UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

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

For the quarterly period ended ~~June 30, 2016~~March 31, 2017

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

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

For the transition period from to

Commission file number 01-11350

CONSOLIDATED-TOMOKA LAND CO.

(Exact name of registrant as specified in its charter)


Florida		59-0483700
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		~~(I.R.S. Employer~~ Identification No.)

1530 Cornerstone Blvd., Suite 100
Daytona Beach, Florida		32117
(Address of principal executive offices)		(Zip Code)

(386) 274-2202

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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

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

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

~~Large accelerated filer~~		o		~~Accelerated filer~~	x

~~Non-accelerated~~Large accelerated filer	☐	Accelerated filer	☒
			o
Non-accelerated filer	☐(Do not check if a smaller reporting company)	Smaller reporting company	☐
	o		
Emerging growth company	☐		

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes ¨☐ No x☒

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

Class of Common Stock Outstanding

~~July 22, 2016~~April 20, 2017

$1.00 par value ~~5,796,325~~5,651,515

Table of Contents

INDEX


	Page
	No.
PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements

Consolidated Balance Sheets – ~~June 30, 2016~~March 31, 2017 (Unaudited) and December 31, ~~2015~~2016	3

Consolidated Statements of Operations – Three ~~and Six~~ Months ended ~~June 30,~~March 31, 2017 and 2016 ~~and 2015~~ (Unaudited)	4

Consolidated Statements of Comprehensive Income – Three ~~and Six~~ Months ended ~~June 30,~~March 31, 2017 and 2016 ~~and 2015~~ (Unaudited)	5

Consolidated Statements of Shareholders’ Equity – ~~Six~~Three Months ended ~~June 30, 2016~~March 31, 2017 (Unaudited)	6

Consolidated Statements of Cash Flows – ~~Six~~Three Months ended ~~June 30,~~March 31, 2017 and 2016 ~~and 2015~~ (Unaudited)	7

Notes to Consolidated Financial Statements (Unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41 38

Item 3.	Quantitative and Qualitative Disclosures About Market Risks	56 51

Item 4. Controls and Procedures	~~Controls and Procedures~~	56 52

PART II—OTHER INFORMATION	52

Item 1. Legal Proceedings	~~Legal Proceedings~~	56 52

Item 1A. Risk Factors	~~Risk Factors~~	57 53

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57 53

Item 3. Defaults Upon Senior Securities	~~Defaults Upon Senior Securities~~	57 53

Item 4. Mine Safety Disclosures	~~Mine Safety Disclosures~~	57 53

Item 5. Other Information	~~Other Information~~	57 53

Item 6. Exhibits	~~Exhibits~~	58 54

SIGNATURES	59 55

Table of Contents

PART I—~~FINANCIA~~LFINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED-TOMOKA LAND CO.

CONSOLIDATED BALANCE SHEETS


							(Unaudited)
	(Unaudited) June 30, 2016			December 31, 2015			March 31, 2017		December 31, 2016
ASSETS
Property, Plant, and Equipment:
Income Properties, Land, Buildings, and Improvements	$	211,698,872		$	268,970,875		$	297,105,291	$	274,334,139
Golf Buildings, Improvements, and Equipment		3,445,842			3,432,681			5,835,936		3,528,194
Other Furnishings and Equipment		1,060,007			1,044,139			1,044,994		1,032,911
Construction in Progress		234,677			50,610			3,077,653		5,267,676
Total Property, Plant, and Equipment		216,439,398			273,498,305			307,063,874		284,162,920
Less, Accumulated Depreciation and Amortization		(13,814,002	)		(16,242,277	)		(18,225,958)		(16,552,077)
Property, Plant, and Equipment—Net		202,625,396			257,256,028			288,837,916		267,610,843
Land and Development Costs ($11,484,560 and $11,329,574 Related to Consolidated VIE as of June 30, 2016 and December 31, 2015, respectively)		56,962,202			53,406,020
Land and Development Costs								44,443,943		51,955,278
Intangible Lease Assets—Net		16,646,400			20,087,151			35,642,983		34,725,822
Assets Held for Sale		38,685,310			-
Impact Fee and Mitigation Credits		4,277,767			4,554,227			2,106,314		2,322,906
Commercial Loan Investments		23,960,467			38,331,956			23,960,467		23,960,467
Cash and Cash Equivalents		24,742,236			4,060,677			4,427,864		7,779,562
Restricted Cash		10,568,618			14,060,523			5,882,767		9,855,469
Investment Securities		-			5,703,767
Refundable Income Taxes		117,079			858,471			1,041,938		943,991
Other Assets		8,544,663			6,034,824			8,596,868		9,469,088
Total Assets	$	387,130,138		$	404,353,644		$	414,941,060	$	408,623,426
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Accounts Payable	$	2,225,130		$	1,934,417		$	1,989,680	$	1,518,105
Accrued and Other Liabilities		9,382,443			8,867,919			5,480,252		8,667,897
Deferred Revenue		5,393,195			14,724,610			1,599,142		1,991,666
Intangible Lease Liabilities - Net		30,870,405			31,979,559			30,635,958		30,518,051
Accrued Stock-Based Compensation		48,000			135,554			28,062		42,092
Deferred Income Taxes—Net		42,405,361			39,526,406			60,351,549		51,364,572
Long-Term Debt		153,887,378			166,796,853			156,813,310		166,245,201
Total Liabilities		244,211,912			263,965,318			256,897,953		260,347,584
Commitments and Contingencies - See Note 18
Shareholders’ Equity:
Consolidated-Tomoka Land Co. Shareholders' Equity:
Common Stock – 25,000,000 shares authorized; $1 par value, 6,018,739 shares issued and 5,796,115 shares outstanding at June 30, 2016; 6,068,310 shares issued and 5,908,437 shares outstanding at December 31, 2015		5,911,602			5,901,510
Treasury Stock – 222,624 shares at June 30, 2016; 159,873 shares at December 31, 2015		(10,864,945	)		(7,866,410	)
Common Stock – 25,000,000 shares authorized; $1 par value, 6,035,389 shares issued and 5,667,820 shares outstanding at March 31, 2017; 6,021,564 shares issued and 5,710,238 shares outstanding at December 31, 2016								5,928,232		5,914,560
Treasury Stock – 367,569 shares at March 31, 2017; 311,326 shares at December 31, 2016								(18,225,862)		(15,298,306)
Additional Paid-In Capital		19,411,293			16,991,257			20,623,683		20,511,388
Retained Earnings		123,210,563			120,444,002			149,414,109		136,892,311
Accumulated Other Comprehensive Loss		(335,271	)		(688,971	)
Total Consolidated-Tomoka Land Co. Shareholders' Equity		137,333,242			134,781,388
Noncontrolling Interest in Consolidated VIE		5,584,984			5,606,938
Accumulated Other Comprehensive Income								302,945		255,889
Total Shareholders’ Equity		142,918,226			140,388,326			158,043,107		148,275,842
Total Liabilities and Shareholders’ Equity	$	387,130,138		$	404,353,644		$	414,941,060	$	408,623,426

See Accompanying Notes to Consolidated Financial Statements

Table of Contents

CONSOLIDATED-TOMOKA LAND CO.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

June 30,

June 30,

2016

2015

2016

2015

Revenues

Income Properties

$
6,033,082

$
4,132,052

$
12,462,323

$
8,392,727

Interest Income from Commercial Loan Investments

635,050

638,710

1,516,295

1,270,194

Real Estate Operations

4,774,620

1,368,141

14,335,518

2,227,942

Golf Operations

1,412,196

1,448,567

2,876,555

2,985,993

Agriculture and Other Income

18,990

20,738

37,682

39,677

Total Revenues

12,873,938

7,608,208

31,228,373

14,916,533

Direct Cost of Revenues

Income Properties

(1,204,040
)

(682,887
)

(2,380,747
)

(1,323,733
)
Real Estate Operations

(1,124,641
)

(305,853
)

(3,381,682
)

(904,576
)
Golf Operations

(1,447,176
)

(1,456,232
)

(2,851,764
)

(2,845,844
)
Agriculture and Other Income

(52,654
)

(43,195
)

(100,705
)

(98,346
)
Total Direct Cost of Revenues

(3,828,511
)

(2,488,167
)

(8,714,898
)

(5,172,499
)
General and Administrative Expenses

(1,899,126
)

(1,874,877
)

(6,696,583
)

(3,344,643
)
Impairment Charges

(1,970,822
)

—

(2,180,730
)

(510,041
)
Depreciation and Amortization

(1,805,559
)

(1,071,752
)

(3,872,926
)

(2,227,491
)
Gain on Disposition of Assets

1,362,948

12,749

1,362,948

18,189

Total Operating Expenses

(8,141,070
)

(5,422,047
)

(20,102,189
)

(11,236,485
)
Operating Income

4,732,868

2,186,161

11,126,184

3,680,048

Investment Income (Loss)

2,691

74,818

(563,693
)

225,277

Interest Expense

(2,154,437
)

(1,888,434
)

(4,246,203
)

(2,954,936
)
Income Before Income Tax Expense

2,581,122

372,545

6,316,288

950,389

Income Tax Expense

(1,000,480
)

(147,928
)

(3,343,081
)

(372,416
)
Net Income

1,580,642

224,617

2,973,207

577,973

Less: Net Loss (Income) Attributable to Noncontrolling Interest in Consolidated VIE

(10,199
)

—

21,954

Net Income Attributable to Consolidated-Tomoka Land Co.

$
1,570,443

$
224,617

$
2,995,161

$
577,973

Per Share Information- See Note 10:

Basic and Diluted

Net Income Attributable to Consolidated-Tomoka Land Co.

$
0.28

$
0.04

$
0.52

$
0.10

Dividends Declared and Paid

$
0.04

$
0.04

$
0.04

$
0.04

~~See Accompanying Notes to Consolidated Financial Statements~~

~~CONSOLIDATED-TOMOKA LAND CO.~~

~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~

~~(Unaudited)~~

Three Months Ended

Six Months Ended

June 30,
2016

June 30,
2015

June 30,
2016

June 30,
2015

Net Income Attributable to Consolidated-Tomoka Land Co.

$
1,570,443

$
224,617

$
2,995,161

$
577,973

Other Comprehensive Income

Realized Loss (Gain) on Investment Securities Sold (Net of Tax of $222,025 and $(49,240) for the six months ended June 30, 2016 and 2015, respectively)

-

-

353,542

(81,551
)
Unrealized Gain (Loss) on Investment Securities (Net of Tax of $-0- and $(185,294) for the three months ended June 30, 2016 and 2015, respectively and Net of Tax of $210,652 and $(41,094) for the six months ended June 30, 2016 and 2015, respectively)

-

(295,050
)

335,429

(65,431
)
Cash Flow Hedging Derivative - Interest Rate Swap (Net of Tax of $(210,550) and $-0- for the three and six months ended June 30, 2016 and 2015, respectively)

(335,271
)

-

(335,271
)

-

Total Other Comprehensive Income (Loss), Net of Tax

(335,271
)

(295,050
)

353,700

(146,982
)
Total Comprehensive Income (Loss)

$
1,235,172

$
(70,433
)

$
3,348,861

$
430,991


	Three Months Ended
	March 31,		March 31,
	2017		2016
Revenues
Income Properties	$	7,073,240	$	6,429,241
Interest Income from Commercial Loan Investments		536,489		881,245
Real Estate Operations		29,474,460		9,560,898
Golf Operations		1,474,944		1,464,359
Agriculture and Other Income		154,151		18,692
Total Revenues		38,713,284		18,354,435
Direct Cost of Revenues
Income Properties		(1,411,713)		(1,176,707)
Real Estate Operations		(9,156,849)		(2,257,041)
Golf Operations		(1,498,678)		(1,404,588)
Agriculture and Other Income		(40,437)		(48,051)
Total Direct Cost of Revenues		(12,107,677)		(4,886,387)
General and Administrative Expenses		(3,220,147)		(4,797,457)
Impairment Charges		—		(209,908)
Depreciation and Amortization		(2,762,575)		(2,067,367)
Land Lease Termination		2,226,526		—
Total Operating Expenses		(15,863,873)		(11,961,119)
Operating Income		22,849,411		6,393,316
Investment Income (Loss)		9,183		(566,384)
Interest Expense		(2,061,891)		(2,091,766)
Income Before Income Tax Expense		20,796,703		3,735,166
Income Tax Expense		(8,050,311)		(2,342,601)
Net Income		12,746,392		1,392,565
Less: Net Loss Attributable to Noncontrolling Interest in Consolidated VIE		—		32,153
Net Income Attributable to Consolidated-Tomoka Land Co.	$	12,746,392	$	1,424,718

Per Share Information- See Note 10:
Basic
Net Income Attributable to Consolidated-Tomoka Land Co.	$	2.28	$	0.25
Diluted
Net Income Attributable to Consolidated-Tomoka Land Co.	$	2.27	$	0.25

Dividends Declared and Paid	$	0.04	$	-

See Accompanying Notes to Consolidated Financial Statements

Table of Contents

CONSOLIDATED-TOMOKA LAND CO.

CONSOLIDATED STATEMENTS OF ~~SHAREHOLDERS’ EQUITY~~COMPREHENSIVE INCOME

(Unaudited)

Consolidated-Tomoka Land Co. Shareholders

Common
Stock

Treasury
Stock

Additional
Paid-In
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Income (Loss)

Total Consolidated-Tomoka Land Co.
Shareholders’
Equity

Noncontrolling
Interest in
Consolidated
VIE

Total
Shareholders'
Equity

Balance January 1, 2016

5,901,510

(7,866,410
)

16,991,257

120,444,002

(688,971
)

134,781,388

5,606,938

140,388,326

Net Income

—

—

—

2,995,161

—

2,995,161

(21,954
)

2,973,207

Stock Repurchase

—

(2,998,535
)

—

—

—

(2,998,535
)

—

(2,998,535
)
Exercise of Stock Options

850

—

28,858

—

—

29,708

—

29,708

Vested Restricted Stock

8,884

—

(205,090
)

—

—

(196,206
)

—

(196,206
)
Stock Issuance

358

—

17,093

—

—

17,451

—

17,451

Stock Compensation Expense from Restricted Stock Grants and Equity Classified Stock Options

—

—

2,579,175

—

—

2,579,175

—

2,579,175

Cash Dividends ($0.04 per share)

—

—

—

(228,600
)

—

(228,600
)

—

(228,600
)
Other Comprehensive Income, Net of Tax

—

—

—

—

353,700

353,700

—

353,700

Balance June 30, 2016

$
5,911,602

$
(10,864,945
)

$
19,411,293

$
123,210,563

$
(335,271
)

$
137,333,242

$
5,584,984

$
142,918,226


	Three Months Ended
	March 31, 2017		March 31, 2016

Net Income Attributable to Consolidated-Tomoka Land Co.	$	12,746,392	$	1,424,718
Other Comprehensive Income
Realized Loss on Investment Securities Sold (Net of Income Tax of $-0- and $222,025, respectively)		—		353,542
Unrealized Gain on Investment Securities (Net of Income Tax of $-0- and $210,652, respectively)		—		335,429
Cash Flow Hedging Derivative - Interest Rate Swap (Net of Income Tax of $18,152 and $-0-, respectively)		47,056		—
Total Other Comprehensive Income, Net of Income Tax		47,056		688,971
Total Comprehensive Income	$	12,793,448	$	2,113,689

See Accompanying Notes to Consolidated Financial Statements

Table of Contents

CONSOLIDATED-TOMOKA LAND CO.

CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~SHAREHOLDERS’ EQUITY

(Unaudited)

Six Months Ended

June 30

June 30

2016

2015

Cash Flow from Operating Activities:

Net Income

$
2,973,207

$
577,973

Adjustments to Reconcile Net Income to Net Cash Provided by (Used In) Operating
Activities:

Depreciation and Amortization

3,872,926

2,227,491

Amortization of Intangible Liabilities to Income Property Revenue

(1,162,780
)

—

Loan Cost Amortization

227,293

167,036

Amortization of Discount on Convertible Debt

551,489

318,197

Amortization of Discount on Debt Securities within Investment Securities

—

(4,228
)
Gain on Disposition of Property, Plant, and Equipment and Intangible Assets

(1,362,948
)

(18,189
)
Impairment Charges

2,180,730

510,041

Accretion of Commercial Loan Origination Fees

(164,893
)

(58,424
)
Amortization of Fees on Acquisition of Commercial Loan Investments

36,382

—

Discount on Commercial Loan Investment Payoff

217,500

—

Realized Loss (Gain) on Investment Securities

575,567

(130,791
)
Realized Gain on Put Option Derivative

—

(24,915
)
Deferred Income Taxes

2,108,493

229,744

Non-Cash Compensation

2,491,621

621,724

Decrease (Increase) in Assets:

Refundable Income Taxes

741,392

(440,488
)
Land and Development Costs

(4,584,904
)

(440,607
)
Impact Fees and Mitigation Credits

276,460

422,731

Other Assets

(2,678,702
)

(1,167,489
)
Increase (Decrease) in Liabilities:

Accounts Payable

290,713

532,273

Accrued and Other Liabilities

514,524

613,782

Deferred Revenue

(9,331,415
)

(1,571,266
)
Net Cash Provided By (Used In) Operating Activities

(2,227,345
)

2,364,595

Cash Flow from Investing Activities:

Acquisition of Property, Plant, and Equipment

(422,002
)

(1,499,328
)
Acquisition of Property, Plant, and Equipment and Intangible Lease Assets and Liabilities through Business Combinations

(2,460,000
)

(8,634,452
)
Acquisition of Commercial Loan Investments

—

(894,878
)
Decrease in Restricted Cash

3,491,905

2,946,703

Proceeds from Sale of Investment Securities

6,252,362

834,964

Proceeds from Sale of Put Options

—

78,995

Acquisition of Investment Securities

—

(6,927,254
)
Proceeds from Disposition of Property, Plant, and Equipment

18,828,578

6,185,947

Principal Payments Received on Commercial Loan Investments

14,282,500

7,200,909

Net Cash Provided By (Used In) Investing Activities

39,973,343

(708,394
)
Cash Flow from Financing Activities:

Proceeds from Long-Term Debt

28,750,000

76,375,000

Payments on Long-Term Debt

(42,050,000
)

(47,540,011
)
Cash Paid for Loan Fees

(388,257
)

—

Cash Proceeds from Exercise of Stock Options

47,159

423,480

Cash Used to Purchase Common Stock

(2,998,535
)

(858,695
)
Cash From (Used for) Excess Tax Benefit (Expense) from Vesting of Restricted Stock

2,507

(29,563
)
Cash Paid for Vesting of Restricted Stock

(198,713
)

—

Dividends Paid

(228,600
)

(233,187
)
Net Cash Provided By (Used In) Financing Activities

(17,064,439
)

28,137,024

Net Increase in Cash

20,681,559

29,793,225

Cash, Beginning of Year

4,060,677

1,881,195

Cash, End of Period

$
24,742,236

$
31,674,420



									Accumulated
					Additional				Other		Total
	Common		Treasury		Paid-In		Retained		Comprehensive		Shareholders’
	Stock		Stock		Capital		Earnings		Income (Loss)		Equity
Balance January 1, 2017	$	5,914,560	$	(15,298,306)	$	20,511,388	$	136,892,311	$	255,889	$	148,275,842
Net Income (Loss)		—		—		—		12,746,392		—		12,746,392
Stock Repurchase		—		(2,927,556)		—		—		—		(2,927,556)
Vested Restricted Stock		13,298		—		(274,919)		—		—		(261,621)
Stock Issuance		374		—		19,605		—		—		19,979
Stock Compensation Expense from Restricted Stock Grants and Equity Classified Stock Options		—		—		367,609		—		—		367,609
Cash Dividends ($0.04 per share)		—		—		—		(224,594)		—		(224,594)
Other Comprehensive Income, Net of Income Tax		—		—		—		—		47,056		47,056
Balance March 31, 2017	$	5,928,232	$	(18,225,862)	$	20,623,683	$	149,414,109	$	302,945	$	158,043,107

See Accompanying Notes to Consolidated Financial Statements

Table of Contents

CONSOLIDATED-TOMOKA LAND CO.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended
	March 31,		March 31,
	2017		2016
Cash Flow from Operating Activities:
Net Income	$	12,746,392	$	1,392,565
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation and Amortization		2,762,575		2,067,367
Amortization of Intangible Liabilities to Income Property Revenue		(531,546)		(606,979)
Loan Cost Amortization		113,288		102,451
Amortization of Discount on Convertible Debt		291,570		273,545
Impairment Charges		—		209,908
Accretion of Commercial Loan Origination Fees		—		(15,035)
Amortization of Fees on Acquisition of Commercial Loan Investments		—		3,318
Realized Loss (Gain) on Investment Securities		—		575,567
Deferred Income Taxes		9,034,033		2,272,246
Non-Cash Compensation		353,579		2,072,982
Decrease (Increase) in Assets:
Refundable Income Taxes		(97,947)		197,980
Land and Development Costs		7,511,335		(2,433,875)
Impact Fees and Mitigation Credits		216,592		109,018
Other Assets		872,220		(2,483,995)
Increase (Decrease) in Liabilities:
Accounts Payable		471,575		2,448,771
Accrued and Other Liabilities		(3,887,645)		(1,707,130)
Deferred Revenue		(392,524)		(5,673,101)
Net Cash Provided By (Used In) Operating Activities		29,463,497		(1,194,397)
Cash Flow from Investing Activities:
Acquisition of Property, Plant, and Equipment and Intangible Lease Assets and Liabilities		(23,557,356)		(289,079)
Acquisition of Property, Plant, and Equipment and Intangible Lease Assets and Liabilities through Business Combinations		—		(2,460,000)
Decrease (Increase) in Restricted Cash		3,972,702		(1,095,982)
Proceeds from Sale of Investment Securities		—		6,252,362
Net Cash Provided By (Used In) Investing Activities		(19,584,654)		2,407,301
Cash Flow from Financing Activities:
Proceeds from Long-Term Debt		6,000,000		3,750,000
Payments on Long-Term Debt		(15,800,000)		—
Cash Paid for Loan Fees		(36,749)		(124,049)
Cash Proceeds from Exercise of Stock Options		19,979		7,484
Cash Used to Purchase Common Stock		(2,927,556)		(1,339,614)
Cash from Excess Tax Benefit (Expense) from Vesting of Restricted Stock		—		2,507
Cash Paid for Vesting of Restricted Stock		(261,621)		(198,713)
Dividends Paid		(224,594)		—
Net Cash Provided By (Used In) Financing Activities		(13,230,541)		2,097,615
Net Increase (Decrease) in Cash		(3,351,698)		3,310,519
Cash, Beginning of Year		7,779,562		4,060,677
Cash, End of Period	$	4,427,864	$	7,371,196

See Accompanying Notes to Consolidated Financial Statements

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CONSOLIDATED-TOMOKA LAND CO.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)

Supplemental Disclosure of Cash Flows:

Income taxes refunded ~~net of payments made, totaled~~totaling approximately ~~$58,000~~$808,000 and $133,000 were received during the ~~six~~three months ended ~~June 30,~~March 31, 2017 and 2016, ~~while income taxes paid totaled approximately $577,000 during the six months ended June 30, 2015.~~respectively.

Interest totaling approximately ~~$3.5~~$2.6 million and ~~$1.5~~$2.5 million was paid during the ~~six~~three months ended ~~June 30,~~March 31, 2017 and 2016, ~~and 2015,~~ respectively. No interest was capitalized during the ~~six~~three months ended ~~June 30,~~March 31, 2017 or 2016, ~~or 2015,~~ respectively.

~~During the six months ended June 30, 2015, in~~In connection with the ~~issuance~~Golf Course Land Purchase (hereinafter defined), the Company is obligated to pay the City an annual surcharge of $1 per golf round played each year (the “Per-Round Surcharge”) with an annual minimum Per-Round Surcharge of $70,000 and a maximum aggregate amount of the ~~Company’s $75.0 million convertible senior notes due 2020, approximately $2.1 million~~Per-Round Surcharges paid equal to $700,000. The maximum amount of ~~the issuance was allocated to the equity component for the conversion option. This non-cash allocation was reflected on the balance sheet~~$700,000 represents contingent consideration and has been recorded as ~~a decrease in long-term debt of approximately $3.4 million and~~ an increase in ~~deferred income taxes of approximately $1.3 million.~~

During the six months ended June 30, 2016, non-cash compensation includes a reduction in the value of accrued stock-based compensation of approximately $88,000. This portion of non-cash compensation was reflectedGolf Buildings, Improvements, and Equipment and Accrued and Other Liabilities on the accompany consolidated balance ~~sheet~~sheets as ~~a decrease in accrued stock-based compensation and on the consolidated income statement as a decrease in general and administrative expenses.~~of March 31, 2017.

See Accompanying Notes to Consolidated Financial Statements

Table of Contents ~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

NOTE 1. DESCRIPTION OF BUSINESS AND PRINCIPLES OF INTERIM STATEMENTS

Description of Business

The terms “us,” “we,” “our,” and “the Company” as used in this report refer to Consolidated-Tomoka Land Co. together with our consolidated subsidiaries.

We are a diversified real estate operating company. We own and manage ~~thirty-seven~~thirty-three commercial real estate properties in ten states in the ~~U.S.~~United States. As of ~~June 30, 2016,~~March 31, 2017, we owned ~~twenty-nine~~twenty-two single-tenant and ~~eight~~eleven multi-tenant income-producing properties with over ~~1,500,000~~1.8 million square feet of gross leasable space. We also own and manage a ~~land~~ portfolio of undeveloped land totaling approximately ~~10,500 acres.~~8,200 acres in the City of Daytona Beach, Florida (the “City”). As of ~~June 30, 2016,~~March 31, 2017, we ~~had~~have three commercial loan investments including one fixed-rate and one variable–rate mezzanine commercial mortgage loan, and a variable-rate B-Note representing a secondary tranche in a commercial mortgage loan. ~~Our~~We have golf operations which consist of the LPGA International ~~golf club,~~Golf Club, which is managed by a third party. We also lease ~~property~~some of our land for ~~twenty~~nineteen billboards, have agricultural operations that are managed by a third party, which ~~consists~~consist of leasing land for hay ~~and sod~~ production, timber harvesting, and hunting leases, and own and manage ~~subsurface interests.~~Subsurface Interests (hereinafter defined). The results of our agricultural and subsurface leasing operations are included in Agriculture and Other Income and Real Estate Operations, respectively, in our consolidated statements of operations.

Interim Financial Information

The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. These unaudited consolidated financial statements do not include all of the information and notes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements and should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2015,~~2016, which provides a more complete understanding of the Company’s accounting policies, financial position, operating results, business properties, and other matters. The unaudited consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to present fairly the financial position of the Company and the results of operations for the interim periods.

The results of operations for the ~~six~~three months ended ~~June 30, 2016~~March 31, 2017 are not necessarily indicative of results to be expected for the year ending December 31, ~~2016.~~2017.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and other entities in which we have a controlling interest. Any real estate entities or properties included in the consolidated financial statements have been consolidated only for the periods that such entities or properties were owned or under control by us. All significant inter-company balances and transactions have been eliminated in the consolidated financial statements. Noncontrolling interests in consolidated pass-through entities are recognized before income taxes.

Use of Estimates in Preparation of Financial Statements

The preparation of financial statements in conformity with GAAP 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.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, bank demand accounts, and money market accounts having maturities at acquisition date of 90 days or less. The Company’s bank balances as of ~~June 30, 2016~~March 31, 2017 include certain amounts over the Federal Deposit Insurance Corporation limits.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~NOTE 1. DESCRIPTION OF BUSINESS AND PRINCIPLES OF INTERIM STATEMENTS (continued)~~

Restricted Cash

Restricted cash totaled approximately ~~$10.6~~$5.9 million at ~~June 30, 2016~~March 31, 2017 of which approximately ~~$9.1~~$4.1 million of cash is being held in escrow, ~~from the sale of an income property and a surface entry right release,~~ to be reinvested through the like-kind exchange structure into ~~one or more other~~an income ~~properties.~~property. Approximately ~~$306,000~~$253,000 is being held in a reserve primarily for property taxes and insurance escrows in connection with our financing of two properties acquired in January 2013; approximately ~~$504,000~~$835,000 is being held in three separate escrow accounts

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related to three separate land transactions of which one closed in each of December 2013, December 2015, and ~~two closed in December 2015; approximately $17,000 is being held by the consolidated variable interest entity in which the Company is the primary beneficiary;~~February 2017; and approximately ~~$634,000~~$672,000 is being held in a reserve primarily for certain required tenant improvements for the ~~Lowes~~Lowe’s in Katy, Texas.

