AXR US Equity☆

Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations

For a description of the Company’s business, refer to Item 1 of Part I of this annual report on Form 10-K. As indicated in Item 1, the Company, through its subsidiaries, is primarily engaged in two business segments: land development and homebuilding. The Company has no foreign sales. The following provides information that management believes is relevant to an assessment and understanding of the Company’s consolidated results of operations and financial condition. The discussion should be read in conjunction with the consolidated financial statements and accompanying notes.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company prepares its financial statements in conformity with accounting principles generally accepted in the United States of America. The Company discloses its significant accounting policies in the notes to its audited consolidated financial statements.

The preparation of such financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of those financial statements as well as the amounts reported in the financial statements and accompanying notes. Areas that require significant judgments and estimates to be made include: (1) land sale cost of revenues, net calculations, which are based on land development budgets and estimates of costs to complete; (2) cash flows, asset groupings and valuation assumptions in performing asset impairment tests of long-lived assets and assets held for sale; (3) actuarially determined defined benefit pension obligations and other pension plan accounting and disclosures; (4) risk assessment of uncertain tax positions; and (5) the determination of the recoverability of net deferred tax assets. Actual results could differ from those estimates.

There are numerous critical assumptions that may influence accounting estimates in these and other areas. Management bases its critical assumptions on historical experience, third-party data and various other estimates that it believes to be reasonable under the circumstances. The most critical assumptions made in arriving at these accounting estimates include the following:

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RESULTS OF OPERATIONS

Year Ended April 30, 2023 Compared to Year Ended April 30, 2022

For 2023, the Company had net income of $21,790,000, or $4.11 per diluted share, compared to net income of $15,862,000, or $2.21 per diluted share, in 2022. As discussed in more detail below, during 2023, the Company recognized a non-cash income tax benefit of $16,071,000 as a result of a worthless stock deduction related to its former fulfillment services business and a non-cash pre-tax pension settlement general and administrative expense of $7,597,000 due to (a) the Company’s defined benefit pension plan paying certain lump sum payouts of pension benefits to former employees and (b) the transfer of nearly all remaining pension benefit liabilities to an insurance company through an annuity purchase.

During 2023 and 2022, the Company has experienced supply chain constraints, increases in the prices of building materials, shortages of skilled labor and delays in municipal approvals and inspections in both the land development business segment and homebuilding business segment, which caused delays in construction and the realization of revenues and increases in cost of revenues. In addition, in response to inflation, the Federal Reserve increased benchmark interest rates during 2023 and 2022 and has signaled it expects additional future interest rate increases, which has resulted in a significant increase in mortgage interest rates during 2023 and 2022, impacting home affordability and consumer sentiment and tempering demand for new homes and finished residential lots. The rising cost of housing due to increases in average sales prices in recent years and the recent increases in mortgage interest rates, coupled with general inflation in the U.S. economy and other macroeconomic factors, have placed pressure on overall housing affordability and have caused many potential homebuyers to pause and reconsider their housing choices. Given the affordability challenges described above and the resulting impact on demand, the Company has increased sales incentives on certain homes classified as homebuilding model inventory or homebuilding construction in process, opportunistically leased completed homes and slowed the pace of housing starts and land development projects. The Company believes these conditions will continue to impact the land development and homebuilding industries for at least the remainder of calendar year 2023.

Future economic conditions and the demand for land and homes are subject to continued uncertainty due to many factors, including the recent increase in mortgage interest rates, higher inflation, low supplies of new and existing home inventory available for sale, ongoing disruptions from supply chain challenges and labor shortages, the ongoing impact of the COVID-19 pandemic and government directives, and other factors. While construction and land costs remain elevated, the Company has been able to offset these cost increases through land and home price increases in 2023 and 2022 due to a strong pricing environment, which may not continue. The Company’s past performance may not be indicative of future results.

Revenues. The following presents information on revenues (dollars in thousands):

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​ Year Ended April 30,

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​ Acres Sold Revenue Revenue Per Acre1

Developed ​ ​ ​

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​ Acres Sold Revenue Revenue Per Acre1

Developed ​ ​ ​

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The changes in the revenue per acre of developed residential land, developed commercial land and undeveloped land for 2023 compared to 2022 were primarily due to the location and mix of lots sold. The Company sold 1,196 acres of contiguous undeveloped land in Sandoval County, New Mexico in 2022, representing $7,107,000 of revenue, to one purchaser. The Company does not expect the sale of a significant amount of undeveloped land in 2022 to be indicative of the sale of such undeveloped land in the future.

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​ ​ Year Ended April 30,

Average selling price ​ $ 525 ​ $ 331

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As of April 30, 2023, the Company had 18 homes in production, including 10 homes under contract, which homes under contract represented $5,640,000 of expected home sale revenues when closed, subject to customer cancellations and change orders. As of April 30, 2022, the Company had 38 homes in production, including 17 homes under contract, which homes under contract represented $8,713,000 of expected home sale revenues when closed, subject to customer cancellations and change orders.

● Building sales and other revenues consist of (in thousands):

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​ ​ Year Ended April 30,

Sales of buildings ​ $ — ​ $ 8,439

Oil and gas royalties ​ 146 ​ 276

Landscaping revenues ​ 585 ​ —

Miscellaneous other revenues ​ 595 ​ 446

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1 Revenues per acre may not calculate precisely due to the rounding of revenues to the nearest thousand dollars.

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Sales of buildings during 2022 consisted of revenues from the sale of a 4,338 square foot, single tenant retail building in the La Mirada subdivision and from the sale of a 143,000 square foot warehouse and office facility located in Palm Coast, Florida. The Company does not expect the sale of the warehouse and office facilities located in Palm Coast, Florida to be indicative of future sales of such properties since the Company has no other similar properties. Landscaping revenues consisted of landscaping services, generally servicing homebuilders and homeowners’ associations, provided by the Company.

Miscellaneous other revenues for 2023 primarily consisted of extension fees for purchase contracts, forfeited deposits and residential rental revenues. Miscellaneous other revenues for 2022 primarily consisted of rent received from a tenant at a building in Palm Coast, Florida and tenants at a shopping center in Albuquerque, New Mexico, a non-refundable option payment and proceeds from the sale of equipment.

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Cost of Revenues. The following presents information on cost of revenues (dollars in thousands):

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​ ​ Year Ended April 30,

Building sales and other cost of revenues ​ 361 ​ 4,387 ​ (4,026) ​ (92) %

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● Land sale cost of revenues, net consist of (in thousands):

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​ Year Ended April 30,

Less: ​ ​

Public improvement district reimbursements ​ (759) ​ (558)

Private infrastructure covenant reimbursements ​ (626) ​ (184)

Payments for impact fee credits ​ (3,713) ​ (2,811)

Land sale cost of revenues, net ​ $ 17,379 ​ $ 17,645

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Land sale gross margins were 42% for 2023 compared to 51% for 2022. The change in gross margin was primarily due to the location, size and mix of property sold (including the sale of 1,233.5 acres in 2022 versus 10.8 acres in 2023 of undeveloped land with a low associated land sale cost of revenues) offset in part by lower than estimated costs in 2022 associated with certain completed projects. As a result of many factors, including the nature and timing of specific transactions and the type and location of land being sold, revenues, average selling prices and related gross margin from land sales can vary significantly from period to period and prior results are not necessarily a good indication of what may occur in future periods.

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General and Administrative Expenses. The following presents information on general and administrative expenses (dollars in thousands):

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​ ​ Year Ended April 30,

Operations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Pension settlement ​ $ 7,597 ​ $ — ​ 7,597 ​ (a) ​

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(a) Percentage not meaningful.

