currently evaluating the impact that the adoption of ASU may have on our financial statements and disclosures. In March 2017, the FASB issued ASU Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. ASU is effective for us beginning November 1, We are currently evaluating the impact that the adoption of ASU may have on our financial statements and disclosures. In February 2018, the FASB issued ASU No , Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income ( ASU ). ASU allows a reclassification from accumulated other comprehensive loss to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act enacted on December 22, 2017 and also requires entities to disclose their accounting policy for releasing income tax effects from accumulated other comprehensive income. We elected to adopt ASU in the current year. See Note 9, Accumulated Other Comprehensive Loss. 3. Discontinued Operations On May 17, 2018, the Company signed a purchase and sale agreement regarding the Walgreens store located in Toms River, New Jersey. On May 22, 2018, a deposit was placed in escrow. As a result, operating activity for the property is being reported as discontinued operations for the three and six months ending April 30, 2018 and The net operating results were previously reported in the rental income of the Statements of Operations. At April 20, 2018, there were assets related to the Walgreens, NJ totaling $4,670,646 included in assets of discontinued operations and there were liabilities totaling $3,117,732 included in liabilities of discontinued operations. The assets as of April 30, 2018 and October 31, 2017 and the results of operations of the property classified as discontinued operations for the three and six months ended April 30, 2018 and 2017, are summarized as follows: BALANCE SHEET 04/30/18 10/31/17 ASSETS Land improvements, buildings and equipment, net $3,722,465 $3,792,287 Land held for investment, principally unimproved 948, ,181 Total assets of discontinued operations $4,670,646 $4,740,468 LIABILITIES Debt $3,108,794 $3,178,754 Accrued liabilities 8,938 10,139 Total liabilities of discontinued operations $3,117,732 $3,188,

16 STATEMENTS OF OPERATIONS Three months ended Six months ended 04/30/18 04/30/17 04/30/18 04/30/17 Revenue $90,750 $90,750 $181,500 $181,500 Expenses (excluding interest) 36,117 36,085 72,234 72,169 Interest expense (calculated on debt related to 53,932 56, , ,132 the property) Income (loss) from discontinued operations before income taxes $701 ($1,619) $799 ($3,801) 4. Segment Reporting The Company currently operates in three business segments, which consist of Resort Operations, Real Estate Management/Rental Income and Land Resource Management. 5. Income Taxes The provision (benefit) for income taxes for the six months ended April 30, 2018 was estimated using a reduced blended rate of 23.33% due to the new Tax Cuts and Jobs Act legislation. An estimated tax expense of $210,000 was recorded in the six months ended April 30, 2018 related to re-measurement of the deferred tax assets and liabilities. During six months ended April 30, 2018, the Company elected to reclassify the stranded tax effects of the Tax Cuts and Jobs Act from accumulated other comprehensive loss to retained earnings, based on ASU No , Income Statement-Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amount reclassified from Accumulated Other Comprehensive Income to Retained Earnings, which related to the re-measurement of deferred taxes on the defined benefit pension plan, amounted to approximately $321,000. The benefit for income taxes for the six months ended April 30, 2017 was estimated using the estimated annual effective tax rate for the fiscal year ending October 31, The effective income tax rate specific to federal taxes for the first six months of Fiscal 2017 was estimated at 34%. The Company s practice is to recognize interest and/or penalties related to income tax matters as income tax expense in its financial statements. As of and for the three and six months ended April 30, 2018 and as of October 31, 2017, no interest and penalties have been accrued in the balance sheet and no expense is reflected in the statement of operations. At April 30, 2018, federal and state tax returns for years ending October 31, 2014 and later are subject to future examination by the respective tax authorities. 6. Land and Land Development Costs Land and improvements in progress held for development consist of the following: 04/30/ /31/2017 Land unimproved designated for development $1,981,817 $1,981,817 Residential development 1,208,201 1,208,201 Infrastructure development 3,673,528 3,673,508 Total Land and Land Development Costs $6,863,546 $6,863,