Investment Securities

In accordance with ~~ASC~~the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 320, Investments – Debt and Equity Securities,, the Company’s investments in debt and equity securities ~~investments~~(��Investment Securities”) have been determined to be ~~equity securities~~ classified as available-for-sale. Available-for-sale securities are carried at fair value in the consolidated balance sheets, with the unrealized gains and losses, net of tax, reported in other comprehensive income.

Realized gains and losses, and declines in value judged to be other-than-temporary related to equity securities, are included in investment income in the consolidated statements of operations. With respect to debt securities, when the fair value of a debt security classified as available-for-sale is less than its cost, management assesses whether or not: (i) it has the intent to sell the security or (ii) it is more likely than not that the Company will be required to sell the security before its anticipated recovery. If either of these conditions are met, the Company must recognize an other-than-temporary impairment through earnings for the differences between the debt security’s cost basis and its fair value, and such amount is included in investment income in the consolidated statements of operations. There were no other-than-temporary impairments during the ~~six~~three months ended ~~June 30, 2016~~March 31, 2017 or 2015. During the fourth quarter of 2015, an other-than-temporary impairment was deemed to exist on a portion of the equity securities held by the Company, resulting in an impairment charge of approximately $60,000.2016. The Company completed the disposition of its remaining position in ~~investment securities~~Investment Securities during the ~~six~~three months ended ~~June 30,~~March 31, 2016 resulting in a loss of approximately $576,000. There were no Investment Securities remaining as of March 31, 2017 or 2016.

The cost of ~~securities~~Investment Securities sold is based on the specific identification method. Interest and dividends on ~~securities~~Investment Securities classified as available-for-sale are included in investment income in the consolidated statements of operations.

The fair value of the Company’s available-for-sale equity securities were measured quarterly, on a recurring basis, using Level 1 inputs, or quoted prices for identical, actively traded assets. The fair value of the Company’s available-for-sale debt securities were measured quarterly, on a recurring basis, using Level 2 inputs.

Derivative ~~Instrument~~Financial Instruments and Hedging Activity

InInterest Rate Swap. During the year ended December 31, 2016, in conjunction with the variable-rate mortgage loan secured by our property located in Raleigh, NCNorth Carolina leased to Wells Fargo Bank, NA (“Wells Fargo”), the Company entered into an interest rate swap to fix the interest rate (the “Interest Rate Swap”). The Company accounts for its cash flow hedging derivative in accordance with FASB ASC Topic 815-20, ~~“Derivatives~~Derivatives and ~~Hedging”. The~~Hedging. Depending upon the hedge’s value at each balance sheet date, the derivative is included in either Other Assets or Accrued and Other Liabilities on the consolidated balance sheet at its fair value. On the date the Interest Rate Swap was entered into, the Company designated the derivative as a hedge of the variability of cash flows to be paid related to the recognized long-term debt liability.

The Company formally documented the relationship between the hedging instrument and the hedged item, as well as its risk-management objective and strategy for undertaking the hedge transaction. At the hedge’s inception, the Company formally assessed whether the derivative that is used in hedging the transaction is highly effective in offsetting changes in cash flows of the hedged item, and we will continue to do so on an ongoing basis. As the terms of the Interest Rate Swap and the associated debt are identical, the Interest Rate Swap qualifies for the shortcut method, therefore, it is assumed that there is no hedge ineffectiveness throughout the entire term of the Interest Rate Swap.

Changes in fair value of the Interest Rate Swap that are highly effective and designated and qualified as a cash-flow hedge are recorded in other comprehensive income and loss, until earnings are affected by the variability in cash flows of the designated hedged item.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~NOTE 1. DESCRIPTION OF BUSINESS AND PRINCIPLES OF INTERIM STATEMENTS (continued)~~

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Fair Value of Financial Instruments

The carrying amounts of the Company’s financial assets and liabilities including cash and cash equivalents, restricted cash, accounts receivable, ~~and~~ accounts payable, and accrued and other liabilities at ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, approximate fair value because of the short maturity of these instruments. The carrying amount of the Company’s investments in variable rate commercial loans approximates fair value at ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, since the floating ~~and fixed~~ rates of the loans reasonably approximate current market rates for notes with similar risks and maturities. The carrying value of the Company’s credit facility approximates ~~fair value at June 30, 2016 and December 31, 2015, since the floating rate reasonably approximates~~ current market rates for revolving credit arrangements with similar risks and maturities. The face value of the Company’s fixed rate commercial loan investment, mortgage notes, and convertible debt is measured at fair value based on current market rates for ~~debt~~financial instruments with similar risks and ~~maturities, see~~maturities. See Note 6, “Fair Value of Financial Instruments.”

Fair Value Measurements

The Company’s estimates of fair value of financial and non-financial assets and liabilities is based on the framework established ~~in the fair value accounting guidance.~~by GAAP. The framework specifies a hierarchy of valuation inputs which was established to increase consistency, clarity and comparability in fair value measurements and related disclosures. ~~The guidance~~GAAP describes a fair value hierarchy based upon three levels of inputs that may be used to measure fair value, two of which are considered observable and one that is considered unobservable. The following describes the three levels:

Level 1 – Valuation is based upon quoted prices in active markets for identical assets or liabilities.

Level 2 – Valuation is based upon inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include option pricing models, discounted cash flow models and similar techniques.

Classification of Commercial Loan Investments

Loans held for investment are stated at the principal amount outstanding and include the unamortized deferred loan fees offset by any applicable unaccreted purchase discounts and origination fees, if ~~applicable, in accordance with GAAP.~~applicable.

Commercial Loan Investment Impairment

The Company’s commercial loans are held for investment. For each loan, the Company evaluates the performance of the collateral property and the financial and operating capabilities of the borrower/guarantor, in part to assess whether any deterioration in the credit has occurred, and for possible impairment of the loan. Impairment would reflect the Company’s determination that it is probable that all amounts due according to the contractual terms of the loan would not be collected. Impairment is measured based on the present value of the expected future cash flows from the loan discounted at the effective rate of the loan or the fair value of the collateral. Upon ~~determination~~measurement of an impairment, the Company would record an allowance to reduce the carrying value of the loan with a corresponding recognition of loss in the results of operations. Significant exercise of judgment is required in determining impairment, including assumptions regarding the estimate of expected future cash flows, collectability of the loan, the value of the underlying collateral and other ~~factors~~provisions including ~~the existence of~~ guarantees. The Company has determined that, as of ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, no allowance for impairment was required.

Recognition of Interest Income from Commercial Loan Investments

Interest income on commercial loan investments includes interest payments made by the borrower and the accretion of purchase discounts and loan origination fees, offset by the amortization of loan costs. Interest payments are accrued based on the actual coupon rate and the outstanding principal balance, and purchase discounts and loan origination fees are accreted into income using the effective yield method, adjusted for prepayments.

Table of Contents~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~NOTE 1. DESCRIPTION OF BUSINESS AND PRINCIPLES OF INTERIM STATEMENTS (continued)~~

Impact Fees and Mitigation Credits

Impact fees and mitigation credits are stated at historical cost. As these assets are sold, the related revenues and cost basis are reported as revenues from, and direct costs of, real estate operations, respectively, in the consolidated statements of operations.

Accounts Receivable

Accounts receivable related to income properties, which are classified in other assets on the consolidated balance sheets, primarily consist of tenant reimbursable expenses. Receivables related to tenant reimbursable expenses totaled approximately ~~$494,000~~$449,000 and ~~$831,000~~$125,000 as of ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, respectively.

Accounts receivable related to real estate operations, which are classified in other assets on the consolidated balance sheets, totaled approximately ~~$3.4~~$2.4 million and ~~$1.3~~$3.8 million as of as of ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, respectively. ~~These~~As more fully described in Note 9, “Other Assets,” these accounts receivable are primarily related to the reimbursement of certain infrastructure costs completed by the Company in conjunction with ~~three~~two land sale transactions that closed during the fourth quarter of 2015 and one land sale transaction that closed during the first quarter of 2016.

Trade accounts receivable primarily consist of receivables related to golf operations, which are classified in other assets on the consolidated balance sheets. Trade accounts receivable related to golf operations, which primarily consist of ~~membership and event receivables,~~amounts due from members or private events, totaled approximately ~~$294,000~~$348,000 and ~~$253,000~~$326,000 as of ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, respectively.

The collectability of the aforementioned receivables is determined based on the aging of the receivable and a review of the specifically identified accounts using judgments. As of ~~as of June 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, no allowance for doubtful accounts was required.

Purchase Accounting for Acquisitions of Real Estate Subject to a Lease

In accordance with the ~~Financial Accounting Standards Board (“FASB”)~~FASB guidance on business combinations, the fair value of the real estate acquired with in-place leases is allocated to the acquired tangible assets, consisting of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, the value of in-place leases, and the value of leasing costs, based in each case on their relative fair values. The Company has determined that income property purchases with a pre-existing lease at the time of acquisition qualify as a business combination, in which case acquisition costs are expensed in the period the transaction closes. For income property purchases in which a new lease is originated at the time of acquisition, the Company has determined that these asset purchases are outside the scope of the business combination standards and accordingly, the acquisition costs are capitalized with the purchase.

The fair value of the tangible assets of an acquired leased property is determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to land, building and tenant improvements based on the determination of the fair values of these assets.

In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded as other assets or liabilities based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases, and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining term of the lease, including the probability of renewal periods. The capitalized above-market lease values are amortized as a reduction of rental income over the remaining terms of the respective leases. The capitalized below-market lease values are amortized as an increase to rental income over the initial term unless the Company believes that it is likely that the tenant will renew the option whereby the Company amortizes the value attributable to the renewal over the renewal period.

The aggregate value of other acquired intangible assets, consisting of in-place leases, is measured by the excess of (i) the purchase price paid for a property after adjusting existing in-place leases to market rental rates over (ii) the estimated fair value of the property as-if-vacant, determined as set forth above. The value of in-place leases exclusive of the value of above-market and below-market in-place leases is amortized to expense over the remaining non-cancelable periods of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be written off. The value of tenant relationships is reviewed on individual transactions to determine if future value was derived from the acquisition.

Prior to October 1, 2016, the Company determined that income property purchases subject to a lease, whether that lease is in-place or originated at the time of acquisition, qualify as a business combination, and acquisition costs were expensed in the period the transaction closes. In January 2017, the FASB issued Accounting Standards Update (“ASU”)

Table of Contents~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~NOTE 1. DESCRIPTION OF BUSINESS AND PRINCIPLES OF INTERIM STATEMENTS (continued)~~2017-01, Business Combinations which clarified the definition of a business. Pursuant to ASU 2017-01, the acquisition of an income property subject to a lease no longer qualifies as a business combination, but rather an asset acquisition. The Company early adopted ASU 2017-01 effective October 1, 2016 on a prospective basis. Accordingly, for income property acquisitions during the fourth quarter of 2016 and the first quarter of 2017, acquisition costs have been capitalized.

Sales of Real Estate

Gains and losses on sales of real estate are accounted for as required by ~~the “Accounting for Sales of Real Estate” Topic of FASB Accounting Standards Codification (“FASB ASC”)~~ FASB ASC ~~976-605-25.~~Topic 976-605-25, Accounting for Real Estate. The Company recognizes revenue from the sale of real estate at the time the sale is consummated, unless the property is sold on a deferred payment plan and the initial payment does not meet established criteria, or the Company retains some form of continuing involvement in the property. As market information becomes available, real estate cost basis is analyzed and recorded at the lower of cost or market.

~~Adoption~~Income Taxes

The Company uses the asset and liability method to account for income taxes. Deferred income taxes result primarily from the net tax effect of ~~New Accounting Standard~~

~~A certain item~~temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, see Note 17, “Income Taxes.” In June 2006, the FASB issued additional guidance, which clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements included in income taxes. The interpretation prescribes a recognition threshold and measurement attribute for the ~~prior period’s consolidated balance sheet~~financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. In accordance with FASB guidance included in income taxes, the Company has analyzed its various federal and state filing positions and believes that its income tax filing positions and deductions are well documented and supported. Additionally, the Company believes that its accruals for tax liabilities are adequate. Therefore, no reserves for uncertain income tax positions have been ~~reclassified to conform~~recorded pursuant to the presentation as of and for the six months ended June 30, 2016. Specifically, upon the adoption of ASU 2015-03, related to simplifying the presentation of debt issuance costs effective January 1, 2016, debt issuance costs, net of accumulated amortization, are required to be presented as a direct deduction from the carrying amount of the related long-term debt liability. The amount reclassified from other assets to long-term debt was approximately $1.7 million as of December 31, 2015.FASB guidance.

NOTE 2. INCOME PROPERTIES

During the ~~six~~three months ended ~~June 30, 2016,~~March 31, 2017, the Company acquired one single-tenant income property and one multi-tenant income property, for an aggregate purchase price of approximately $19.1 million, or an aggregate acquisition cost of approximately ~~$2.5 million.~~$19.4 million including capitalized acquisition costs. Of the total acquisition cost, approximately ~~$1.0~~$13.3 million was allocated to land, approximately ~~$1.6~~$4.8 million was allocated to buildings and improvements, approximately ~~$100,000~~$2.1 million was allocated to intangible assets pertaining to the in-place lease value, ~~and~~ leasing fees and above market lease value, and approximately ~~$200,000~~$800,000 was allocated to intangible liabilities for the below market lease value. The weighted average amortization period for the intangible assets and liabilities is approximately ~~8.3~~3.9 years. The ~~property~~properties acquired during the ~~six~~three months ended ~~June 30, 2016 is~~March 31, 2017 are described below:

On ~~February 18, 2016,~~January 27, 2017, the Company acquired a ~~4,685~~18,120 square-foot building situated on approximately ~~0.37~~1.2 acres in ~~Dallas, TX~~Sarasota, Florida which ~~was~~is 100% ~~occupied and~~ leased to ~~two tenants, anchored by 7-Eleven,~~an affiliate of Staples, Inc. The purchase price was approximately ~~$2.5~~$4.1 million, and as of the acquisition date, the remaining term of the lease was approximately 5.0 years.