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Interest Income (Expense). Interest income (expense), net increased to $8,000 for 2023 from $2,000 for 2022. Interest and loan costs of $57,000 and $224,000 were capitalized in real estate inventory for 2023 and 2022.

Other Income. Other income of $1,803,000 for 2023 consisted of the sale of all of the Company’s minerals and mineral rights in and under approximately 147 surface acres of land in Brighton, Colorado. Other income of $261,000 for 2022 primarily consisted of $185,000 received in connection with the bankruptcy of a warranty provider, $45,000 of debt forgiveness with respect to a note payable and $30,000 received from a life insurance policy for a retired executive of the Company.

Income Taxes. The Company had a benefit for income taxes of $14,149,000 for 2023 compared to a provision for income taxes of $5,704,000 for 2022. The benefit for income taxes for 2023 was primarily due to the income tax benefit related to the Company’s worthless stock deduction offset in part by income taxes for the amount of income before income taxes during the year. The provision for income taxes for 2022 correlated to the amount of income before income taxes during the year. Refer to Note 13 to the consolidated financial statements contained in this annual report on Form 10-K for detail regarding the Company’s worthless stock deduction.

LIQUIDITY AND CAPITAL RESOURCES

The Company had cash and cash equivalents of $19,993,000 and $15,721,000 as of April 30, 2023 and April 30, 2022. AMREP Corporation is a holding company that conducts substantially all of its operations through subsidiaries. As a holding company, AMREP Corporation is dependent on its available cash and on cash from subsidiaries to pay expenses and fund operations. The Company’s liquidity is affected by many factors, including some that are based on normal operations and some that are related to the real estate industry and the economy generally.

The Company’s primary sources of funding for working capital requirements are cash flow from operations, bank financing for specific real estate projects, a revolving line of credit and existing cash balances. Land and homebuilding properties generally cannot be sold quickly, and the ability of the Company to sell properties has been and will continue to be affected by market conditions. The ability of the Company to generate cash flow from operations is primarily dependent upon its ability to sell the properties it has selected for disposition at the prices and within the timeframes the Company has established for each property. The development of additional lots

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for sale, construction of homes or pursuing other real estate projects may require financing or other sources of funding, which may not be available on acceptable terms (or at all). If the Company is unable to obtain such financing, the Company’s results of operations could be adversely affected.

The Company expects the primary demand for funds in the future will be for the development and acquisition of land, construction of home and commercial projects and general and administrative expenses. The development and acquisition of land and construction of home and commercial projects is generally required to satisfy delivery obligations of developed land or finished homes to customers. Further, the Company regularly evaluates property available for purchase from third parties for possible acquisition and development by the Company. To the extent the sources of capital described above are insufficient to meet its needs, the Company may conduct public or private offerings of securities, dispose of certain assets or draw on existing or new debt facilities. The Company believes that it has adequate cash, bank financing and cash flows from operations to provide for its anticipated spending in fiscal year 2024.

COVID-19. Any epidemic, pandemic or similar serious public health issue, and the measures undertaken by governmental authorities to address it, could significantly disrupt or prevent the Company from operating its business in the ordinary course for an extended period. As a result, the impact of such public health issues and the related governmental actions could materially impact the Company’s financial position, results of operations and cash flows. For instance, in March 2020, the World Health Organization declared COVID-19 a global pandemic, resulting in extraordinary and wide-ranging actions taken by public health and governmental authorities to contain and combat the outbreak and spread of COVID-19, including quarantines, shelter-in-place orders and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations. These restrictions had an adverse impact on the Company beginning in the spring of 2020. As effective treatment and mitigation measures for COVID-19 advanced, economic activity gradually resumed and demand for new homes improved significantly. The effects of the pandemic on economic activity, combined with the strong demand for new homes, caused many disruptions to the Company’s supply chain and shortages in certain building components and materials, as well as labor shortages. These conditions caused construction cycles to lengthen and while the Company’s business is now fully functioning, some of those conditions continue to impact the Company’s operations and financial performance.

There is continuing uncertainty regarding how long COVID-19 and its resultant effect on the economy will continue to impact the Company’s supply chain and operations. The Company’s operational and financial performance could be impacted by a resurgence in the pandemic and any containment or mitigation measures put in place as a result of the resurgence, all of which are highly uncertain, unpredictable and outside the Company’s control. If COVID-19 or any of its variants continues to have a significant negative impact on the economy, or if a new pandemic emerges, the Company’s results of operations and financial condition could be adversely impacted.

Pension Plan. The Company has a defined benefit pension plan for which accumulated benefits were frozen and future service credits were curtailed as of March 1, 2004. Under generally accepted accounting principles, the Company’s defined benefit pension plan was overfunded as of April 30, 2023 by $747,000, with $1,030,000 of assets and $283,000 of liabilities, and was overfunded as of April 30, 2022 by $90,000, with $18,054,000 of assets and $17,964,000 of liabilities. The pension plan liabilities were determined using a weighted average discount interest rate of 4.51% per year as of April 30, 2023 and 3.97% per year as of April 30, 2022, which are based on the FTSE Pension Discount Curve as of such dates as it corresponds to the projected liability requirements of the pension plan. The pension plan is subject to minimum IRS contribution requirements, but these requirements can be satisfied by the use of the pension plan’s existing credit balance. No cash contributions to the pension plan were required during 2023 or 2022 and the Company did not make any contributions to the pension plan during 2023 or 2022. The Company recognized a non-cash pre-tax pension settlement general and administrative expense of $7,597,000 during 2023 due to (a) the Company’s defined benefit pension plan paying certain lump sum payouts of pension benefits to former employees and (b) the transfer of nearly all remaining pension benefit liabilities to an insurance company through an annuity purchase.

Cash Flow. The following presents information on the cash flows for the Company (dollars in thousands):

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​ ​ Year Ended April 30,

Net cash used in investing activities ​ (131) ​ (1,195) ​ 1,064 ​ 89 %

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(a)Percentage not meaningful.

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Asset and Liability Levels. The following presents information on certain assets and liabilities (dollars in thousands):

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​ ​ April 30,

Prepaid pension costs ​ 747 ​ 90 ​ 657 ​ (a) ​

Accounts payable and accrued expenses ​ 4,851 ​ 6,077 ​ (1,226) ​ (20) %

Income taxes receivable (payable), net ​ 41 ​ (3,648) ​ 3,689 ​ (a) ​

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(a) Percentage not meaningful.

● Real estate inventory consists of (dollars in thousands):

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​ ​ April 30,

Land inventory in New Mexico ​ $ 59,361 ​ $ 59,374 $ (13) ​ (a) ​

Land inventory in Colorado ​ 3,445 ​ 3,434 ​ 11 ​ (a) ​

Homebuilding construction in process ​ 1,648 ​ 3,306 ​ (1,658) ​ (50) %

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(a) Percentage not meaningful.

Refer to Note 2 to the consolidated financial statements contained in this annual report on Form 10-K for detail regarding real estate inventory. From April 30, 2022 to April 30, 2023, the change in land inventory in New Mexico was primarily due to land development activity and the acquisition and sale of land, the change in homebuilding model inventory was primarily due to the sale of homes offset in part by the completion of homes not yet sold and the change in homebuilding construction in process was primarily due to supply chain constraints, shortages of skilled labor and delays in municipal approvals and inspections causing construction cycle time to lengthen.