17 7. Land Held for Investment 04/30/ /31/2017 Land held for investment Land Unimproved $1,692,278 $1,692,278 Land Commercial rental properties 1,446,831 1,446,831 Total land held for investment $3,139,109 $3,139, Marketable Securities The cost and fair value of marketable securities are as follows: Cost Unrealized Gains April 30, 2018 Unrealized Losses Fair Value Available for sale: Corporate bonds $1,243,868 $0 $0 $1,243,868 Preferred stocks 2,528,261 49,149 (64,019) 2,513,391 Certificates of deposit 253, ,620 Total marketable securities $4,025,749 $49,149 ($64,019) $4,010,879 The amortized costs of the available for sale bonds and certificates of deposit at April 30, 2018, maturing within one year, was $1,243,868 and $176,620, respectively, and maturing one year through five years was $0 and $77,000, respectively. The preferred stocks include investments in 51 public companies in various industries with the largest investment, at market value, in a single company of $128,018. For the six months ended April 30, 2018, there were realized gains of $1,296 and realized losses of $5,582 on sales of preferred stocks. For the six months ended April 30, 2017, there were realized gains of $354 and realized losses of $13,487 on the sale of preferred stocks. Cost Unrealized Gains October 31, 2017 Unrealized Losses Fair Value Available for sale: Corporate bonds $1,595,472 $0 $0 $1,595,472 Preferred Stocks 2,473, ,058 (5,645) 2,591,862 Certificates of deposit 253, ,620 Total marketable securities $4,322,541 $124,058 ($5,645) $4,440,954 The amortized costs of the available for sale bonds and certificates of deposit at October 31, 2017, maturing within one year, was $1,595,472 and $0, respectively, and maturing one year through five years was $0 and $253,620, respectively. The preferred stocks include investments in 47 public companies in various industries with the largest investment, at market value, in a single company of $132,098. For the twelve months ended October 31, 2017, there were realized gains of $7,488 and realized losses of $13,486 on sales of preferred stocks

18 9. Pension Benefits Components of Net Periodic Pension Cost: Three Months Ended Six Months Ended 04/30/18 04/30/17 04/30/18 04/30/17 Service Cost $26,500 $24,750 $53,000 $49,500 Interest Cost 84,500 88, , ,000 Expected return on plan assets (80,250) (84,000) (160,500) (168,000) Net amortization and deferral: Amortization of accumulated loss 81, , , ,500 Net amortization and deferral 81, , , ,500 Total net periodic pension cost $112,250 $144,000 $224,500 $288,000 The Company expects to contribute $214,300 to their pension plan in the fiscal year ending October 31, 2018 ( Fiscal 2018 ). As of April 30, 2018, the Company made contributions totaling $90,900 and anticipate contributing the $123,400 to fund their pension plan in the remaining six months of Fiscal Accumulated Other Comprehensive Loss The following table presents the changes in the accumulated other comprehensive loss for the six months ended April 30, 2018 and the twelve months ended October 31, 2017: 04/30/18 Unrealized Gains on Securities Defined Benefit Pension Plan Accumulated Other Comprehensive Loss Beginning balance $70,345 ($1,987,259) ($1,916,914) Current period other comprehensive loss (80,607) (80,607) Adoption of ASU (321,155) (321,155) Ending balance ($10,262) ($2,308,414) ($2,318,676) We elected to adopt ASU during the six months ended April 30, The applicable tax rate was adjusted in response to the Tax Cuts and Jobs Act and the corresponding changes in the U.S. Federal statutory tax rate resulted in a reclassification of $321,155 from Accumulated other comprehensive loss to Retained earnings as of April 30, /31/17 Unrealized Gains on Securities Defined Benefit Pension Plan Accumulated Other Comprehensive Loss Beginning balance $40,941 ($2,377,561) ($2,336,620) Current period other comprehensive income 29, , ,706 Ending balance $70,345 ($1,987,259) ($1,916,914) The other comprehensive income (loss) is reported net of tax. 11. Fair Value of Financial Instruments and Impairment The Company uses ASC 820, Fair Value Measurements ( ASC 820 ), to measure the fair value of certain assets and liabilities. ASC 820 provides a framework for measuring fair value in accordance with GAAP, establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value and requires certain disclosures about fair value measurements. The fair value hierarchy is summarized below: Level 1: Level 2: Fair value determined based on quoted prices in active markets for identical assets or liabilities. Fair value determined using significant observable inputs, generally either quoted prices in active markets for similar assets or liabilities or quoted prices in markets that are not active