On March 1, 2017, the Company acquired an approximately 136,000 square-foot grocery-anchored shopping center situated on approximately 10.3 acres in Fort Worth, Texas. The property consists of four single-tenant buildings and one multi-tenant building situated on three separate, but contiguous, land parcels. In aggregate, the property is approximately 96% leased. The purchase price was approximately $15.0 million, and as of the acquisition date, the weighted average remaining term of the leases was approximately ~~8.2~~4.1 years.

~~Four~~No income properties were disposed of during the ~~six~~three months ended ~~June 30,~~March 31, 2017.

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During the three months ended March 31, 2016, ~~as described below:~~

~~On April 5, 2016, the Company sold its income property leased to American Signature Furniture located in Daytona Beach, Florida, which had 3.8 years remaining on the lease, for a sales~~the Company acquired one multi-tenant property at a purchase price ~~of approximately $5.2 million. The Company’s gain on the sale was approximately $197,000, or $0.02 per share after tax.~~

On April 6, 2016, the Company sold its income property leased to an affiliate of CVS, located in Sebring, Florida, which was sub-leased to Advanced Auto Parts and had approximately 3.1 years remaining on the lease, for a sales price of approximately $2.4 million. The Company’s loss on the sale was approximately $210,000, or $0.02 per share after tax, which was charged to earnings as an impairment during the three months ended March 31, 2016.

On April 22, 2016, the Company sold its 15,360 square foot self-developed property leased to Teledyne ODI, located in Daytona Beach, Florida, which had approximately 9.3 years remaining on the lease, for a sales price of approximately $3.0 million. The Company’s gain on the sale was approximately $822,000, or $0.09 per share after tax.

On June 22, 2016, the Company sold its income property leased to Lowe’s located in Lexington, North Carolina, which had 9.6 years remaining on the lease, for a sales price of approximately $9.1 million. The Company’s gain on the sale was approximately $344,000, or $0.04 per share after tax.

~~An impairment charge~~ of approximately ~~$942,000 was recognized~~$2.5 million. No income properties were disposed of during the three months ended ~~June 30, 2016 on the single-tenant income property in Altamonte Springs, Florida leased to PNC Bank as described in Note 8, “Impairment of Long-Lived Assets.”~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~NOTE 2. INCOME PROPERTIES (continued)~~

~~Fourteen single-tenant properties were classified as held for sale as of~~ March 31, ~~2016 which continue to be held for sale as of June 30, 2016 as the sale has not yet closed. Those fourteen properties classified as held for sale are described below:~~

On March 28, 2016, the Company entered into a purchase and sale agreement for the sale of a portfolio of fourteen single-tenant income properties (the “Portfolio Sale”). The properties include nine properties leased to Bank of America, located primarily in Orange County and also in Los Angeles County, California; two properties leased to Walgreens, located in Boulder, Colorado and Palm Bay, Florida; a property leased to a subsidiary of CVS located in Tallahassee, Florida; a ground lease for a property leased to Chase Bank located in Chicago, Illinois; and a ground lease for a property leased to Buffalo Wild Wings in Phoenix, Arizona. The sales price for the Portfolio Sale is approximately $51.6 million. The Portfolio Sale contemplates that the sales price includes the buyer’s assumption of the existing $23.1 million mortgage loan secured by the aforementioned properties. The Portfolio Sale, if completed, would result in an estimated gain of approximately $11.4 million, or approximately $1.22 per share, after tax. The Portfolio Sale is anticipated to close in the third quarter of 2016. The closing of the Portfolio Sale is subject to customary closing conditions.

On April 5, 2016, the Company entered into a 15 year lease with a national fitness center for the anchor space at The Grove at Winter Park located in Winter Park, Florida. The lease is for approximately 40,000 square feet, or 36%, of the 112,000 square foot multi-tenant retail center. On July 6, 2016, the Company funded approximately $4.0 million into an escrow account for customary tenant improvements for the fitness center, which could open as early as the fourth quarter of 2016. The tenant will draw funding from escrow as construction progresses.

~~One single-tenant income property and one vacant pad site were acquired during the six months ended June 30, 2015 at an aggregate acquisition cost of approximately $9.1 million. Two~~2016; however, seventeen single-tenant income properties were classified as held for sale as of March 31, ~~2015, for~~2016, three of which ~~the sale~~ closed in April ~~2015.~~2016 and fourteen of which closed in September 2016. An impairment of approximately ~~$510,000~~$210,000 was charged to earnings during the three months ended March 31, ~~2015,~~2016 related to one of the April ~~2015 sale~~2016 sales as more fully described in Note 8, “Impairment of Long-Lived Assets.”

NOTE 3. COMMERCIAL LOAN INVESTMENTS

~~On May 26, 2016,~~Our investments in commercial loans or similar structured finance investments, such as mezzanine loans or other subordinated debt, have been and are expected to continue to be secured by commercial or residential real estate or the ~~Company’s $14.5 million~~borrower’s pledge of its ownership interest in the entity that owns the real estate. The first mortgage loans we invest in or originate are for commercial real estate located in the United States and its territories, and are current or performing with either a fixed or floating rate. Some of these loans may be syndicated in either a pari-passu or senior/subordinated structure. Commercial first mortgage loans generally provide for a higher recovery rate due to their senior position in the underlying collateral. Commercial mezzanine loans are typically secured by a pledge of the borrower’s equity ownership in the underlying commercial real estate. Unlike a mortgage, a mezzanine loan is not secured by a lien on the property. An investor’s rights in a mezzanine loan are usually governed by an intercreditor agreement that provides holders with the rights to cure defaults and exercise control on certain decisions of any senior debt secured by the Sheraton Old San Juan Hotel located in San Juan, Puerto Rico was paid off at a discount of approximately $218,000. On payoff, the remaining loan origination fee net of loan costs was accreted into income.

During the three months ended June 30, 2016, the approximately $9.0 million B-Note secured by property in Sarasota, Florida and the $10.0 million mezzanine loan secured by property in Dallas, Texas were extended by the borrowers, each borrower having exercised one-year extension options thereby extending the maturity dates to June 2017 and September 2017, respectively.same commercial property.

As of ~~June 30, 2016,~~March 31, 2017, the Company owned three performing commercial loan investments which have an aggregate outstanding principal balance of approximately $24.0 million. These loans are secured by real estate, or the borrower’s equity interest in real estate, located in Dallas, Texas, Sarasota, Florida, and Atlanta, Georgia, and have an average remaining maturity of approximately ~~1.4~~0.6 years and a weighted average interest rate of ~~8.7%~~9.1%. One of the loans has a remaining 1-year extension and another loan has two 1-year extensions remaining available at the borrower’s election which would extend the remaining maturity of this portfolio to approximately 1.8 years.

The Company’s commercial loan investment portfolio was comprised of the following at ~~June 30, 2016:~~

Description

Date of
Investment

Maturity
Date

Original Face
Amount

Current Face
Amount

Carrying
Value

Coupon Rate

Mezz – Hotel – Atlanta, GA

January 2014

February 2019

$
5,000,000

$
5,000,000

$
5,000,000

12.00%

B-Note – Retail Shopping Center,
Sarasota, FL

May 2014

June 2017

8,960,467

8,960,467

8,960,467

30-day LIBOR
plus 7.50%

Mezz – Hotel, Dallas, TX

September 2014

September 2017

10,000,000

10,000,000

10,000,000

30-day LIBOR
plus 7.25%

Total

$
23,960,467

$
23,960,467

$
23,960,467

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~NOTE 3. COMMERCIAL LOAN INVESTMENTS (continued)~~

~~The carrying value of the commercial loan investment portfolio as of June 30, 2016 consisted of the following:~~

Total

Current Face Amount

$
23,960,467

Unamortized Fees

-

Unaccreted Origination Fees

-

Total Commercial Loan Investments

$
23,960,467

~~The Company’s commercial loan investment portfolio was comprised of the following at~~March 31, 2017 and December 31, ~~2015:~~

2016:


											Date of	Maturity	Original Face		Current Face		Carrying
Description	Date of Investment	Maturity Date	Original Face Amount		Current Face Amount		Carrying Value		Coupon Rate		Investment	Date	Amount		Amount		Value		Coupon Rate
Mezz – Hotel – Atlanta, GA	January 2014	February 2019	$	5,000,000	$	5,000,000	$	5,000,000		12.00%	January 2014	February 2019	$	5,000,000	$	5,000,000	$	5,000,000	12.00%
B-Note – Retail Shopping Center, Sarasota, FL	May 2014	June 2016		8,960,467		8,960,467		8,960,467	30-day LIBOR plus 7.50%		May 2014	June 2017		8,960,467		8,960,467		8,960,467	30 ‑day LIBOR plus 7.50%
Mezz – Hotel, Dallas, TX	September 2014	September 2016		10,000,000		10,000,000		10,000,000	30-day LIBOR plus 7.25%		September 2014	September 2017		10,000,000		10,000,000		10,000,000	30 day LIBOR plus 7.25%
First Mortgage – Hotel, San Juan, Puerto Rico	September 2015	September 2018		14,500,000		14,500,000		14,371,489	30-day LIBOR plus 9.00%
Total			$	38,460,467	$	38,460,467	$	38,331,956					$	23,960,467	$	23,960,467	$	23,960,467

The carrying value of the commercial loan investment portfolio as of March 31, 2017 and December 31, ~~2015 consisted of~~2016 was equal to the ~~following:~~face amount.

Total

Current Face Amount

$
38,460,467

Unamortized Fees

36,382

Unaccreted Origination Fees

(164,893
)
Total Commercial Loan Investments

$
38,331,956

NOTE 4. LAND AND SUBSURFACE INTERESTS

As of March 31, 2017, the Company owned approximately 8,200 acres of undeveloped land in Daytona Beach, Florida, along six miles of the west and east side of Interstate 95. Currently, the majority of this land is used for agricultural purposes. Approximately 1,100 acres of our land holdings are located on the east side of Interstate 95 and are generally well suited for commercial development. Approximately 7,100 acres of our land holdings are located on the west side of Interstate 95 and the majority of this land is generally well suited for residential development. Included in the western land is approximately 1,100 acres which are located further west of Interstate 95 and a few miles north of Interstate 4 and this land is generally well suited for industrial purposes.

Table of Contents

Real estate operations revenue consisted of the following for the three months ended March 31, 2017 and 2016, respectively:


	Three Months Ended March 31, 2017		Three Months Ended March 31, 2016
Revenue Description	($000's)		($000's)
Land Sales Revenue	$	28,707	$	190
Tomoka Town Center - Percentage of Completion Revenue		—		8,958
Revenue from Reimbursement of Infrastructure Costs		320		—
Impact Fee and Mitigation Credit Sales		217		105
Subsurface Revenue		230		308
Total Real Estate Operations Revenue	$	29,474	$	9,561

The Tomoka Town Center consists of approximately 235 acres of which approximately 180 acres are developable. Land sales with a gross sales price totaling approximately $21.4 million within the Tomoka Town Center consisted of sales of approximately 99 acres to Tanger, Sam’s Club, and North American Development Group (“NADG”) in 2015 and 2016 (the “Tomoka Town Center Sales Agreements”). The remaining developable acreage of approximately 82 acres is currently under contract with NADG as described in the land pipeline in Note 18, “Commitment and Contingencies.” The Company performed certain infrastructure work, beginning in the fourth quarter of 2015 through completion in the fourth quarter of 2016, which required the sales price on the Tomoka Town Center Sales Agreements to be recognized on the percentage-of-completion basis. All revenue related to the Tomoka Town Center Sales Agreements had been recognized as of December 31, 2016. The timing of the reimbursements for the cost of the remaining infrastructure work of approximately $2.4 million is more fully described in Note 9, “Other Assets.”

Land Sales. During the ~~six~~three months ended ~~June 30,~~March 31, 2017, a total of approximately 1,587.4 acres were sold for approximately $28.7 million as described below:


					Gross Sales				Gain
			Date of	No. of	Price		Price		on Sale
	Buyer (or Description)	Location	Sale	Acres	($000's)		per Acre		($000's)
1	Minto Communities, LLC	West of I-95	02/10/17	1,581.00	$	27,151	$	17,000	$	20,041
2	Commercial	East of I-95	03/22/17	6.35		1,556		245,000		11
				1,587.35	$	28,707	$	18,000	$	20,052

During the three months ended March 31, 2016, a total of approximately ~~7.46~~7.5 acres ~~of land was~~were sold for approximately $2.2 million as described below:


					Gross Sales				Gain
			Date of	No. of	Price (1)		Price		on Sale
	Buyer (or Description)	Location	Sale	Acres	($000's)		per Acre		($000's)
1	Commercial / Retail	East of I-95	02/12/16	3.1	$	190	$	61,000	$	145
2	NADG - OutParcel	East of I-95	03/30/16	4.4		2,000		455,000		1,304
				7.5	$	2,190	$	292,000	$	1,449

·⁽¹⁾

~~On February 12,~~

Land Sales Revenue for the three months ended March 31, 2016 is equal to the ~~Company sold approximately 3.06 acres~~Gross Sales Price of land ~~located in Daytona Beach, Florida at a~~sales of $2.19 million, less the $2.0 million sales price for the NADG – OutParcel, as the NADG – OutParcel revenue is included in Tomoka Town Center – Percentage of ~~$190,000, or approximately $62,000 per acre, for a gain of approximately $145,000.~~Completion Revenue.

On March 30, 2016, the Company sold approximately 4.40 acres of land located within the 235-acre Tomoka Town Center located in Daytona Beach, Florida east of Interstate 95 and south of LPGA Boulevard (the “Town Center”) at a sales price of approximately $2.0 million, or approximately $455,000 per acre, for a gain of approximately $1.25 million recognized at closing, with the remaining estimated gain of approximately $683,000 to be recognized as related infrastructure work is completed.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~Land Impairments.