● Investment assets, net consist of (dollars in thousands):

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​ ​ April 30,

Land held for long-term investment ​ $ 8,961 ​ $ 9,017 $ (56) ​ (1) %

Owned real estate leased or intended to be leased ​ 4,802 ​ — ​ 4,802 ​ (a) ​

Less accumulated depreciation ​ (16) ​ — ​ (16) ​ (a) ​

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(a) Percentage not meaningful.

Land held for long-term investment represents property located in areas that are not planned to be developed in the near term and that has not been offered for sale in the normal course of business.

Owned real estate leased or intended to be leased represents homes and buildings leased or intended to be leased to third parties. As of April 30, 2023, eight homes are leased to residential tenants and two buildings under construction have been leased to commercial tenants. Given the impact on demand as a result of affordability challenges described in Note 16 to the consolidated financial statements contained in this annual report on Form 10-K, the Company has opportunistically leased completed homes. Depreciation associated with owned real estate leased or intended to be leased was $16,000 for 2023; there was no such depreciation in 2022.

Off-Balance Sheet Arrangements. As of April 30, 2023 and April 30, 2022, the Company did not have any off-balance sheet arrangements (as defined in Item 303(a)(4)(ii) of Regulation S-K).

Recent Accounting Pronouncements. Refer to Note 1 to the consolidated financial statements contained in this annual report on Form 10-K for a discussion of recently issued accounting pronouncements.

IMPACT OF INFLATION

The Company’s operations can be impacted by inflation. Inflation can cause increases in the cost of land, materials, services, interest rates and labor. Unless such increased costs are recovered through increased sales prices or improved operating efficiencies, operating margins will decrease. The Company’s homebuilding segment as well as homebuilders that are customers of the Company’s land development business segment face inflationary concerns that rising housing costs, including interest costs, may substantially outpace increases in the incomes of potential purchasers and make it difficult for them to purchase a new home or sell an owned home. If this situation were to exist, the demand for homes produced by the Company’s homebuilding segment could decrease and the demand for the Company’s land by homebuilder customers could decrease. Although the rate of inflation has been historically low in recent years,

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it increased significantly in 2023 and 2022 and the Company has and is experiencing significant increases in the prices of labor and certain materials as a result of this increase and increased demand for new homes. Inflation may also increase the Company’s financing costs. While the Company attempts to pass on to its customers increases in costs through increased sales prices, market forces may limit the Company’s ability to do so. If the Company is unable to raise sales prices enough to compensate for higher costs, or if mortgage interest rates increase significantly, the Company’s revenues, gross margins and net income could be adversely affected.

FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of the Company. The Company and its representatives may from time to time make written or oral statements that are “forward-looking”, including statements contained in this annual report on Form 10-K and other filings with the Securities and Exchange Commission, reports to the Company’s shareholders and news releases. All statements that express expectations, estimates, forecasts or projections are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, other written or oral statements, which constitute forward-looking statements, may be made by or on behalf of the Company. Words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “projects”, “forecasts”, “may”, “should”, variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and contingencies that are difficult to predict. All forward-looking statements speak only as of the date of this annual report on Form 10-K or, in the case of any document incorporated by reference, the date of that document. All subsequent written and oral forward-looking statements attributable to the Company or any person acting on behalf of the Company are qualified by the cautionary statements in this section. Many of the factors that will determine the Company’s future results are beyond the ability of management to control or predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in or suggested by such forward-looking statements.

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The forward-looking statements contained in this annual report on Form 10-K include, but are not limited to, statements regarding (1) the Company’s ability to finance its future working capital, land development, acquisition of land, homebuilding, commercial projects, general and administrative expenses and capital expenditure needs, (2) the Company’s expected liquidity sources, including the availability of bank financing for projects and the utilization of existing bank financing, (3) anticipated development of the Company’s real estate holdings, (4) the development and construction of possible future commercial properties to be marketed to tenants, (5) the designs, pricing and levels of options and amenities with respect to the Company’s homebuilding operations, (6) the amount and timing of reimbursements under, and the general effectiveness of, the Company’s public improvement districts and private infrastructure reimbursement covenants, (7) the number of planned residential lots in the Company’s subdivisions, (8) estimates of the Company’s exposure to warranty claims, estimates of the cost to complete of common land development costs and the estimated relative sales value of individual parcels of land in connection with the allocation of common land development costs, (9) the sale of a significant amount of undeveloped land in 2022 and the sale of the warehouse and office facilities located in Palm Coast, Florida not being indicative of future operating results and the Company’s share repurchase activity not being indicative of future financing activities, (10) estimates and assumptions used in determining future cash flows of real estate projects, (11) the conditions resulting in homebuyer affordability challenges persisting through calendar year 2023, (12) the backlog of homes under contract and in production, the dollar amount of expected sale revenues when such homes are closed and homes and buildings leased or intended to be leased to third parties, (13) the effect of recent accounting pronouncements, (14) contributions by the Company to the pension plan, the amount of future annual benefit payments to pension plan participants payable from plan assets, the appropriateness of valuation methods to determine the fair value of financial instruments in the pension plan and the expected return on assets in the pension plan, (15) the timing of recognizing unrecognized compensation expense related to shares of common stock issued under the AMREP Corporation 2016 Equity Compensation Plan, (16) the Company’s belief that its compensation package and benefits offered to employees are competitive with others in the industry, (17) the future issuance of deferred stock units to directors of the Company, (18) the future business conditions that may be experienced by the Company, including the pace of the Company’s housing starts and land development projects, (19) the dilution to earnings per share that outstanding options to purchase shares of common stock of the Company may cause in the future, (20) the adequacy of the Company’s facilities, (21) the materiality of claims and legal actions arising in the normal course of the Company’s business, (22) projections of future earnings for the future recoverability of deferred tax assets and state net operating losses that are not expected to be realizable, (23) the duration, effect and severity of any pandemic and (24) the measures that governmental authorities may take to address a pandemic which may precipitate or exacerbate one or more of the above-mentioned or other risks and significantly disrupt or prevent the Company from operating in the ordinary course for an extended period of time. The Company undertakes no obligation to update or publicly release any revisions to any forward-looking statement to reflect events, circumstances or changes in expectations after the date of such forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

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Item 7A.Quantitative and Qualitative Disclosures About Market Risk

Not required.

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Item 8.Financial Statements and Supplementary Data

Management’s Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America.

Because of the inherent limitations of internal control over financial reporting, including the possibilities of human error and the circumvention or overriding of controls, material misstatements may not be prevented or detected on a timely basis. Accordingly, even internal controls determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Furthermore, projections of any evaluation of the effectiveness of internal controls to future periods are subject to the risk that such controls may become inadequate due to changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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Management has assessed the effectiveness of internal control over financial reporting as of April 30, 2023 based upon the criteria set forth in a report entitled “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Based on its assessment, management has concluded that, as of April 30, 2023, internal control over financial reporting was effective.

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This annual report on Form 10-K does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to such attestation pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report on internal control over financial reporting in this annual report on Form 10-K.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the board of directors of AMREP Corporation and Subsidiaries:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of AMREP Corporation and Subsidiaries (the “Company”) as of April 30, 2023, the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for the year ended April 30, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of April 30, 2023, and the results of its operations and its cash flows for the year ended April 30, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Common Land Sale Cost of Revenues

Critical Audit Matter Description

As described in Notes 1, 2, and 8 to the consolidated financial statements, the Company records common land sale cost of revenues based upon an allocation of certain common development costs associated with the entire project. Common development costs include the installation of utilities and roads and can be based upon estimates to complete. The allocation of these costs is based upon the estimates. These estimates and cost allocations are reviewed on a regular basis until a project is substantially completed, and may be revised and reallocated as necessary on the basis of current estimates.

