From June 30, 2021, our sources of income include dividends on the Series B shares of HC Realty and interest paid on our cash deposits and the S&L Note. The Company believes that the income generated from these sources, the dividends paid on the common shares of HC Realty and the cash available are sufficient to fund operating expenses for at least 12 months from the date of these financial statements.
After June 30, 2021, the Company completed the acquisition of NCTIC and NCTG in accordance with the purchase agreement. See note 8 of the notes to the financial statements for a more in-depth analysis of the transaction. The Company will continue to seek acquisition opportunities that will allow us to potentially take advantage of the Company’s net operating losses carried forward and also create appropriate risk-adjusted returns for shareholders.
Results from Operations
Three and six months over June 30, 2021
The Company generated interest income of $ 1,000 and $ 13,000 for the three and six month periods ending June 30, 2021, respectively, with respect to $ 207,000
and $ 431,000 for the three and six month periods ending June 30, 2020, respectively. The decrease is mainly due to the decrease in interest income on the second A&R note under the forbearance agreement and the repayment of this note in March 2020, a decrease in interest income on the HC mortgage loan agreement due to the repayment of this note in August 2020, ceasing to increase interest income on the S&L Note in the third quarter of 2020, recognizing interest payments on the S&L Note as principal payments and lower interest rates on our cash deposits. Interest income for the three and six month periods ending June 30, 2021 comprised of cash interest income on our cash deposits and income taxes receivable. The Company generated dividend income of $ 256,000 and
$ 513,000 for the three and six month periods ending June 30, 2021, respectively, with respect to $ 121,000 and $ 171,000 for the three and six month periods ending
June 30, 2020, respectively. The increase is mainly due to the April 3,
April 29, and June 29, 2020 acquisitions of additional Series B shares of HC Realty.
General and administrative costs decreased to $ 256,000 and $ 596,000 for the three and six month periods ending June 30, 2021 of $ 434,000 and $ 872,000 for the completed three and six month periods June 30, 2020 mainly due to the reduction in legal and professional fees incurred in connection with the Company’s registration statement and changes regarding the offering of rights in
june 2020. General and administrative expenses for the three and six month period ending June 30, 2021 consisted of $ 77,000 and $ 237,000 professional fees, $ 63,000 and $ 125,000 salaries, $ 24,000 and $ 45,000 insurance costs,
$ 21,000 and $ 42,000 stock-based compensation expense, $ 13,000 and $ 25,000 the franchise tax burden, and $ 58,000 and $ 122,000 other operating expenses. Included in expenses incurred during the three and six month periods completed June 30, 2021 were around $ 132,000 legal and professional fees and other due diligence costs associated with pursuing potential acquisitions, including transactions contemplated by the purchase agreement.
Our effective tax rate for the three and six month periods ended June 30, 2021
and 2020 was effectively 0% due to our net operating loss carryforwards.
Financial situation, liquidity and capital resources
Sources of liquidity include cash on hand, cash interest earned on our cash and the S&L Note and dividends from our HC Real Estate common and series B shares. We expect that available cash will be sufficient for current operating expenses for at least 12 months from the date of these financial statements. TO June 30, 2021, we have had $ 12.2 million in cash and $ 234,000 in cash subject to restrictions. A portion of our unallocated and restricted cash is currently held in savings accounts earning approximately 0.05%. We also received quarterly dividends on our HC Real Estate common and series B shares at annual rates of 5.5% and 10%. See Note 7 of the Notes to the Financial Statements for a discussion of the uncertainties associated with COVID-19.
Cash provided by operations for the six-month period ending June 30, 2021 of
$ 633,000 consisted of $ 13,000 interest income in cash received, $ 82,000 dividends on our HC Real Estate ordinary actions, $ 513,000 dividends on our Series B shares of HC Realty, and $ 488,000 income tax refund offset by $ 463,000 payments to employees and suppliers. Payments to employees and suppliers consisted mainly of $ 138,000 salaries and social charges in the current management,
$ 60,000 insurance premiums, and $ 125,000 legal and professional fees.
Cash generated by investing activities for the half-year ended June 30, 2021
consisting of cash principal payments received on the S&L Note of approximately $ 170,000.
Critical Accounting Policies
Our accounting policies and critical estimates based on information provided in Section 7, âManagement’s Comments and Analysis of Financial Condition and Results of Operationsâ, included in our 2020 Annual Report on Form 10-K. We believe there have been no new critical accounting policies or material changes to our existing critical accounting policies and estimates during the three and six months ended. June 30, 2021.
Certain statements made in this report are not based on historical facts but are forward-looking statements. These statements can be identified by the use of forward-looking terms such as “believes”, “believes”, “expects”, “could”, “will”, “should”, “could”, negative thereof or other variations thereof or comparable terminology, or through policy discussions. These statements reflect our reasonable judgment with respect to future events and are subject to risks and uncertainties that could cause actual results to differ materially from those of forward-looking statements. These risks and uncertainties include the occurrence of events, including due to the COVID-19 pandemic, which have a negative impact on the business or assets of HC Real Estate reduce the value of our investment in HC Real Estate, or which have a negative impact on our liquidity in such a way as to limit or eliminate our ability to use the proceeds from the sale of S&L assets or the offering of rights to finance acquisitions, or an inability on our part to identify ” other suitable businesses to acquire or develop with the proceeds of the sale of S&L assets or the offering of rights, or an inability by S&L to make payments to us under the S&L Note, or an inability to successfully execute and manage the new operations purchased as part of the acquisition. Any forward-looking statement speaks only as of the date of such filing and we assume no obligation to update or revise any forward-looking statement, whether as a result of new developments or otherwise.
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