~~NOTE 4. LAND AND SUBSURFACE INTERESTS (continued)~~

In addition, the gain recognized on the percentage-of-completion basis for the sales within the Town Center, of which approximately 180 of the total 235 acres are developable, is described below. The Town Center infrastructure work was approximately 81% complete as of June 30, 2016. The gain consists of revenue from a portion of the sales price and revenue from expected reimbursement of infrastructure costs, less the allocated cost basis of the infrastructure costs incurred, as the infrastructure work is completed:

Land Tract

Date Closed

No. of Acres

Sales Price

Avg. Sales Price per Acre

Revenue ⁽¹⁾Recognized in
Q2 2016

Revenue ⁽¹⁾Recognized in YTD Q2 2016

Gain ⁽²⁾Recognized in Q2 2016

Gain ⁽²⁾ Recognized in YTD Q2 2016

Deferred Revenue ⁽³⁾as of June 30, 2016

Tanger Outlet

11/12/2015

38.93

$
9,700,000

$
249,165

$
1,633,919

$
5,129,130

$
1,314,682

$
4,106,231

$
1,773,019

Sam's Club

12/23/2015

18.10

4,500,000

248,619

837,596

2,627,483

689,171

2,151,898

770,425

NADG - First Parcel

12/29/2015

37.26

5,168,335

138,710

1,040,527

3,269,246

734,984

2,290,225

1,018,759

NADG - Outparcel

3/30/2016

4.40

2,000,000

454,545

330,730

1,775,334

294,649

1,546,609

394,230

Total Tomoka Town Center Sales

98.69

$
21,368,335

$
216,520

$
3,842,772

$
12,801,193

$
3,033,486

$
10,094,963

$
3,956,433

⁽¹⁾The revenue recognized in each quarter consists of revenue from a portion of the sales price that was previously deferred and revenue from expected reimbursements, as the infrastructure work is completed.

⁽²⁾~~The gain recognized in each quarter consists of revenue less the allocated cost basis of the infrastructure costs, as the infrastructure work is completed.~~

⁽³⁾The total revenue remaining to be recognized for the above land transactions includes the above approximately $3.9 million of deferred revenue plus an estimated approximately $806,000 of revenue related to the reimbursement of the infrastructure costs to be incurred through completion of the work, less the estimated remaining cost basis of approximately $1.0 million. See Note 18, "Commitments and Contingencies" for a description of the commitments related to the remaining infrastructure costs to be incurred.

The NADG First Parcel and Outparcel sales represent the first two of multiple transactions contemplated under a single purchase and sale agreement (the “NADG Agreement”) with an affiliate of North American Development Group (“NADG”). The NADG Agreement provides NADG with the ability to acquire portions of the remaining acreage under contract within the Town Center (the “Remaining Option Parcels”) in multiple, separate transactions through 2018 (the “Option Period”). The Remaining Option Parcels represent a total of approximately 81.55 acres and total potential proceeds to the Company of approximately $20.2 million, or approximately $248,000 per acre. Pursuant to the NADG Agreement, NADG can close on any and all of the Remaining Option Parcels at any time during the Option Period. The NADG Agreement also establishes a price escalation percentage that would be applied to any of the Remaining Option Parcels that are acquired after January 2017, and an additional price escalation percentage that would be applied to any Remaining Option Parcels acquired in 2018.

Pursuant to the agreements with Tanger, Sam’s Club, and NADG (the “Town Center Sales Agreements”), which together represent the potential sale of the developable acreage in the Town Center, the Company is responsible for the completion of certain infrastructure improvements (the “Infrastructure Work”) at the Town Center. The Infrastructure Work is currently estimated to cost between $12.5 million and $13.0 million and is expected to be completed in or around October 2016. In connection with the transaction with Tanger, the Company expects to receive approximately $4.5 million for the portion of the Infrastructure Work attributable to the Tanger property from the Tomoka Town Center Community Development District (the “Town Center District”), a special purpose governmental entity, based upon the achievement of certain milestones related to the Infrastructure Work and the Tanger project, and based upon when the Company dedicates the Infrastructure Work to the Town Center District. The payment of the $4.5 million will be recognized into revenue when earned. The Company expects to receive payments, in addition to the sales proceeds from each of the Town Center Sales Agreements (the “Incremental Payments”), including certain fixed annual payments, over the next ten years from Tanger and Sam’s, which annual amounts are included in the estimated gains from the transactions. In aggregate, the majority of the Incremental Payments and the payment received from the Town Center District are expected to largely offset the cost of the Infrastructure Work. As a result of our responsibility for completing the Infrastructure Work, we have applied the percentage of completion basis of accounting to the Tanger Outlet, Sam’s Club and NADG transactions whereby we will recognize the revenue deferred for each transaction as the Infrastructure Work is completed. The Incremental Payments recorded as receivables as of June 30, 2016 and December 31, 2015 totaled approximately $3.4 million and $1.3 million, respectively, and are included as a part of other assets on the consolidated balance sheets.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~NOTE 4. LAND AND SUBSURFACE INTERESTS (continued)~~

The following table provides a reconciliation of the land transactions closed (as of June 30, 2016) or under contract for all the developable parcels of the Town Center (sales price and estimated infrastructure reimbursement presented in $000’s) and the reimbursement amounts for the Infrastructure Work from each buyer:

Land Tract

No. of Acres

Sales Price
(In $000's)

Sales Price per Acre

Infrastructure Reimbursement (in $000s)

Tanger Outlet [Closed] ⁽¹⁾

38.93

$
9,700

$
249,165

$
5,500

Sam's Club [Closed] ⁽²⁾

18.10

4,500

248,619

1,100

NADG - First Parcel [Closed]⁽³⁾

37.26

5,168

138,710

1,800

NADG - Outparcel [Closed]⁽³⁾

4.40

2,000

454,545

211

NADG - Option Parcels ⁽⁴⁾

81.55

20,196

247,645

3,889

Total Developable Area

180.24

41,564

230,602

12,500

Common Area ⁽⁵⁾

54.32

N/A

N/A

(12,800
)
Total Town Center

234.56

$
41,564

$
177,199

$
(300
)

⁽¹⁾ ~~Includes $4.5 million in incentives from the Town Center District, with remainder to be paid in equal installments over 10 years;~~

⁽²⁾ ~~Infrastructure reimbursement, pursuant to contract, paid in equal installments over 10 years;~~

⁽³⁾ ~~Infrastructure reimbursement due upon the later of i) Infrastructure Work completion or, ii) August 31, 2016;~~

⁽⁴⁾ Under Contract. Sales price reflects current contract price; price escalations would occur should any of the transactions close in 2017 and 2018. Infrastructure reimbursements for each Option Parcel occurs upon later of i) transaction closing, ii) Infrastructure Work completion, or iii) August 31, 2016; and

⁽⁵⁾ ~~Includes common area for the Town Center association and land dedicated for public use, both to be conveyed by the Company.~~

~~During the six months ended June 30, 2015, the Company sold approximately 3.9 acres. On June 1, 2015, the Company sold~~

~~approximately 3.0 acres of land located on the south side of LPGA Boulevard, just east of Clyde Morris Boulevard, at a sales price of~~

$505,000, or approximately $167,000 per acre, for a gain of approximately $476,000. On June 17, 2015, the Company sold approximately 0.9 acres of land located in Highlands County, at a sales price of $250,000 for a gain of approximately $223,000.

~~For a description of~~There were no impairment charges ~~totaling approximately $1.0 million~~ on the Company’s undeveloped land during the three months ended ~~June 30, 2016, see Note 8, “Impairment~~March 31, 2017 or 2016.

Table of ~~Long-Lived Assets.”~~Contents

Beachfront Venture. During the year ended December 31, 2015, the Company acquired, through a real estate venture with an unaffiliated third party institutional investor, an interest in approximately six acres of vacant beachfront property located in Daytona Beach, ~~Florida~~Florida. The property was acquired for approximately $11.3 million of which the Company contributed approximately $5.7 million. As of December 31, 2015, the real estate venture was fully consolidated as ~~more fully described~~the Company determined that it was the primary beneficiary of the variable interest entity. On November 17, 2016, the Company acquired the unaffiliated third party’s 50% interest for approximately $4.8 million, a discount of approximately $879,000. The discount was recorded through equity on the consolidated balance sheet during the quarter and year ended December 31, 2016. The Company evaluated its interest in ~~Note 21, “Variable Interest Entity.”~~the six-acre vacant beachfront property for impairment and determined that no impairment was necessary as of December 31, 2016. As the Company owns the entire real estate venture as of December 31, 2016, there is no longer a consolidated VIE. The cost basis of the six acre vacant beachfront property asset totaled approximately $11.7 million as of March 31, 2017 which includes costs for entitlement. The beachfront property received approval of the rezoning and entitlement of the site to allow for the development of two restaurants and also for up to approximately 1.2 million square feet of vertical density. In the first quarter of 2017, the Company executed a 15-year lease agreement with the operator of LandShark Bar & Grill, for an approximately 6,264 square foot restaurant property the Company will develop on the parcel. The annual rent under the lease is based on a percentage of the tenant’s net operating income (“NOI”) until the Company has received its investment basis in the property and thereafter, the Company will receive a lower percentage of the tenant’s NOI during the remaining lease term. In April 2017, the Company executed a 15-year lease agreement with the tenant, Cocina 214 Restaurant & Bar, for the second restaurant property to be developed on the parcel. The annual rent is equal to the greater of $360,000 per year or a certain percentage of gross sales. The lease also provides for additional percentage rent upon the achievement of certain gross sales thresholds. The Company expects the development of the two restaurant properties to be completed in time for the tenants to commence operations during the first quarter of 2018.

Other Real Estate Assets. The Company owns impact fees with a cost basis of approximately $709,000 and mitigation credits with a cost basis of approximately $1.4 million for a combined total of approximately $2.1 million as of March 31, 2017. As of December 31, 2016, the Company owned impact fees with a cost basis of approximately $925,000 and mitigation credits with a cost basis of approximately $1.4 million for a combined total of approximately $2.3 million. During the three months ended March 31, 2017 and 2016, the Company received cash payments of approximately $217,000 and $105,000, respectively, for impact fees with a cost basis that was generally of equal value.

Subsurface Interests. The Company owns full or fractional subsurface oil, gas, and mineral interests underlying approximately 500,000 “surface” acres of land owned by others in 20 counties in ~~Florida.~~Florida (the “Subsurface Interests”). The Company leases ~~its interests~~the Subsurface Interests to mineral exploration firms for exploration. Our subsurface operations consist of revenue from the leasing of exploration rights and in some instances, additional revenues from royalties applicable to production from the leased acreage.

During November 2015, the Company hired Lantana Advisors, a subsidiary of SunTrust, to evaluate the possible sale of its subsurface interests. On April 13, 2016 the Company entered into a purchase and sale agreement with Land Venture Partners, LLC for the sale of its 500,000 acres of subsurface interests, all located in the state of Florida, including the royalty interests in two operating oil wells in Lee County, Florida and its interests in the oil exploration lease with Kerogen Florida Energy Company LP, for a sales price of approximately $24 million (the “Subsurface Sale”). The purchase and sale agreement contemplates a closing of the Subsurface Sale prior to year-end 2016. The Subsurface Sale, if completed, would result in an estimated gain of approximately $22.6 million, or approximately $2.40 per share, after tax. The Company intends to use the proceeds from this sale as part of a Section 1031 like-kind exchange. The closing of the Subsurface Sale is subject to customary closing conditions. There can be no assurances regarding the likelihood or timing of the Subsurface Sale being completed or the final terms thereof, including the sales price.

During 2011, an eight-year oil exploration lease was executed. The lease calls for annual lease payments which are recognized as revenue ratably over the respective twelve month lease periods. In addition, non-refundable drilling penalty payments are made as required by the drilling requirements in the lease which are recognized as revenue when received. Cash payments for both the annual lease payment and the drilling penalty, if applicable, are received in full on or before the first day of the respective lease year.

Table of Contents~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~NOTE 4. LAND AND SUBSURFACE INTERESTS (continued)~~

Lease payments on the respective acreages and drilling penalties received through lease year ~~five~~six are as follows:


	Acreage
Lease Year	(Approximate)	Florida County	Lease Payment (1)		Drilling Penalty (1)
Lease Year 1 - 9/23/2011 - 9/22/2012	136,000	Lee and Hendry	$	913,657	$	—
Lease Year 2 - 9/23/2012 - 9/22/2013	136,000	Lee and Hendry		922,114		—
Lease Year 3 - 9/23/2013 - 9/22/2014	82,000	Hendry		3,293,000		1,000,000
Lease Year 4 - 9/23/2014 - 9/22/2015	42,000	Hendry		1,866,146		600,000
Lease Year 5 - 9/23/2015 - 9/22/2016	25,000	Hendry		1,218,838		175,000
Lease Year 6 - 9/23/2016 - 9/22/2017	15,000	Hendry		806,683		150,000
Total Payments Received to Date			$	9,020,438	$	1,925,000

⁽¹⁾

Lease Year

Acreage (Approximate)

Florida County

Lease Payment ⁽¹⁾

Drilling Penalty ⁽¹⁾

Lease Year 1 - 9/23/2011 - 9/22/2012

136,000

Lee and Hendry

$
913,657

$
-

Lease Year 2 - 9/23/2012 - 9/22/2013

136,000

Lee and Hendry

922,114

-

Lease Year 3 - 9/23/2013 - 9/22/2014

82,000

Hendry

3,293,000

1,000,000

Lease Year 4 - 9/23/2014 - 9/22/2015

42,000

Hendry

1,866,146

600,000

Lease Year 5 - 9/23/2015 - 9/22/2016

25,000

Hendry

1,218,838

175,000

Total Payments Received to Date

$
8,213,755

$
1,775,000

⁽¹⁾Cash payment for the Lease Payment and Drilling Penalty is received on or before the first day of the lease year. The Drilling Penalty is recorded as revenue when received, while the Lease Payment is recognized on a straight-line basis over the respective lease term. See separate disclosure of the revenue per year below.

The terms of the lease state the Company will receive royalty payments if production occurs, and may receive additional annual rental payments if the lease is continued in years ~~six through~~seven and eight. The lease is effectively eight one-year terms as the lessee has the option to terminate the ~~lease.~~lease at the end of each lease year.

Lease income generated by the annual lease payments is recognized on a straight-line basis over the guaranteed lease term. For the three months ended ~~June 30,~~March 31, 2017 and 2016, ~~and 2015,~~ lease income of approximately ~~$303,000~~$199,000 and ~~$465,000, respectively, was recognized. For the six months ended June 30, 2016 and 2015, lease income of approximately $606,000 and $925,000,~~$303,000, respectively, was recognized. There can be no assurance that the oil exploration lease will be extended beyond the expiration of the current term of September 22, ~~2016~~2017 or, if renewed, on similar terms or conditions.