We identified common land sale cost of revenues as a critical audit matter because of the significant estimates and assumptions management makes in allocating common land costs to individual parcels of real estate once sold. Performing audit procedures to evaluate the reasonableness of these estimates and assumptions requires a high degree of auditor judgment and an increased extent of effort.

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How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the critical audit matter included, among other things, the following:

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/s/ Baker Tilly US, LLP

Baker Tilly US, LLP

We have served as the Company’s auditor since 2022.

Philadelphia, Pennsylvania

July 25, 2023

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

AMREP Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of AMREP Corporation and Subsidiaries (the “Company”) as of April 30, 2022, the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for the one year in the period ended April 30, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of April 30, 2022, and the results of its operations and its cash flows for the one year in the period ended April 30, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from audit of the financial statements for the year ended April 30, 2022 that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allocation of common development costs

For the year ended April 30, 2022, the Company’s land sale cost of revenues includes all direct acquisition costs and other costs specifically identified with the land and an allocation of common development costs associated with its land development projects. As discussed in Note 1 to the consolidated financial statements, common development costs are allocated based on the estimated relative sales value of the individual parcels of land being sold to the total expected sales value for the unsold parcels of land in the applicable portion of the subdivision. At the time of the closings of the sales of individual land parcels, certain common development costs may not yet be incurred. To recognize the appropriate amount of cost of revenues, the Company estimates the total remaining common development costs associated with its land development projects. Estimates may be affected by changes to zoning laws, land development requirements and the cost of labor, material, and subcontractors.

Auditing the Company’s allocation of common development costs associated with its land development projects was complex and subject to sensitive management assumptions.

To test the Company’s allocation of common development costs associated with its land development projects, our audit procedures included, among others, testing the significant assumptions used to develop the estimated costs to complete the land development

18

projects and testing the completeness and accuracy of the underlying data and allocation calculations. To test the reasonableness of the assumptions utilized in the allocation of common development costs, we compared the estimated land development costs to actual costs of similar communities developed by the Company; agreed the actual development costs to supporting documentation, including underlying contracts; tested the estimated relative selling prices by comparing to actual current selling prices; and reviewed margins disaggregated by project for reasonableness.

/s/ Marcum LLP

Marcum LLP

We served as the Company’s auditor from 2017 to 2022.

Philadelphia, Pennsylvania

July 21, 2022

​

19

AMREP CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

APRIL 30, 2023 AND 2022

(Amounts in thousands, except share and per share amounts)

​

​ ​ ​ ​ ​ ​ ​

ASSETS ​ ​ ​ ​

Income taxes receivable ​ 41 ​ —

Deferred income taxes, net ​ 12,493 ​ 958

Prepaid pension costs ​ 747 ​ 90

LIABILITIES AND SHAREHOLDERS’ EQUITY ​ ​

​ ​ ​

LIABILITIES: ​ ​

Accounts payable and accrued expenses ​ $ 4,851 ​ $ 6,077

Income taxes payable ​ — ​ 3,648

​ ​ ​

SHAREHOLDERS' EQUITY: ​ ​

Capital contributed in excess of par value ​ 32,686 ​ 32,383

Accumulated other comprehensive income (loss), net ​ 1,170 ​ (4,573)

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY ​ $ 115,895 ​ $ 94,917

​

The accompanying notes to consolidated financial statements are an

integral part of these consolidated financial statements.

​

20

AMREP CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands)

​

​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended April 30,

REVENUES: ​ ​

Building sales and other revenues ​ 1,326 ​ 9,161

​ ​ ​

COSTS AND EXPENSES: ​ ​

Building sales and other cost of revenues ​ 361 ​ 4,387

General and administrative expenses Operations ​ 5,472 ​ 5,354

Pension settlement ​ ​ 7,597 ​ ​ —

​ ​ ​ ​ ​ ​ ​

Interest income , net ​ 8 ​ 2

Income before income taxes ​ ​ 7,641 ​ ​ 21,566

​ ​ ​ ​ ​ ​ ​

(Benefit) provision for income taxes ​ (14,149) ​ 5,704

​ ​ ​

Basic earnings per share ​ $ 4.13 ​ $ 2.21

Diluted earnings per share ​ $ 4.11 ​ $ 2.21

Weighted average number of common shares outstanding – basic ​ 5,282 ​ 7,170

Weighted average number of common shares outstanding – diluted ​ 5,307 ​ 7,193

​

The accompanying notes to consolidated financial statements are an

integral part of these consolidated financial statements.

​

21

AMREP CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

​

​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended April 30,

Other comprehensive income, net of tax: ​ ​ ​ ​

Pension settlement ​ ​ 7,597 ​ ​ —

Income tax effect ​ ​ (2,354) ​ ​ —

Pension settlement, net of tax ​ ​ 5,243 ​ ​ —

Decrease in pension liability ​ ​ 615 ​ ​ 75

Income tax effect ​ ​ (115) ​ ​ (25)

Decrease in pension liability, net of tax ​ 500 ​ 50

Other comprehensive income ​ 5,743 ​ 50

​

The accompanying notes to consolidated financial statements are an

integral part of these consolidated financial statements.

​

22

AMREP CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Amounts in thousands)

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ Capital ​ ​ ​ ​ Accumulated ​ ​

​ ​ ​ ​ ​ ​ ​ Contributed ​ ​ ​ ​ Other ​ ​

​ ​ Common Stock ​ in Excess of ​ Retained ​ Comprehensive ​ ​

​ Shares Amount Par Value Earnings Income (Loss) Total

Issuance of restricted common stock 13 ​ 1 ​ 149 ​ — ​ — ​ 150

Issuance of deferred common share units — ​ — ​ 90 ​ — ​ — ​ 90

Issuance of option to purchase common stock ​ — ​ ​ — ​ ​ 25 ​ ​ — ​ ​ — ​ ​ 25

Other comprehensive income — ​ — ​ — ​ — ​ 50 ​ 50

Issuance of restricted common stock ​ 15 ​ ​ 2 ​ ​ 162 ​ ​ — ​ ​ — ​ ​ 164

Issuance of deferred common stock units ​ — ​ ​ — ​ ​ 90 ​ ​ — ​ ​ — ​ ​ 90

Net income ​ — ​ ​ — ​ ​ — ​ ​ 21,790 ​ ​ — ​ ​ 21,790

Other comprehensive income ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 5,743 ​ ​ 5,743

​

The accompanying notes to consolidated financial statements are an

integral part of these consolidated financial statements.