19 Level 3: Fair value determined using significant unobservable inputs, such as pricing models, discounted cash flows, or similar techniques. The estimated recurring fair values of the Company s financial instruments at April 30, 2018 and October 31, 2017 are as follows: Carrying Amount 4/30/18 10/31/17 Carrying Fair Value Amount Fair Value ASSETS: Cash and cash equivalents and cash held in escrow $1,950,167 $1,950,167 $3,131,106 $3,131,106 Marketable securities available for sale 4,010,879 4,010,879 4,440,954 4,440,954 Accounts receivable 177, ,291 43,936 43,936 LIABILITIES: Accounts payable 293, , , ,690 Accrued liabilities 273, ,248 1,177,317 1,177,317 Debt $3,450,642 $3,533,912 $3,525,834 $3,609,606 Fair Values were determined as follows: Cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities: The carrying amounts approximate fair value because of the short-term maturity of these instruments. Marketable securities consist of debt securities (corporate bonds and commercial paper), preferred stocks and 2 certificates of deposit. Fair value of the marketable securities for corporate bonds is determined using significant observable inputs, either quoted prices in active markets for similar assets or quoted prices in markets that are not active Level 2 hierarchy. Fair value of preferred stocks and certificates of deposit is determined using unadjusted quoted prices in active markets for identical assets Level 1 hierarchy. Debt: The fair value of debt is estimated using discounted cash flows based on current borrowing rates available to the Company for similar types of borrowing arrangements - Level 2 hierarchy. The following tables set forth by level within the fair value hierarchy the Company s marketable securities asset at fair value as of April 30, 2018 and October 31, Investment Assets at Fair Value as of April 30, 2018 Level 1 Level 2 Level 3 Total Preferred stocks: Real estate investment trust $1,382,652 $1,382,652 Finance 869, ,121 Insurance 261, ,618 Bonds Commercial paper $893, ,235 Corporate 350, ,633 Certificates of Deposit 253, ,620 Total marketable securities $2,767,011 $1,243,868 $4,010,

20 Investment Assets at Fair Value as of October 31, 2017 Level 1 Level 2 Level 3 Total Preferred Stocks: Real estate investment trust $1,440,955 $1,440,955 Finance 878, ,420 Insurance 272, ,487 Bonds Corporate $1,100,312 1,100,312 Commercial paper 495, ,160 Certificate of Deposit 253, ,620 Total marketable securities $2,845,482 $1,595,472 $4,440,954 As of April 30, 2018, the carrying amount net of prior period impairments for land and land development costs is $6,863,546. The carrying amount net of prior period impairments for land improvements, buildings and equipment is $5,975,249. The carrying amount net of prior period impairments for land held for investment is $3,139,109. The carrying amount for assets of discontinued operations is $4,670,646, no impairment was ever expensed on the assets of discontinued operations. The carrying amount for long-lived assets held for sale is $65,657, no impairment was ever expensed on the assets held for sale. There was no impairment expense in the six months ended April 30, As of October 31, 2017, the carrying amount net of prior period impairments for land and land development costs is $6,863,526. The carrying amount net of prior period impairments for land improvements, buildings and equipment is $6,225,994, less impairment expense of $28,120 recorded in Fiscal 2017 for a revised carrying value of $6,197,874. The carrying amount net of prior period impairments for land held for investment is $3,147,989, less impairment expense of $8,880 recorded in Fiscal 2017 for a revised carrying value of $3,139,109. Lot 5 Maple Terrace located in Saylorsburg, PA was listed for sale in January 2017 with a sale price below the carrying value. After careful consideration by Management as to what would be acceptable as the minimum sale price for the property less closing costs, the total carrying value of $166,162 was written down by an impairment charge of $37,000, of which $28,120 was on the land improvements, buildings and equipment, net and $8,880 was on the land held for investment. The carrying amount for assets of discontinued operations is $4,740,468, no impairment was ever expensed on the assets of discontinued operations. The carrying amount for long-lived assets held for sale is $65,657, no impairment was ever expensed on this asset held for sale. There was a total of $37,000 impairment expense for the six months ended April 30, Per Share Data Earnings per share ( EPS ) is based on the weighted average number of common shares outstanding during the period. The calculation of diluted EPS assumes weighted average options have been exercised to purchase shares of common stock in the relevant period, net of assumed repurchases using the treasury stock method. For the three and six months ended April 30, 2018 and 2017, there were no unexercised stock options. As a result, the calculation of diluted EPS has been excluded from the table below since diluted EPS for these periods is equal to EPS. Weighted average basic shares, taking into consideration shares issued, weighted average options, if any, used in calculating EPS and treasury shares repurchased, shares cancelled and basic loss per weighted average share for the three and six months ended April 30, 2018 and April 30, 2017 are as follows: Three Months Ended Six Months Ended 4/30/18 04/30/17 4/30/18 04/30/17 Weighted average shares of common stock outstanding used to compute basic loss per share 2,443,563 2,443,824 2,443,581 2,443,