~~The~~During the three months ended March 31, 2017 and 2016, the Company also received oil royalties from operating oil wells on 800 acres under a separate lease with a separate operator. Revenues received from oil royalties totaled approximately ~~$11,000~~$31,000 and ~~$28,000,~~$5,000, during the three months ended ~~June 30,~~March 31, 2017 and 2016, ~~and 2015,~~ respectively. ~~Revenues~~

The Company is not prohibited from ~~oil royalties totaled approximately $16,000 and $49,000, during~~ the ~~six months ended June 30, 2016 and 2015, respectively.~~

disposition of any or all of its Subsurface Interests. Should the Company complete a transaction to sell all or a portion of its Subsurface Interests, the Company may utilize the like-kind exchange structure in acquiring one or more replacement investments such as income-producing properties. The Company may release surface entry rights or other rights upon request of a surface owner for a negotiated release fee based on a percentage of the surface value. ~~Cash payments for the release of surface entry rights totaled approximately $450,000 and $2,000~~No such releases occurred during the ~~six~~three months ended June 30, 2016 and 2015, respectively, which is included in revenue from real estate operations. The May 2016 transaction for approximately $450,000 reflected gross proceeds net of fees, for the release of the Company’s surface entry rights related to approximately 960 acres of surface rights in Hendry County, Florida. The Company intends to utilize the proceeds from this transaction as part of a like-kind exchange transaction.March 31, 2017 or 2016.

NOTE 5. INVESTMENT SECURITIES

During the ~~six~~three months ended ~~June 30,~~March 31, 2016, the Company completed the disposition of its remaining position in investment securities, including common stock and debt securities of a publicly traded real estate company, with a total basis of approximately $6.8 million, resulting in net proceeds of approximately $6.3 million, or a loss of approximately $576,000. During the six months ended June 30, 2015, the Company sold preferred stock of a publicly traded real estate company with a total basis of approximately $704,000 resulting in net proceeds of approximately $835,000, or a gain of approximately $131,000.

The Company had no remaining available-for-sale securities as of ~~June 30, 2016.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~NOTE 5. INVESTMENT SECURITIES (continued)~~

~~Available-for-sale securities consisted of the following as of~~March 31, 2017 or December 31, ~~2015:~~ 2016.

As of December 31, 2015

Cost⁽¹⁾

Gains in
Accumulated
Other
Comprehensive
Income

Losses in
Accumulated
Other
Comprehensive
Income

Estimated
Fair Value
(Level 1 and 2
Inputs)

Debt Securities

$
843,951

$
—

$
(41,451
)

$
802,500

Total Debt Securities

843,951

-

(41,451
)

802,500

Common Stock

5,981,464

—

(1,080,197
)

4,901,267

Total Equity Securities

5,981,464

—

(1,080,197
)

4,901,267

Total Available-for-Sale Securities

$
6,825,415

$
-

$
(1,121,648
)

$
5,703,767

⁽¹⁾ ~~The cost basis in the common stock investment is net~~Table of ~~an other-than-temporary impairment charge of approximately $60,000 charged to earnings through investment income in the consolidated statements of operations.~~Contents

The gross unrealized loss included in accumulated other comprehensive income as of December 31, 2015 was approximately $1.1 million, net of tax of approximately $433,000. During the six months ended June 30, 2016, but prior to the disposition of the investment securities, gross unrealized gains of approximately $546,000, net of tax of approximately $211,000, were earned and included in other comprehensive income to reduce the accumulated comprehensive loss balance. The remaining unrealized loss of approximately $576,000, was then realized upon disposition during the six months ended June 30, 2016, and removed from accumulated other comprehensive income, net of tax of approximately $222,000, and charged to earnings as an investment loss.

During the six months ended June 30, 2015, gross unrealized losses of approximately $106,000, net of tax of approximately $41,000, were recorded through other comprehensive income. The gross unrealized losses of approximately $106,000 include the gross unrealized loss of approximately $120,000, offset by the approximate $14,000 in gross unrealized gains on the preferred stock investments prior to their sale in the first quarter of 2015.

~~Following~~following is a table reflecting the gains and losses recognized on the sale of investment securities ~~and the gains or losses recognized~~ during the ~~six~~three months ended ~~June 30, 2016~~March 31, 2017 and ~~2015:~~2016:


	For the six months ended June 30,						For the three months ended March 31,
	2016			2015			2017		2016
Proceeds from the Disposition of Debt Securities	$	827,738		$	—		$	—	$	827,738
Cost Basis of Debt Securities Sold		(843,951	)		—			—		(843,951)
Loss recognized in Statement of Operations on the Disposition of Debt Securities	$	(16,213	)	$	—		$	—	$	(16,213)
Proceeds from the Disposition of Equity Securities		5,424,624			834,964			—		5,424,624
Cost Basis of Equity Securities Sold		(5,983,978	)		(704,173	)		—		(5,983,978)
Gain (Loss) recognized in Statement of Operations on the Disposition of Equity Securities	$	(559,354	)	$	130,791		$	—	$	(559,354)
Total Gain (Loss) recognized in Statement of Operations on the Disposition of Debt and Equity Securities	$	(575,567	)	$	130,791		$	—	$	(575,567)

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

NOTE 6. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table presents the carrying value and estimated fair value of the Company’s financial instruments at ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015:~~

2016:


									March 31, 2017				December 31, 2016
	June 30, 2016				December 31, 2015				Carrying		Estimated		Carrying		Estimated
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value		Value		Fair Value		Value		Fair Value
Cash and Cash Equivalents - Level 1	$	24,742,236	$	24,742,236	$	4,060,677	$	4,060,677	$	4,427,864	$	4,427,864	$	7,779,562	$	7,779,562
Restricted Cash - Level 1		10,568,618		10,568,618		14,060,523		14,060,523		5,882,767		5,882,767		9,855,469		9,855,469
Commercial Loan Investments - Level 2		23,960,467		23,960,467		38,331,956		38,460,467		23,960,467		24,201,097		23,960,467		24,228,242
Long-Term Debt - Level 2		153,887,378		158,562,177		166,796,853		172,572,305		156,813,310		161,360,505		166,245,201		171,111,337
Interest Rate Swap - Level 2		545,821		545,821		-		-

To determine estimated fair values of the financial instruments listed above, market rates of interest, which include credit assumptions, were used to discount contractual cash flows. The estimated fair values are not necessarily indicative of the amount the Company could realize on disposition of the financial instruments. The use of different market assumptions or estimation methodologies could have a material effect on the estimated fair value amounts.

The following table presents the fair value of assets measured on a recurring basis by Level atas of March 31, 2017:


			Fair Value at Reporting Date Using
			Quoted Prices in				Significant
			Active Markets		Significant Other		Unobservable
			for Identical		Observable Inputs		Inputs
	3/31/2017		Assets (Level 1)		(Level 2)		(Level 3)

Cash Flow Hedge - Interest Rate Swap	$	493,195	$	—	$	493,195	$	—
Total	$	493,195	$	—	$	493,195	$	—

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The following table presents the fair value of assets measured on a recurring basis by Level as of December 31, ~~2015 (there were none~~2016:


			Fair Value at Reporting Date Using
			Quoted Prices in				Significant
			Active Markets		Significant Other		Unobservable
			for Identical		Observable Inputs		Inputs
	12/31/2016		Assets (Level 1)		(Level 2)		(Level 3)

Cash Flow Hedge - Interest Rate Swap	$	416,590	$	—	$	416,590	$	—
Total	$	416,590	$	—	$	416,590	$	—

At December 31, 2016, approximately eight acres of undeveloped land under contract for sale as of ~~June 30, 2016):~~

December 31, 2016 were measured on a non-recurring basis using Level 3 inputs in the fair value hierarchy, which resulted in aggregate impairment charge of approximately $1.0 million. One of these land contracts closed during the three months ended March 31, 2017, therefore, the fair value measurement is no longer applicable. The following table presents the fair value of those assets measured on a non-recurring basis by Level as of March 31, 2017:

12/31/2015

Quoted Prices in Active Markets for Identical Assets (Level 1)

Significant Other Observable Inputs
(Level 2)

Significant Unobservable Inputs
(Level 3)

Available-for-Sale Securities

  Available-for-Sale Debt Securities

$
802,500

$
-

$
802,500

$
-

  Available-for-Sale Equity Securities

4,901,267

4,901,267

-

-

    Total Available-for-Sale Securities

5,703,767

4,901,267

802,500

-

Total

$
5,703,767

$
4,901,267

$
802,500

$
-


			Fair Value at Reporting Date Using
			Quoted Prices in				Significant
			Active Markets		Significant Other		Unobservable
			for Identical		Observable Inputs		Inputs
	3/31/2017		Assets (Level 1)		(Level 2)		(Level 3)

Land Parcel - 4.5 Repurchased Acres	$	1,119,410	$	—	$	—	$	1,119,410
Total	$	1,119,410	$	—	$	—	$	1,119,410

NOTE 7. INTANGIBLE LEASE ASSETS AND LIABILITIES

Intangible lease assets and liabilities consist of the value of above-market and below-market leases, the value of in-place leases, and the value of leasing costs, based in each case on their fair values.

Intangible lease assets and liabilities consisted of the following as of ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015:~~

2016:


	As of						As of
	June 30, 2016			December 31, 2015			March 31, 2017		December 31, 2016
Intangible Lease Assets:
Value of In-Place Leases	$	16,324,202		$	19,588,642		$	32,725,992	$	30,978,776
Value of Above Market In-Place Leases		1,178,878			1,469,143			2,938,435		2,905,624
Value of Intangible Leasing Costs		3,719,078			3,835,158			7,358,168		7,010,192
Sub-total Intangible Lease Assets		21,222,158			24,892,943			43,022,595		40,894,592
Accumulated Amortization		(4,575,758	)		(4,805,792	)		(7,379,612)		(6,168,770)
Sub-total Intangible Lease Assets—Net		16,646,400			20,087,151			35,642,983		34,725,822
Intangible Lease Liabilities:
Intangible Lease Liabilities (included in accrued and other liabilities):
Value of Below Market In-Place Leases		(32,483,281	)		(32,315,741	)		(34,141,817)		(33,370,217)
Sub-total Intangible Lease Liabilities		(32,483,281	)		(32,315,741	)		(34,141,817)		(33,370,217)
Accumulated Amortization		1,612,876			336,182			3,505,859		2,852,166
Sub-total Intangible Lease Liabilities—Net		(30,870,405	)		(31,979,559	)		(30,635,958)		(30,518,051)
Total Intangible Assets and Liabilities—Net	$	(14,224,005	)	$	(11,892,408	)	$	5,007,025	$	4,207,771

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~NOTE 7. INTANGIBLE LEASE ASSETS AND LIABILITIES (continued)~~

Total net amortization related to intangible lease assets ~~during~~and liabilities was approximately $557,000 and ($24,000) for the ~~six~~three months ended ~~June 30,~~March 31, 2017 and 2016, respectively. During the three months ended March 31, 2017 and ~~2015 was~~2016, approximately $1.1 million and ~~$718,000,~~$583,000, respectively, ~~and~~ was included in depreciation and amortization ~~in the consolidated statements of operations. Total amortization related to intangible lease liabilities during the six months ended June 30, 2016 was~~while approximately ~~$1.2 million~~$531,000 and $607,000, respectively, was included as an increase to income properties revenue in the consolidated statements of operations.

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The estimated future amortization and accretion of intangible lease assets and liabilities is as follows:


											Future Accretion		Net Future
									Future		to Income		Amortization of
									Amortization		Property		Intangible Assets
Year Ending December 31,	Future Amortization Expense		Future Accretion to Income Property Revenue			Net Future Amortization of Intangible Assets and Liabilities			Amount		Revenue		and Liabilities
Remainder of 2016	$	990,549	$	(1,111,603	)	$	(121,054	)
2017		1,941,510		(2,189,685	)		(248,175	)
Remainder of 2017									$	3,449,413	$	(1,614,711)	$	1,834,702
2018		1,937,911		(2,191,717	)		(253,806	)		4,599,217		(2,163,801)		2,435,416
2019		1,935,341		(2,192,911	)		(257,570	)		4,570,659		(2,158,677)		2,411,982
2020		1,886,208		(2,192,911	)		(306,703	)		4,129,238		(2,091,948)		2,037,290
2021		1,369,584		(2,279,897	)		(910,313	)		2,438,802		(2,242,803)		195,999
2022										1,916,549		(2,313,964)		(397,415)
Thereafter		5,609,190		(17,735,574	)		(12,126,384	)		12,087,650		(15,598,599)		(3,510,949)
Total	$	15,670,293	$	(29,894,298	)	$	(14,224,005	)	$	33,191,528	$	(28,184,503)	$	5,007,025

NOTE 8. IMPAIRMENT OF LONG-LIVED ASSETS

The Company assesses the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The fair value of long-lived assets required to be assessed for impairment is determined on a non-recurring basis using Level 3 inputs in the fair value hierarchy. These Level 3 inputs may include, but are not limited to, executed purchase and sale agreements on specific properties, third party valuations, discounted cash flow models, and other model-based techniques.

~~During the three months ended June 30, 2016, an~~There were no impairment charge of approximately $942,000 was recognized on an income property in Altamonte Springs, Florida leased to PNC Bank under contract for sale as of June 30, 2016. The total impairment charge represents the anticipated loss on the sale of approximately $783,000 plus estimated closing costs of approximately $159,000.

During the three months ended June 30, 2016, an impairment charge of approximately $717,000 was recognized on approximately 4 of the approximately 6 acres of undeveloped land in Daytona Beach, Florida for which a contract for sale was executedcharges during the three months ended June 30, 2016. Such acreage was repurchased in prior years by the Company and carried a higher cost basis than the remainder of the Company’s historical land holdings. The total impairment charge represents the anticipated loss on the sale of approximately $646,000 plus estimated closing costs of approximately $71,000.

During the three months ended June 30, 2016, an impairment charge of approximately $311,000 was recognized on approximately 4 acres of undeveloped land in Daytona Beach, Florida for which a contract for sale was executed subsequent to June 30, 2016. Such acreage was repurchased in a prior year by the Company and carried a higher cost basis than the remainder of the Company’s historical land holdings. The total impairment charge represents the anticipated loss on the sale of approximately $256,000 plus estimated closing costs of approximately $55,000.March 31, 2017.