​

23

AMREP CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

​

​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended April 30,

CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​

Amortization of debt issuance costs ​ — ​ 84

Non-cash credits and charges: ​ ​ ​ ​ ​ ​

Stock-based compensation ​ 238 ​ 217

Deferred income tax provision ​ (13,762) ​ 1,766

Net periodic pension cost ​ (283) ​ (490)

Pension settlement ​ ​ 7,597 ​ ​ —

Gain on debt forgiveness ​ ​ — ​ ​ (45)

Changes in assets and liabilities: ​ ​ ​ ​

Real estate inventory and investment assets ​ (3,122) ​ (7,295)

Accounts payable and accrued expenses ​ (1,251) ​ 1,486

Taxes (receivable) payable, net ​ (3,690) ​ 3,553

Net cash provided by operating activities ​ 6,389 ​ 15,476

​ ​ ​ ​ ​

CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​ ​ ​

Proceeds from corporate-owned life insurance policy ​ — ​ 92

Capital expenditures of property and equipment ​ (131) ​ (1,287)

Net cash used in investing activities ​ (131) ​ (1,195)

​ ​ ​ ​ ​

CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ ​ ​

Proceeds from debt financing ​ 50 ​ 6,857

Principal debt payments ​ (2,036) ​ (8,264)

Payments for debt issuance costs ​ — ​ (50)

Repurchase of common stock ​ ​ — ​ ​ (21,904)

Net cash used in financing activities ​ (1,986) ​ (23,361)

​ ​ ​ ​ ​

Increase (decrease) in cash and cash equivalents ​ 4,272 ​ (9,080)

Cash and cash equivalents, beginning of year ​ 15,721 ​ 24,801

Cash and cash equivalents, end of year ​ $ 19,993 ​ $ 15,721

​ ​ ​ ​ ​

SUPPLEMENTAL CASH FLOW INFORMATION: ​ ​ ​ ​

Income taxes refunded, net ​ $ 134 ​ $ 3

Interest paid ​ $ 57 ​ $ 203

​

The accompanying notes to consolidated financial statements are an

integral part of these consolidated financial statements.

​

24

AMREP CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND FINANCIAL REPORTING POLICIES

Organization and principles of consolidation

The consolidated financial statements include the accounts of AMREP Corporation, an Oklahoma corporation, and its subsidiaries (collectively, the “Company”). The Company, through its subsidiaries, is primarily engaged in two business segments: land development and homebuilding. The Company has no foreign sales. All intercompany accounts and transactions have been eliminated in consolidation.

The consolidated balance sheets are presented in an unclassified format since the Company has substantial operations in the real estate industry and its operating cycle is greater than one year. Certain 2022 balances in these financial statements have been reclassified to conform to the current year presentation with no effect on the net income or shareholders’ equity. To better align with industry practice, the Company reclassified public improvement district reimbursements, private infrastructure covenant reimbursements and a portion of miscellaneous other revenues representing payment for impact fee credits within building sales and other revenues for 2022 as a reduction to land sale cost of revenues in these financial statements to conform to the current year presentation with no effect on net income or shareholders’ equity.

Fiscal year

The Company’s fiscal year ends on April 30. All references to 2023 and 2022 mean the fiscal years ended April 30, 2023 and 2022, unless the context otherwise indicates.

Revenue recognition

The Company accounts for land sale revenues, home sale revenues and building sales and other revenues in accordance with Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606).

Land sale revenues: Revenues and cost of revenues from land sales are recognized when the parties are bound by the terms of a contract, consideration has been exchanged, title and other attributes of ownership have been conveyed to the buyer by means of a closing and the Company is not obligated to perform further significant development of the specific property sold. In general, the Company’s performance obligation for each of these land sales is fulfilled upon the delivery of the land, which generally coincides with the receipt of cash consideration from the counterparty.

Land sale cost of revenues, net includes all direct acquisition costs and other costs specifically identified with the property, including pre-acquisition costs and capitalized real estate taxes and interest, and an allocation of certain common development costs associated with the entire project. Common development costs include the installation of utilities and roads, and may be based upon estimates of cost to complete. The allocation of costs is based on the estimated relative sales value of the individual parcels of land being sold to the total expected sales value for the unsold parcels of land in the applicable portion of the subdivision. Estimates and cost allocations are reviewed on a regular basis until a project is substantially completed, and are revised and reallocated as necessary on the basis of current estimates. Amounts received from public improvement districts, private infrastructure covenants and payments for impact fee credits reduce the amount of land sale cost of revenues.

Home sale revenues: Revenues and cost of revenues from home sales are recognized at the time each home is delivered and title and possession are transferred to the buyer. The Company’s performance obligation to deliver a home is generally satisfied in less than one year from the date a binding sale agreement is signed. In general, the Company’s performance obligation for each home sale is fulfilled upon the delivery of the completed home, which generally coincides with the receipt of cash consideration from the counterparty. If the Company’s performance obligations are not complete upon the home closing, the Company defers a portion of the home sale revenues related to the outstanding obligations and subsequently recognizes that revenue upon completion of such obligations. As of April 30, 2023 and April 30, 2022, deferred home sale revenues and costs related thereto were immaterial.

Forfeited customer deposits for homes are recognized in home sale revenues in the period in which the Company determines that the customer will not complete the purchase of the home and the Company has the right to retain the deposit. In order to promote sales of homes, the Company may offer homebuyers sales incentives. These incentives vary by type and amount on a community-by-community and home-by-home basis. Incentives are reflected as a reduction in home sale revenues.

25

Home construction and related costs are capitalized as incurred within real estate inventory under the specific identification method on the balance sheet and are charged to home sale cost of revenues on the consolidated statement of operations when the related home is sold.

The Company offers homeowners a comprehensive third-party warranty on each home. Homes are generally covered by a ten-year warranty for qualified and defined structural defects, one year for defects and products used and two years for electrical, plumbing, heating, ventilation and air conditioning parts and labor. Estimates of the Company’s exposure to warranty claims are included within accrued expenses at the time home sale revenues are recognized

Building sales and other revenues: Revenues and cost of revenues from building sales and other consist of sales of buildings, oil and gas royalties and miscellaneous other revenues.

Sales of buildings consist of building sales in New Mexico and Florida. Revenues from these building sales are recognized when the parties are bound by the terms of a contract, consideration has been exchanged, title and other attributes of ownership have been conveyed to the buyer by means of a closing and the Company is not obligated to perform further significant development of the specific property sold. In general, the Company’s performance obligation for each of these building sales is fulfilled upon the delivery of the property, which generally coincides with the receipt of cash consideration from the counterparty. Building sales and other cost of revenues includes all direct acquisition costs and other costs specifically identified with the property, including pre-acquisition and acquisition costs, if applicable, closing and selling costs and construction costs.

Oil and gas royalties are recognized at the time of receipt of cash by the Company as such amounts are unknown with any degree of certainty prior to receipt.

Landscaping revenues consist of landscaping services, generally servicing homebuilders and homeowners’ associations, provided by the Company.

Miscellaneous other revenues primarily include extension fees for purchase contracts and rental payments and additional rent from tenants pursuant to leases with respect to property or buildings of the Company. Base rental payments are recognized as revenue monthly over the term of the lease. Additional rent related to the reimbursement of real estate taxes, insurance, repairs and maintenance, and other operating expenses is recognized as revenue in the period the expenses are incurred.

Cash and cash equivalents

Cash equivalents consist of highly liquid investments that have an original maturity of ninety days or less when purchased and are readily convertible into cash. Restricted cash consists of cash deposits with a bank that are restricted due to subdivision improvement agreements with a governmental authority. The Company did not have any restricted cash as of April 30, 2023 or April 30, 2022.

Long-lived assets

Long-lived assets consist of real estate inventory and investment assets and are accounted for in accordance with Accounting Standards Codification (“ASC”) 360-10. A substantial majority of the Company's real estate assets are located in Rio Rancho, New Mexico ("Rio Rancho") and certain adjoining areas of Sandoval County, New Mexico. As a result of this geographic concentration, the Company has been and will be affected by changes in economic conditions in that region.

Real estate inventory: Real estate inventory includes land and improvements on land held for development or sale. The cost basis of the land and improvements includes all direct acquisition costs including development costs, certain amenities, capitalized interest, capitalized real estate taxes and other costs. Interest and real estate taxes are not capitalized unless active development is underway. Real estate inventory held for development or sale is stated at accumulated cost and is evaluated and reviewed for impairment when events or changes in circumstances indicate the carrying value of an asset may not be recoverable.