21 Basic loss per weighted average share is computed as follows: Three Months Ended Six Months Ended 4/30/18 04/30/17 4/30/18 04/30/17 Net loss before discontinued operations ($347,778) ($431,470) ($1,159,308) ($822,848) Weighted average share of common stock outstanding 2,443,563 2,443,824 2,443,581 2,443,824 Basic loss per weighted average share ($0.14) ($0.18) ($0.47) ($0.34) Net income (loss) from discontinued operations $701 ($619) $799 ($2,801) Weighted average share of common stock outstanding 2,443,563 2,443,824 2,443,581 2,443,824 Basic earnings (loss) per weighted average share $0.00 $0.00 $0.00 $0.00 Net loss ($347,077) ($432,089) ($1,158,509) ($825,649) Weighted average share of common stock outstanding 2,443,563 2,443,824 2,443,581 2,443,824 Basic loss per weighted average share ($0.14) ($0.18) ($0.47) ($0.34) 13. Supplemental Disclosure to Statements of Cash Flows The following are supplemental disclosures to the statements of cash flows for the six months ended April 30, 2018 and 2017: Cash paid during the period for: Interest $225,046 $235,875 Income taxes $0 $0 Non cash: Marketable securities available for sale and shareholders equity decreased resulting from changes in the net unrealized gains and losses $80,607 $4,222 Reclassification increasing Accumulated other comprehensive loss and increasing Retained earnings due to re-measurement of deferred tax on unrealized losses of pension plan $321,155 $0 Reclassification of land improvements, buildings and equipment, net and land held for investment, principally unimproved to assets of discontinued operations $0 $4,740,468 Reclassification of debt and accrued liabilities to liabilities of discontinued operations $0 $3,188, Business Segment Information The following information is presented in accordance with the accounting pronouncement regarding disclosures about segments of an enterprise and related information. The Company s business segments were determined from the Company s internal organization and management reporting, which are based primarily on differences in services

22 Resort Operations Resort Operations consists of: amenities surrounding Big Boulder Lake Boulder View Tavern and Boulder Lake Club; the Jack Frost National Golf Course; and The Stretch fishing club. Real Estate Management/Rental Income Real Estate Management/Rental Income consists of: investment properties leased to others located in Eastern Pennsylvania, and Minnesota; services to the trusts that operate resort residential communities; and rental of communication towers and signboards. Land Resource Management Land Resource Management consists of: land sales; land purchases; timbering operations; a real estate development division; and leasing of land and land improvements. Timbering operations consist of selective timbering on our land holdings. The real estate development division is responsible for the residential land development activities which include overseeing the construction of single and multi-family homes and development of infrastructure. Information by business segment is as follows: Three months ended Six months ended 04/30/18 04/30/17 4/30/18 04/30/17 Revenues from continuing operations: Resort operations $490,569 $494,222 $927,555 $910,773 Real estate management/rental income 309, , , ,639 Land resource management 242, , , ,507 Total revenues from operations $1,042,082 $1,155,617 $1,805,970 $2,327,919 Operating income (loss) from continuing operations, excluding general and administrative expenses: Resort operations ($167,542) ($188,394) ($380,759) ($355,578) Real estate management/rental income 113, , , ,244 Land resource management 65,769 (34,186) (75,114) 63,820 Total operating income (loss), excluding general and administrative expenses $11,688 ($113,781) ($267,913) ($127,514) General and administrative expenses: Resort operations $213,133 $217,501 $483,582 $417,908 Real estate management/rental income 134, , , ,698 Land resource management 105, , , ,559 Total general and administrative expenses $452,743 $508,573 $941,543 $1,068,165 Interest and other income, net: Resort operations $17 $0 $79 $478 Real estate management/rental income Land resource management Total interest and other income, net $24 $0 $104 $1,156 Interest expense: Resort operations $1,393 $401 $2,799 $1,056 Real estate management/rental income 57,965 60, , ,593 Land resource management