During the three months ended March 31, 2016, an impairment charge of approximately $210,000 was recognized on an income property held for sale as of March 31, 2016 for which the sale closed on April 6, ~~2016, as described in Note 2, “Income Properties.”~~2016. The total impairment charge represented the loss on the sale of approximately $134,000 plus closing costs of approximately $76,000.

During the six months ended June 30, 2015, an impairment charge of approximately $510,000 was recognized on two income properties held for sale as of March 31, 2015, for which the sale closed on April 17, 2015. The total impairment charge represented the loss on the sale of approximately $277,000 plus estimated closing costs of approximately $233,000.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

NOTE 9. OTHER ASSETS

Other assets consisted of the following:


	As of				As of
	June 30, 2016		December 31, 2015		March 31, 2017		December 31, 2016
Income Property Tenant Receivables	$	493,820	$	830,574	$	448,593	$	125,383
Income Property Straight-line Rent Adjustment		1,977,575		1,781,798		2,008,411		1,773,946
Interest Receivable from Commercial Loan Investments		116,007		155,163		74,260		72,418
Cash Flow Hedge - Interest Rate Swap						493,195		416,590
Infrastructure Reimbursement Receivables		3,407,454		1,306,602		2,366,503		3,844,236
Golf Operations Receivables		294,244		253,358		347,736		325,510
Deferred Deal Costs		604,957		520,308		240,368		745,878
Prepaid Expenses, Deposits, and Other		1,650,606		1,187,021		2,617,802		2,165,127
Total Other Assets	$	8,544,663	$	6,034,824	$	8,596,868	$	9,469,088

As of December 31, 2016, the Infrastructure Reimbursement Receivables were all related to the Tomoka Town Center land sales and consisted of approximately $1.1 million in incentives due from the community development district, approximately $250,000 due from NADG for a fill dirt agreement, approximately $1,750,000 due from Tanger for infrastructure reimbursement to be repaid over 10 years in $175,000 installments, net of a discount of approximately $191,000, and approximately $990,000 due from Sam’s Club for infrastructure reimbursement to be repaid over 9 remaining years in $110,000 installments, net of a discount of approximately $80,000. The $1.1 million and $250,000 receivables, as well as the second installment of $110,000 from Sam’s Club were all received subsequent to December 31, 2016, leaving approximately $2.4 million in Infrastructure Reimbursements Receivable as of March 31, 2017.

Table of Contents

NOTE 10. COMMON STOCK AND EARNINGS PER SHARE

Basic earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share is based on the assumption of the conversion of stock options and vesting of restricted stock at the beginning of each period using the treasury stock method at average cost for the periods.


	Three Months Ended				Six Months Ended					Three Months Ended
	June 30, 2016		June 30, 2015		June 30, 2016		June 30, 2015		March 31, 2017		March 31, 2016
Income Available to Common Shareholders:
Net Income Attributable to Consolidated-Tomoka Land Co.	$	1,570,443	$	224,617	$	2,995,161	$	577,973	$	12,746,392	$	1,424,718
Weighted Average Shares Outstanding		5,703,542		5,822,815		5,719,213		5,824,717		5,602,137		5,734,884
Common Shares Applicable to Stock
Options Using the Treasury Stock Method		-		22,719		-		27,356		21,277		—
Total Shares Applicable to Diluted Earnings Per Share		5,703,542		5,845,534		5,719,213		5,852,073		5,623,414		5,734,884

Per Share Information:
Basic and Diluted net Income Per Share
Basic
Net Income Attributable to Consolidated-Tomoka Land Co.	$	0.28	$	0.04	$	0.52	$	0.10	$	2.28	$	0.25

Diluted
Net Income Attributable to Consolidated-Tomoka Land Co.									$	2.27	$	0.25

The effect of ~~81,250~~77,750 and ~~87,500~~67,500 potentially dilutive securities ~~were~~was not included for the three ~~and six~~ months ended ~~June 30,~~March 31, 2017 and 2016, respectively, as the effect would be ~~antidilutive. The effect of 25,000 and 40,200 potentially dilutive securities were not included for the three and six months ended June 30, 2015, respectively, as the effect would be antidilutive.~~anti-dilutive.

The Company intends to settle its 4.50% Convertible Senior Notes due 2020 (the ~~“Notes”~~“Convertible Notes”) in cash upon conversion with any excess conversion value to be settled in shares of our common stock. Therefore, only the amount in excess of the par value of the Convertible Notes will be included in our calculation of diluted net income per share using the treasury stock method. As such, the Convertible Notes have no impact on diluted net income per share until the price of our common stock exceeds the current conversion price of ~~$68.90.~~$68.82. The average price of our common stock during the three ~~and six~~ months ended ~~June 30,~~March 31, 2017 and 2016 ~~and 2015~~ did not exceed the conversion price which resulted in no additional diluted outstanding shares.

NOTE 11. TREASURY STOCK

In ~~November 2008,~~ the ~~Company’s Board~~fourth quarter of ~~Directors authorized~~2015, the Company toannounced a $10 million stock repurchase ~~from time to time up to $8~~program (the “$10 Million Repurchase Program”). As of March 29, 2017, the $10 Million Repurchase Program had been completed. In the first quarter of 2017, the Company announced a new $10 million stock repurchase program (the “New $10 Million Repurchase Program”) of ~~its common stock. There was no expiration date for~~which approximately $331,000 had been repurchased as of March 31, 2017. In the ~~repurchase authorization. The Company repurchased 4,660 shares of its common stock at a cost of approximately $105,000 through December~~aggregate, during the three months ended March 31, ~~2013 and those shares were retired. During 2014,~~2017, under both programs, the Company repurchased ~~an additional 25,836~~56,243 shares of its common stock on the open market for a total cost of approximately $928,000, or an average price per share of $35.92, and placed those shares in treasury. During the year ended December 31, 2015, the Company repurchased an additional 119,403 shares of its common stock on the open market for a total cost of approximately $6.5$2.9 million, or an average price per share of ~~$54.31, and placed those shares in treasury, thereby completing the $8 million share repurchase program.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~NOTE 11. TREASURY STOCK (continued)~~

In the fourth quarter of 2015, the Company also announced a new $10 million stock repurchase program. Under the new $10 million repurchase program, during the six months ended June 30, 2016, the Company repurchased 62,751 shares of its common stock on the open market for a total cost of approximately $3.0 million, or an average price per share of $47.78,$52.05, and placed those shares in treasury.

NOTE 12. LONG-TERM DEBT

Credit Facility. The Company has a revolving credit facility (the “Credit Facility”) with Bank of Montreal (“BMO”) as the administrative agent for the lenders thereunder. The Credit Facility is guaranteed by certain wholly-owned subsidiaries of the Company. The Credit Facility bank group is led by BMO and also includes Wells Fargo and Branch Banking & Trust Company. The Credit Facility matures on August 1, 2018, with the ability to extend the term for 1 year.

The Credit Facility has a total borrowing capacity of $75.0 million with the ability to increase that capacity up to $125.0 million during the term. The Credit Facility provides the lenders with a secured interest in the equity of the Company subsidiaries that own the properties included in the borrowing base. The indebtedness outstanding under the Credit Facility accrues interest at a rate ranging from the 30-day LIBOR plus 135 basis points to the 30-day LIBOR plus 225 basis points based on the total balance outstanding under the Credit Facility as a percentage of the total asset value of the Company, as defined in the Credit Facility. The Credit Facility also accrues a fee of 20 to 25 basis points for any unused portion of the borrowing capacity based on whether the unused portion is greater or less than 50% of the total borrowing capacity.

Table of Contents

At ~~June 30, 2016,~~March 31, 2017, the current commitment level under the Credit Facility was $75.0 million. The available borrowing capacity under the Credit Facility was approximately ~~$42.3~~$50.5 million, ~~subject to~~based on the level of borrowing base ~~requirements.~~assets. As of ~~May 13, 2016,~~March 31, 2017, the Credit Facility had a ~~zero balance after the Company had paid off all outstanding draws.~~$24.5 million balance.

On March ~~21, 2016, the Company entered into~~ an amendment of the Credit Facility (the “First Amendment”). The First Amendment modified certain terms of the Company’s Credit Facility effective as of September 30, 2015, including, among other things, (i) modifying certain non-cash or non-recurring items in the calculation of Adjusted EBITDA~~, as defined in the Credit Facility,~~ and eliminating stock repurchases from the calculation of fixed charges, both of which are part of the calculation of the fixed charge coverage ratio financial covenant, (ii) the addition of a measure for the fixed charge coverage ratio that must be met before the Company may repurchase shares of its own stock, and (iii) providing a consent of the lenders regarding the amount of the Company’s stock repurchases since the third quarter of 2015.

~~On April 13, 2016,~~14, 2017, the Company entered into an amendment of the Credit Facility (the ~~“Second~~“Third Amendment”). The ~~Second~~Third Amendment modified ~~section~~Section 8.8(n) of the Credit Facility, which pertains to permitted stock repurchases by the Company, ~~by, among other things, (i) adding~~to increase the ~~gains from~~aggregate stock repurchases permitted under the ~~sale of unimproved land, including the sale of subsurface interests or the release of surface entry rights, net of taxes incurred in connection with the sale,~~Credit Facility. Pursuant to the calculation of Adjusted EBITDA, for the purpose of determining the coverage ratio that must be met before the Company may repurchase shares of its own stock, and (ii) reducing the coverage ratio that must be met before the Company may repurchase shares of its own stock pursuant to section 8.8(n) from 1.75x to 1.50x. As of the date of the SecondThird Amendment, the Company ~~meets the required coverage ratio; therefore, subject~~expects to ~~black-out periods and other restrictions applicable to share repurchases, the Company will~~ be able to continue to make additional repurchases of its own common stock under ~~its existing~~the New $10 ~~million repurchase program.~~Million Repurchase Program.

The Credit Facility is subject to customary restrictive covenants including, but not limited to, limitations on the Company’s ability to: (a) incur indebtedness; (b) make certain investments; (c) incur certain liens; (d) engage in certain affiliate transactions; and (e) engage in certain major transactions such as mergers. In addition, the Company is subject to various financial maintenance covenants including, but not limited to, a maximum indebtedness ratio, a maximum secured indebtedness ratio, and a minimum fixed charge coverage ratio. The Credit Facility also contains affirmative covenants and events of default including, but not limited to, a cross default to the Company’s other indebtedness and upon the occurrence of a change of control. The Company’s failure to comply with these covenants or the occurrence of an event of default could result in acceleration of the Company’s debt and other financial obligations under the Credit Facility.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~NOTE 12. LONG-TERM DEBT (continued)~~

Mortgage Notes Payable. On February 22, 2013, the Company closed on a $7.3 million non-recourse first mortgage loan originated with UBS Real Estate Securities Inc., secured by its interest in the two-building office complex leased to Hilton Resorts Corporation, which was acquired on January 31, 2013. The mortgage loan matures in February 2018, carries a fixed rate of interest of 3.655% per annum, and requires payments of interest only prior to maturity.

On March 8, 2013, the Company closed on a $23.1 million non-recourse first mortgage loan originated with Bank of America, N.A., secured by its interest in fourteen income properties. The mortgage loan ~~matures in April 2023, carries~~carried a fixed rate of 3.67% per annum, and ~~requires~~required payments of interest only prior to its maturity. On September 16, 2016, in conjunction with the sale of the fourteen income properties, the buyer assumed the $23.1 million mortgage loan. Accordingly, the Company is no longer subject to this loan as of March 31, 2017.

On September 30, 2014, the Company closed on a $30.0 million non-recourse first mortgage loan originated with Wells Fargo, secured by its interest in six income properties. The mortgage loan matures in October 2034, and carries a fixed rate of 4.33% per annum during the first ten years of the term, and requires payments of interest only during the first ten years of the loan. After the tenth anniversary of the effective date of the loan, the cash flows, as defined in the related loan agreement, generated by the underlying six income properties must be used to pay down the principal balance of the loan until paid off or until the loan matures. The loan is fully pre-payable after the tenth anniversary ~~date~~ of the effective date of the loan.

On April 15, 2016, the Company closed on a $25.0 million non-recourse first mortgage loan originated with Wells Fargo, secured by the Company’s income property leased to Wells Fargo located in Raleigh, North Carolina. The mortgage loan has a 5-year term with two years interest only, and interest and a 25-year amortization for the balance of the term. The mortgage loan bears a variable rate of interest based on the 30-day LIBOR plus a rate of 190 basis points. The interest rate for this mortgage loan has been fixed through the use of an interest rate swap that fixed the rate at 3.17%. The mortgage loan can be prepaid at any time subject to the termination of the interest rate swap.

Convertible Debt. On March 11, 2015, the Company issued $75.0 million aggregate principal amount of 4.50% Convertible ~~Senior Notes due 2020 (the “Notes”).~~Notes. The Convertible Notes bear interest at a rate of 4.50% per year, payable ~~semiannually~~semi-annually in arrears on March 15 and September 15 of each year, beginning on September 15, 2015. The Convertible Notes will mature on March 15, 2020, unless earlier purchased or converted. The initial conversion rate iswas 14.5136 shares of common stock for each $1,000 principal amount of Convertible Notes, which ~~represents~~represented an initial conversion price of approximately $68.90 per share of common stock. On July 20, 2016, the Company’s Board of Directors implemented a quarterly dividend in place of the previous semi-annual dividend. As a result, effective February 7, 2017, the adjusted conversion rate is 14.5307 shares of common stock for each $1,000 principal amount of Convertible Notes, which represents an adjusted conversion price of approximately $68.82 per share of common stock.