Investment assets, net: Investment assets, net consist of (i) land held for long-term investment, which represents property located in areas that are not planned to be developed in the near term and that has not been offered for sale in the normal course of business, and (ii) owned real estate leased or intended to be leased, which represents homes and buildings leased or intended to be leased to third parties. Investment assets are stated at the lower of cost or net realizable value. Depreciation of investment assets (other than land) is provided principally by the straight-line method at various rates calculated to amortize the book values of the respective assets over their estimated useful lives, which generally are 10 to 40 years for buildings and improvements. Land is not subject to depreciation.

26

Impairment of long-lived assets: Long-lived assets are evaluated and tested for impairment when events or changes in circumstances indicate the carrying value of an asset may not be recoverable. Asset impairment tests are based upon the intended use of assets, expected future cash flows and estimates of fair value of assets. The evaluation of long-lived assets includes an estimate of future cash flows on an undiscounted basis using estimated revenue streams, operating margins and general and administrative expenses. The estimation process involved in determining if assets have been impaired and in the determination of estimated future cash flows is inherently uncertain because it requires estimates of future revenues and costs, as well as future events and conditions. If the excess of undiscounted cash flows over the carrying value of a project is small, there is a greater risk of future impairment and any resulting impairment charges could be material. Due to the subjective nature of the estimates and assumptions used in determining future cash flows, actual results could differ materially from current estimates and the Company may be required to recognize impairment charges in the future.

Leases

Right-of-use assets and lease liabilities are recorded on the balance sheet for all leases with an initial term over one year. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Right-of-use assets are classified within other assets and the corresponding lease liability is included in accounts payable and accrued expenses in the balance sheet.

Share-based compensation

The Company accounts for awards of restricted stock, stock options and deferred stock units in accordance with ASC 718-10, which requires that compensation cost for all stock awards be calculated and amortized over the service period (generally equal to the vesting period). Compensation expense for awards of restricted stock, stock options and deferred stock units are based on the fair value of the awards at their grant dates. To estimate the grant-date fair value of stock options, the Company uses the Black-Scholes option-pricing model. The Black-Scholes model estimates the per share fair value of an option on its date of grant based on the following: the option’s exercise price; the price of the underlying stock on the date of grant; the estimated dividend yield; a “risk-free” interest rate; the estimated option term; and the expected volatility. For the “risk-free” interest rate, the Company uses a U.S. Treasury bond due in a number of years equal to the option’s expected term. To estimate expected volatility, the Company analyzes the historic volatility of the Company’s common stock.

Income taxes

Deferred income tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities, and are measured by using currently enacted tax rates expected to apply to taxable income in the years in which those differences are expected to reverse. The Company provides a valuation allowance against deferred tax assets unless, based upon the available evidence, it is more likely than not that the deferred tax assets will be realized.

Earnings per share

Basic earnings per share is based on the weighted average number of common shares outstanding during each year. Unvested restricted shares of common stock are not included in the computation of basic earnings per share, as they are considered contingently returnable shares. Unvested restricted shares of common stock are included in diluted earnings per share if they are dilutive. Deferred stock units are included in both basic and diluted earnings per share computations. Stock options are not included in the computation of basic earnings per share. Stock options are included in diluted earnings per share if they are not anti-dilutive and are in-the-money.

Pension plan

The Company recognizes the over-funded or under-funded status of its defined benefit pension plan as an asset or liability as of the date of the plan’s year-end statement of financial position and recognizes changes in that funded status in the year in which the changes occur through comprehensive income.

Comprehensive income

Comprehensive income is defined as the change in equity during a period from transactions and other events from non-owner sources. Total comprehensive income is the total of net income or loss and other comprehensive income or loss that, for the Company, consists of the minimum pension liability net of the related deferred income tax effect.

27

Management’s estimates and assumptions

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant judgments and estimates that affect the financial statements include, but are not limited to, (i) land sale cost of revenues, net calculations, which are based on land development budgets and estimates of costs to complete; (ii) cash flows, asset groupings and valuation assumptions in performing asset impairment tests of long-lived assets and assets held for sale; (iii) actuarially determined benefit obligations and other pension plan accounting and disclosures; (iv) risk assessment of uncertain tax positions; and (v) the determination of the recoverability of net deferred tax assets. The Company bases its significant estimates on historical experience and on various other assumptions that management believes are reasonable under the circumstances. Actual results could differ from these estimates.

Recent accounting pronouncements

There are no new accounting standards or updates to be adopted that the Company currently believes might have a significant impact on its consolidated financial statements.

​

(2) REAL ESTATE INVENTORY

Real estate inventory consists of (in thousands):

​ ​ ​ ​ ​ ​ ​

​ ​ April 30,

Land inventory in Colorado ​ 3,445 ​ 3,434

Homebuilding model inventory ​ 1,171 ​ 1,135

Homebuilding construction in process ​ 1,648 ​ 3,306

​

Land inventory in New Mexico represents land and improvements on land in New Mexico held for development or sale. Land inventory in Colorado represents an approximately 160 acre property in Brighton, Colorado. Homebuilding model inventory represents costs for residential homes that are completed and ready for sale. Homebuilding construction in process represents costs for residential homes being built.

Interest and loan costs of $57,000 and real estate taxes of $79,000 were capitalized in real estate inventory for the year ending April 30, 2023. Interest and loan costs of $224,000 and real estate taxes of $28,000 were capitalized in real estate inventory for the year ending April 30, 2022.

​

(3) INVESTMENT ASSETS, NET

Investment assets, net consist of (in thousands):

​

​ ​ ​ ​ ​ ​ ​

​ ​ April 30,

Land held for long-term investment ​ $ 8,961 ​ $ 9,017

Owned real estate leased or intended to be leased ​ 4,802 ​ —

Less accumulated depreciation ​ (16) ​ —

Owned real estate leased or intended to be leased, net ​ 4,786 ​ —

​

As of April 30, 2023, eight homes are leased to residential tenants and two buildings under construction have been leased to commercial tenants. Depreciation associated with owned real estate leased or intended to be leased was $16,000 for 2023; there was no such depreciation in 2022.

​

28

(4) OTHER ASSETS

Other assets consist of (in thousands):

​

​ ​ ​ ​ ​ ​ ​

​ ​ April 30,

Miscellaneous assets ​ ​ 362 ​ ​ 249

Less accumulated depreciation of property and equipment ​ ​ (266) ​ ​ (220)

Property and equipment, net ​ 1,351 ​ 1,267

​

Prepaid expenses as of April 30, 2023 primarily consist of a land development cash collateralized performance guaranty, stock compensation, insurance and corporate income and real estate taxes. Prepaid expenses as of April 30, 2022 primarily consist of insurance, stock compensation, real estate taxes and utility deposits. Amortized lease cost for right-of-use assets associated with the leases of office facilities was $25,000 and $70,000 for 2023 and 2022. In 2022, the Company acquired a 7,000 square foot office building in Rio Rancho from which its real estate business now operates. Depreciation expense associated with property and equipment was $46,000 and $24,000 for 2023 and 2022.

​

(5) ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of (in thousands):

​

​ ​ ​ ​ ​ ​ ​

​ ​ April 30,

Land development and homebuilding operations ​ ​ ​ ​ ​ ​

Corporate operations ​ 634 ​ 456

​

​

29

(6) NOTES PAYABLE

​

The following tables present information on the Company’s notes payable in effect as of April 30, 2023 (dollars in thousands):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Principal Amount ​ ​ ​ ​ ​

​ ​ ​ ​ Available for ​ Outstanding

(data as of April 30) ​ ​ ​ New Borrowings ​ Principal Amount

Revolving Line of Credit BOKF ​ $ 4,177 ​ $ — ​ $ —

La Mirada BOKF ​ — ​ — ​ 2,030

Equipment Financing ​ DC ​ ​ — ​ ​ 44 ​ ​ —

​

​ ​ ​ ​ ​ ​ ​ ​

(data as of April 30, 2023) ​ ​ Mortgaged Property ​ ​

Loan Identifier Interest Rate Book Value ​ Scheduled Maturity

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Revolving Line of Credit ​ $ — ​ $ — ​ $ — ​ $ —

Equipment Financing ​ 7 ​ — ​ — ​ —

​

As of April 30, 2023, the Company and each of its subsidiaries were in compliance with the financial covenants contained in the loan documentation for the then outstanding notes payable. Additional information regarding each of the above notes payable is provided below.

ASW made certain representations and warranties in connection with this loan and is required to comply with various covenants, reporting requirements and other customary requirements for similar loans, including ASW and its subsidiaries having at least $3.0 million of unencumbered and unrestricted cash, cash equivalents and marketable securities in order to be entitled to advances under the loan. The loan documentation contains customary events of default for similar financing transactions, including: ASW’s failure to make principal, interest or other payments when due; the failure of ASW to observe or perform its covenants under the loan documentation; the representations and warranties of ASW being false; the insolvency or bankruptcy of ASW; and the failure of ASW to maintain a net worth of at least $32 million. Upon the occurrence and during the continuance of an event of default, BOKF may declare the outstanding principal amount and all other obligations under the loan immediately due and payable. ASW incurred customary costs and expenses and paid certain fees to BOKF in connection with the loan.

30

Wymont and ASW made certain representations and warranties in connection with this loan and are required to comply with various covenants, reporting requirements and other customary requirements for similar loans. The loan documentation contains customary events of default for similar financing transactions, including: Wymont’s failure to make principal, interest or other payments when due; the failure of Wymont or ASW to observe or perform their respective covenants under the loan documentation; the representations and warranties of Wymont or ASW being false; the insolvency or bankruptcy of Wymont or ASW; and the failure of ASW to maintain a net worth of at least $32 million. Upon the occurrence and during the continuance of an event of default, BOKF may declare the outstanding principal amount and all other obligations under the loan immediately due and payable. Wymont incurred customary costs and expenses and paid certain fees to BOKF in connection with the loan.

The following table summarizes the notes payable scheduled principal repayments subsequent to April 30, 2023 (in thousands):

​ ​ ​ ​

Fiscal Year Scheduled Payments

Thereafter ​ ​ 20

Total ​ $ 44

​

31

The following table presents information on the Company’s notes payable in effect during 2023 or 2022 and terminated prior to April 30, 2023 (in thousands):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ Original ​ Outstanding

​ ​ ​ ​ Maximum ​ Principal Amount

​ ​ ​ ​ Available ​ April 30,

Loan Identifier Lender Principal Amount 2023 ​ 2022

Lomas Encantadas U2B P3 BOKF ​ $ 2,400 ​ $ — ​ $ 410

Hawk Site U37 SLFCU ​ 3,000 ​ — ​ ​ —

Lavender Fields – acquisition Seller ​ 1,838 ​ — ​ ​ 1,749

Lavender Fields – development BOKF ​ 3,750 ​ — ​ ​ 1,293

​

Additional information regarding each of the above terminated notes payable is provided below:

​

(7) REVENUES

Land sale revenues. Land sale revenues are sales of developed residential land, developed commercial land and undeveloped land to multiple customers.

Home sale revenues. Home sale revenues are from homes constructed and sold by the Company in the Albuquerque, New Mexico metropolitan area.

32

Building sales and other revenues. Building sales and other revenues consist of(in thousands):

​

​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended April 30,

Sales of buildings ​ $ — ​ $ 8,439

Oil and gas royalties ​ ​ 146 ​ ​ 276

Landscaping revenues ​ ​ 585 ​ ​ —

Miscellaneous other revenues ​ ​ 595 ​ ​ 446

​

Sales of buildings during 2022 consist of revenues from the sale of a 4,338 square foot, single tenant retail building in the La Mirada subdivision and from the sale of a 143,000 square foot warehouse and office facility located in Palm Coast, Florida.

In January 2023, the Company sold certain minerals and mineral rights in and under approximately 147 surface acres of land in Brighton, Colorado that were leased to a third party. The Company owns certain minerals and mineral rights in and under approximately 55,000 surface acres of land in Sandoval County, New Mexico.

Landscaping revenues consist of landscaping services, generally servicing homebuilders and homeowners’ associations, provided by the Company.

Miscellaneous other revenues for 2023 primarily consist of extension fees for purchase contracts, forfeited deposits and residential rental revenues. Miscellaneous other revenues for 2022 primarily consist of rent received from a tenant at a building in Palm Coast, Florida and tenants at a shopping center in Albuquerque, New Mexico, a non-refundable option payment and proceeds from the sale of equipment.

Major customers. Substantially all of the land sale revenues were received from four customers during 2023 and four customers during 2022. There were no outstanding receivables from these customers as of April 30, 2023 or April 30, 2022. There were three customers that each contributed in excess of 10% of the Company’s revenues during 2023. The revenues from each such customer during 2023 are as follows: $7,763,000, $6,810,000 and $6,182,000, with each of these revenues reported in the Company’s land development business segment. There were four customers that each contributed in excess of 10% of the Company’s revenues during 2022. The revenues for each such customer during 2022 are as follows: $10,982,000, $7,107,000, $6,750,000 and $6,445,000,with each of these revenues reported in the Company’s land development business segment.

​

(8) COST OF REVENUES

Land sale cost of revenues, net consist of (in thousands):

​ ​ ​ ​ ​ ​ ​

​ Year Ended April 30,

Less: ​ ​

Public improvement district reimbursements ​ (759) ​ (558)

Private infrastructure covenant reimbursements ​ (626) ​ (184)

Payments for impact fee credits ​ (3,713) ​ (2,811)

Land sale cost of revenues, net ​ $ 17,379 ​ $ 17,645

​

Land sale cost of revenues, net includes all direct acquisition costs and other costs specifically identified with the property and an allocation of certain common development costs associated with the entire project. Amounts received from public improvement districts, private infrastructure covenants and payments for impact fee credits reduce the amount of land sale cost of revenues. A portion of the Lomas Encantadas subdivision and a portion of the Enchanted Hills subdivision in Rio Rancho are subject to a public improvement district. The public improvement district reimburses the Company for certain on-site and off-site costs of developing the subdivisions by imposing a special levy on the real property owners within the district. The Company has accepted discounted prepayments of amounts due under the public improvement district. The Company instituted private infrastructure reimbursement covenants on various land development projects. Similar to a public improvement district, the covenants are expected to reimburse the Company for certain on-site and off-site costs of developing the subject property by imposing a special levy on the real property owners subject to the covenants. The Company has accepted discounted prepayments of amounts due under the private infrastructure reimbursement covenants. Impact fees are charges or assessments payable by homebuilders to local governing authorities in order to generate revenue for funding or recouping the costs of capital improvements or facility expansions necessitated by and attributable to the new

33

development. The Company receives credits, allowances and offsets applicable to impact fees in connection with certain off-site costs incurred by the Company in developing subdivisions, which the Company generally sells to homebuilders.

Home sale cost of revenues includes costs for residential homes that were sold.

Building sales and other cost of revenues for 2023 consist of expenses associated with the cost of goods sold for landscaping services. Building sales and other cost of revenues for 2022 consist of expenses associated with the sale of a 143,000 square foot warehouse and office facility located in Palm Coast, Florida and the sale of a 4,338 square foot, single tenant retail building in the La Mirada subdivision.

​

(9) GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses consist of (in thousands):

​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended April 30,

Pension settlement ​ $ 7,597 ​ $ —

​

​

(10) FAIR VALUE MEASUREMENTS

The FASB’s accounting guidance defines fair value and establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The FASB’s guidance classifies the inputs to measure fair value into the following hierarchy:

Level 1 Unadjusted quoted prices for identical assets or liabilities in active markets.

Level 2 Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3 Inputs for the asset or liability are unobservable and reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability.

The fair value measurement level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques need to maximize the use of observable inputs and minimize the use of unobservable inputs. There were no transfers between Levels 1, 2 or 3 during 2023 or 2022.

The Financial Instruments Topic of the FASB Accounting Standards Codification requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. The Topic excludes all nonfinancial instruments from its disclosure requirements. Fair value is determined under the hierarchy discussed above. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. The following methods and assumptions are used in estimating fair value disclosure for financial instruments: the carrying amounts of cash and cash equivalents and trade payables approximate fair value because of the short maturity of these financial instruments; and debt that bears variable interest rates indexed to prime or LIBOR also approximates fair value as it reprices when market interest rates change.

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(11) BENEFIT PLANS

Pension plan

The Company has a defined benefit pension plan for which accumulated benefits were frozen and future service credits were curtailed as of March 1, 2004. Under generally accepted accounting principles, the Company’s defined benefit pension plan was overfunded as

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of April 30, 2023 by $747,000, with $1,030,000 of assets and $283,000 of liabilities and as of April 30, 2022 by $90,000, with $18,054,000 of assets and $17,964,000 of liabilities. The pension plan liabilities were determined using a weighted average discount interest rate of 4.51% per year as of April 30, 2023 and 3.97% per year as of April 30, 2022, which are based on the FTSE Pension Discount Curve as of such dates as it corresponds to the projected liability requirements of the pension plan.

The Company funds the pension plan in compliance with IRS funding requirements. The pension plan is subject to minimum IRS contribution requirements, but these requirements can be satisfied by the use of the pension plan’s existing credit balance. No cash contributions to the pension plan were required or made during 2023 or 2022. Pension assets and liabilities are measured at fair value (measured in accordance with the guidance described in Note 10) and are subject to fair value adjustment in certain circumstances (for example, when there is evidence of impairment). There were no impairments resulting in a change in fair value during 2023 or 2022.

The Company recognized a non-cash pre-tax pension settlement general and administrative expense of $7,597,000 during 2023 due to (a) the Company’s defined benefit pension plan paying certain lump sum payouts of pension benefits to former employees and (b) the transfer of nearly all remaining pension benefit liabilities to an insurance company through an annuity purchase. There were no such charges in 2022.

Net periodic pension cost for 2023 and 2022 was comprised of the following components (in thousands):

​

​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended April 30,

Interest cost on projected benefit obligation ​ $ 603 ​ $ 503

Expected return on assets ​ (1,123) ​ (1,535)

Recognized net actuarial loss ​ 372 ​ 392

Net periodic pension cost ​ $ (42) ​ $ (490)

Settlement ​ ​ 7,597 ​ ​ -

Net periodic pension cost after settlement ​ ​ 7,555 ​ ​ (490)

​

Assumptions used in determining net periodic pension cost and the pension benefit obligation were:

​

​ ​ ​ ​ ​ ​

​ ​ Year Ended April 30,

Discount rate used to determine net periodic pension cost 3.97 % 2.48 %

Discount rate used to determine pension benefit obligation N/A ​ 3.97 %

​

The expected return on assets for the pension plan is based on management’s expectation of long-term average rates of return to be achieved by the underlying investment portfolio. In establishing this assumption, management considers historical and expected returns for the asset classes in which the pension plan is invested, as well as current economic and market conditions.

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The actuarial gain of $1,667,000 for 2023 is a plan experience gain. The actuarial gain of $2,414,000 for 2022 consists of a gain from a change in discount rate gain of $2,360,000, other assumption losses of $76,000 and plan experience gains of $130,000. The following table sets forth changes in the pension plan’s benefit obligation and assets, and summarizes components of amounts recognized in the Company’s balance sheet (in thousands):

​

​ ​ ​ ​ ​ ​ ​

​ ​ April 30,

Change in benefit obligation: ​ ​

Benefit obligation at beginning of year ​ $ 17,964 ​ $ 21,578

Settlement ​ ​ (15,357) ​ ​ -

Benefit obligation at end of year ​ $ 283 ​ $ 17,964

Change in plan assets: ​ ​ ​

Fair value of plan assets at beginning of year ​ $ 18,054 ​ $ 21,102

Actual return on plan assets ​ (103) ​ (1,239)

Company contributions ​ — ​ —

Settlement ​ ​ (15,357) ​ ​ —

Fair value of plan assets at end of year ​ $ 1,030 ​ $ 18,054

Overfunded status ​ $ 747 ​ $ 90

​

The funded status of the pension plan is equal to the net liability recognized in the balance sheets. The following table summarizes the amounts recorded in accumulated other comprehensive income (loss), which have not yet been recognized as a component of net periodic pension costs (in thousands):

​

​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended April 30,

Pretax accumulated comprehensive income (loss) ​ $ 138 ​ $ (8,350)

​

The following table summarizes the changes in accumulated other comprehensive income (loss) related to the pension plan for the years ended April 30, 2023 and 2022 (in thousands):

​

​ ​ ​ ​ ​ ​ ​

​ ​ Pension Benefits

​ Pretax Net of Tax

Amortization of net loss ​ (392) ​ (264)

Net actuarial loss ​ ​ (372) ​ ​ (302)

Amortization of net loss ​ ​ (243) ​ ​ (198)

Accumulated comprehensive income (loss), April 30, 2023 ​ $ 138 ​ $ (1,170)

​

The Company recognizes the known changes in the funded status of the pension plan in the period in which the changes occur through other comprehensive income, net of the related income tax effect. The Company recorded, net of tax, other comprehensive income of $5,743,000 and $50,000 in 2023 and 2022 to account for the net effect of changes to the pension liability.

The amount of benefit payments in future fiscal years to pension plan participants payable from plan assets is expected to be as follows: 2024 - $283,000.

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The asset allocation for the pension plan by asset category was as follows:

​

​ ​ ​ ​ ​ ​

​ ​ April 30,

Equity securities — % 57 %

Fixed income securities — 38 ​

Cash and cash equivalents 100 5 ​

​

As of April 30, 2023, the pension plan assets are held in cash and cash equivalents due to the amount of pension plan liabilities. The pension plan holds no securities of the Company.

The Company has adopted the disclosure requirements in ASC 715, which requires additional fair value disclosures consistent with those required by ASC 820. The following is a description of the valuation methodologies used for pension plan assets measured at fair value: common stock – valued at the closing price reported on a listed stock exchange; corporate bonds, debentures and government agency securities – valued using pricing models, quoted prices of securities with similar characteristics or discounted cash flow; and U.S. Treasury securities – valued at the closing price reported in the active market in which the security is traded.