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The conversion rate is subject to adjustment in certain circumstances. Holders may not surrender their Convertible Notes for conversion prior to December 15, 2019 except upon the occurrence of certain conditions relating to the closing sale price of the Company’s common stock, the trading price per $1,000 principal amount of Convertible Notes, or specified corporate events. The Company may not redeem the Convertible Notes prior to the stated maturity date and no sinking fund is provided for the Convertible Notes. The Convertible Notes are convertible, at the election of the Company, into solely cash, solely shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock. The Company intends to settle the Convertible Notes in cash upon conversion, with any excess conversion value to be settled in shares of our common stock. In accordance with GAAP, the Convertible Notes are accounted for as a liability with a separate equity component recorded for the conversion option. A liability was recorded for the Convertible Notes on the issuance date at fair value based on a discounted cash flow analysis using current market rates for debt instruments with similar terms. The difference between the initial proceeds from the Convertible Notes and the estimated fair value of the debt instruments resulted in a debt discount, with an offset recorded to additional paid-in capital representing the equity component. The discount on the Convertible Notes was approximately $6.1 million at issuance, which represents the cash discount paid of approximately $2.6 million and the approximate $3.5 million attributable to the value of the conversion option recorded in equity, which is being amortized into interest expense through the maturity date of the Convertible Notes. As of ~~June 30, 2016~~March 31, 2017, the unamortized debt discount of our Convertible Notes was approximately ~~$4.7~~$3.8 million.

Net proceeds from issuance of the Notes was approximately $72.4 million (net of the cash discount paid of approximately $2.6 million) of which approximately $47.5 million was used to repay the outstanding balance of our Credit FacilityLong-term debt as of March ~~11, 2015. We utilized the remaining amount for investments in income-producing properties or investments in commercial loans secured by commercial real estate.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~NOTE 12. LONG-TERM DEBT (continued)~~

~~Long-term debt~~31, 2017 and December 31, 2016 consisted of the following:


	March 31, 2017					December 31, 2016
			Due Within					Due Within
	Total		One Year			Total		One Year
Credit Facility	$	24,500,000	$	—		$	34,300,000	$	—
Mortgage Note Payable (originated with UBS)		7,300,000		7,300,000	(1)		7,300,000		—
Mortgage Note Payable (originated with Wells Fargo)		30,000,000		—			30,000,000		—
Mortgage Note Payable (originated with Wells Fargo)		25,000,000		—			25,000,000		—
4.50% Convertible Senior Notes due 2020, net of discount		71,172,151		—			70,880,581		—
Loan Costs, net of accumulated amortization		(1,158,841)		—			(1,235,380)		—
Total Long-Term Debt	$	156,813,310	$	7,300,000		$	166,245,201	$	—

June 30, 2016

Total

Due Within
One Year

Credit Facility

$
—

$
—

Mortgage Note Payable (originated with UBS)

7,300,000

—

Mortgage Note Payable (originated with BOA)

23,100,000

—

Mortgage Note Payable (originated with Wells Fargo)

30,000,000

—

Mortgage Note Payable (originated with Wells Fargo)

25,000,000

4.50% Convertible Senior Notes due 2020, net of discount

70,311,211

—

Loan Costs, net of accumulated amortization

(1,823,833
)

—

Total Long-Term Debt

$
153,887,378

$
—

⁽¹⁾

The maturity schedule below reflects $31.8 million due in 2018 while the amount due within one year above totals $7.3 million. The difference of $24.5 million is for the Credit Facility which matures on August 1, 2018, which is more than one year from the balance sheet date of March 31, 2017.

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Payments applicable to reduction of principal amounts as of March 31, 2017 will be required as follows:


Year Ending December 31,	Amount		Amount
Remainder of 2016	$	—
2017		—
2018		7,300,000		31,800,000
2019		—		—
2020		75,000,000		75,000,000
2021		25,000,000		25,000,000
2022				—
Thereafter		53,100,000		30,000,000
Total Long-Term Debt - Face Value	$	160,400,000	$	161,800,000

The carrying value of long-term debt as of ~~June 30, 2016~~March 31, 2017 consisted of the following:


	Total			Total
Current Face Amount	$	160,400,000		$	161,800,000
Unamortized Discount on Convertible Debt		(4,688,789	)		(3,827,849)
Loan Costs, net of accumulated amortization		(1,823,833	)		(1,158,841)
Total Long-Term Debt	$	153,887,378		$	156,813,310

For the three months ended ~~June 30,~~March 31, 2017, interest expense, excluding amortization of loan costs and debt discounts, was approximately $1.7 million with approximately $2.6 million paid during the period. For the three months ended March 31, 2016, interest expense, excluding amortization of loan costs and debt discounts, was approximately ~~$1.8~~$1.7 million with approximately $801,000 paid during the period. For the six months ended June 30, 2016, interest expense, excluding amortization of loan costs and debt discounts, was approximately $3.5 million with approximately $3.5 million paid during the quarter. No interest was capitalized during the three or six months ended June 30, 2016.

For the three months ended June 30, 2015, interest expense, excluding amortization of loan costs and debt discounts, was approximately $1.5 million with approximately $665,000 paid during the period. For the six months ended June 30, 2015, interest expense, excluding amortization of loan costs and debt discounts, was approximately $2.5 ~~million with approximately $1.5~~ million paid during the period. No interest was capitalized during the three ~~and six~~ months ended ~~June 30, 2015.~~March 31, 2017 or 2016.

The amortization of loan costs incurred in connection with the Company’s long-term debt is included in interest expense in the consolidated ~~financial statements.~~statements of operations. Loan costs are amortized over the term of the respective loan agreements using the straight-line method, which approximates the effective interest method. For the three months ended ~~June 30,~~March 31, 2017 or 2016, ~~and 2015,~~ the amortization of loan costs totaled approximately ~~$125,000~~$113,000 and ~~$94,000, respectively. For the six months ended June 30, 2016 and 2015, the amortization of loan costs totaled approximately $227,000 and $167,000,~~$102,000, respectively.

The amortization of the approximately $6.1 million discount on the Convertible Notes is also included in interest expense in the consolidated ~~financial statements.~~statements of operations. The discount is amortized over the term of the Convertible Notes using the effective interest method. For the three months ended ~~June 30,~~March 31, 2017 or 2016, ~~and 2015~~ the amortization of the discount totaled approximately ~~$278,000~~$292,000 and ~~$293,000,~~$273,000, respectively. ~~For the six months ended June 30, 2016 and 2015 the amortization of the discount totaled approximately $551,000 and $318,000, respectively.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~NOTE 12. LONG-TERM DEBT (continued)~~

The Company was in compliance with all of its debt covenants as of ~~December 31, 2015 and~~ March 31, 2016. As of June 30, 2016, the Company was in compliance with all of its debt covenants but for a default with respect to a covenant under the Credit Facility which requires the Company to maintain a borrowing base value of $75 million for income properties included in the borrowing base. Subsequent to our disposition of the income property leased to Lowe’s in Lexington, North Carolina in June 2016, the value of income properties on the borrowing base was approximately $71 million. The total value of the calculated borrowing base was also impacted by a provision of the Credit Facility which limits the value for a single income property to no more than 20% of the total borrowing base value. As a result, our $25.1 million investment in the 245 Riverside property in Jacksonville, Florida, which is included in the borrowing base, had a value of approximately $14 million in the borrowing base calculation. The Company obtained a waiver from the lending group effective until the earlier of (i) the date on which the Company adds one or more properties to the borrowing base sufficient to establish compliance with the covenant or (ii)2017 and December 31, 2016. As of May 13, 2016, the Credit Facility had a zero balance after the Company paid off all outstanding draws. If the Company fails to become compliant with the covenant by December 31, 2016, its liquidity could be adversely affected if another waiver from the lending group is not obtained or the lending group elects to terminate the Credit Facility. The Company expects to become compliant with the covenant through the acquisition of income-producing properties prior to December 31, 2016. As of July 29, 2016, the Company is under contract to acquire certain income-producing properties, some of which we expect to close before the end of the third quarter 2016. We expect the acquisition of these properties would result in the Company satisfying the borrowing base covenant; however, there can be no assurances regarding the likelihood or timing of any one of these potential acquisition transactions being completed or the final terms thereof.

NOTE 13. INTEREST RATE SWAP

During April 2016, the Company entered into an interest rate swap agreement to hedge cash flows tied to changes in the underlying floating interest rate tied to LIBOR for the $25.0 million mortgage note payable as discussed in Note 12, “Long-Term Debt.” During the three months ended ~~June 30, 2016,~~March 31, 2017, the interest rate swap agreement was 100% effective. Accordingly, the change in fair value on the interest rate swap has been classified in accumulated other comprehensive ~~loss.~~income. As of ~~June 30, 2016,~~March 31, 2017, the fair value of our interest rate swap agreement, which was a ~~loss~~gain of approximately ~~$546,000,~~$493,000, was included in ~~accrued and~~ other ~~liabilities~~assets on the consolidated balance sheets. The interest rate swap was effective on April 7, 2016 and matures on April 7, 2021. The interest rate swap fixed the variable rate debt on the notional amount of related debt of $25.0 million to a rate of 3.17%.

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NOTE 14. ACCRUED AND OTHER LIABILITIES

Accrued and other liabilities consisted of the following:


	As of				As of
	June 30, 2016		December 31, 2015		March 31, 2017		December 31, 2016
Golf Course Lease	$	2,415,401	$	2,602,638	$	—	$	2,226,527
Accrued Property Taxes		1,223,698		40,042		640,003		28,973
Golf $1 Round Surcharge						700,000		—
Reserve for Tenant Improvements		756,651		812,493		17,901		398,621
Accrued Construction Costs						717,874		856,947
Accrued Interest		1,204,004		1,195,231		327,751		1,220,990
Environmental Reserve and Restoration Cost Accrual		2,103,190		2,405,635		1,367,256		1,505,757
Cash Flow Hedge - Interest Rate Swap		545,821		-
Other		1,133,678		1,811,880		1,709,467		2,430,082
Total Accrued and Other Liabilities	$	9,382,443	$	8,867,919	$	5,480,252	$	8,667,897

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~NOTE 14. ACCRUED AND OTHER LIABILITIES (continued)~~

In July 2012, the Company entered into an agreement with the City ~~of Daytona Beach, Florida (the “City”)~~ to, among other things, amend the lease payments under its golf course lease (the “Lease Amendment”). Under the Lease Amendment, the base rent payment, which was scheduled to increase from $250,000 to $500,000 as of September 1, 2012, ~~will remain~~remained at $250,000 for the remainder of the lease term and any extensions would behave been subject to an annual rate increase of 1.75% beginning September 1, 2013. The Company also agreed to invest $200,000 prior to September 1, 2015 for certain improvements to the facilities. In addition, pursuant to the Lease Amendment, beginning September 1, 2012, and continuing throughout the initial lease term and any extension option,On January 24, 2017, the Company ~~will pay additional~~acquired the land and improvements comprising the golf courses, previously leased from the City, for approximately $1.5 million (the “Golf Course Land Purchase”). In conjunction with the Golf Course Land Purchase, the lease between the Company and the City was terminated. Therefore, during the three months ended March 31, 2017, the Company eliminated the remaining accrued liability of approximately $2.2 million, resulting in the recognition of approximately $0.40 per share in non-cash earnings, or $0.24 per share after tax, which comprises the land lease termination in the consolidated statements of operations. The $2.2 million consisted of approximately $1.7 million which reflects the acceleration of the remaining amount of accrued rent that was no longer owed to the City ~~equal to 5.0% of gross revenues exceeding $5,500,000 and 7.0% of gross revenues exceeding $6,500,000. Since the inception of the lease, the Company has recognized the rent expense on~~as a ~~straight-line basis resulting in an estimated accrual for deferred rent. Upon the effective date~~result of the Lease Amendment, ~~the Company’s straight-line rent was revised to reflect the lower rent levels through expiration of the lease. As a result, approximately $3.0 million of the rent previously deferred will not be due~~which prior to the ~~City, and will be~~Golf Course Land Purchase was being recognized into income over the remaining lease term which ~~expires~~was originally to expire in 2022. AsThe remaining approximately $500,000 reflects the amount of ~~June 30, 2016, approximately $1.5 million of~~rent accrued pursuant to the ~~rent previously deferred that~~lease, as amended, which will ~~not~~no longer be owed to the City due to the lease termination on January 24, 2017.

Additionally, in connection with the Golf Course Land Purchase, the Company is obligated to pay the City ~~remained~~additional consideration in the amount of an annual surcharge of $1 per golf round played each year (the “Per-Round Surcharge”) with an annual minimum Per-Round Surcharge of $70,000 and a maximum aggregate amount of the Per-Round Surcharges paid equal to ~~be amortized through September 2022.~~$700,000. The maximum amount of $700,000 represents contingent consideration and has been recorded as an increase in Golf Buildings, Improvements, and Equipment and Accrued and Other Liabilities in the accompany consolidated balance sheets as of March 31, 2017.

In connection with the acquisition ~~of the Lowes~~ on April 22, 2014 of the property in Katy, Texas leased to Lowe’s, the Company was credited approximately $651,000 at closing for certain required tenant improvements, some of which ~~are~~were not required to be completed until December 2016. ~~As of June 30,~~Through December 31, 2016, approximately $100,000 of these tenant improvements had been completed and funded, leaving approximately $551,000 remaining to be funded. The remaining commitment as of December 31, 2016, totaled approximately $381,000, which was equal to the amount of the final reimbursement request the Company received from Lowe’s which was paid during the three months ended March 31, 2017, leaving no remaining commitment.

During the year ended December 31, 2014, the Company accrued an environmental reserve of approximately $110,000 in connection with an estimate of additional costs required to monitor a parcel of less than one acre of land owned by the Company in Highlands County, Florida on which environmental remediation work had previously been performed. The Company engaged legal counsel who, in turn, engaged environmental engineers to review the site and the prior monitoring test results. During the year ended December 31, 2015, their review was completed, and the Company made an additional accrual of approximately $500,000, representing the low end of the range of possible costs estimated by the engineers to be between approximately $500,000 and $1.0 million to resolve this matter subject to the approval of the state department of environmental protection (the “FDEP”). The FDEP ~~has preliminarily accepted the Company’s proposed remediation plan~~issued a Remedial Action Plan Modification Approval Order (the “FDEP Approval”) in August 2016 which supports the approximate $500,000 ~~accrual.~~accrual made in 2015. The Company is implementing the remediation plan pursuant to the FDEP Approval. Since the ~~initial~~total accrual of approximately ~~$110,000~~$610,000 was made, approximately ~~$129,000~~$417,000 in costs have been incurred through ~~June 30, 2016.~~March 31, 2017, leaving a remaining accrual of approximately $193,000.

~~During~~

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As part of the ~~year ended December 31, 2015, the Company accrued $187,500 for the estimated penalty associated with~~resolution of a regulatory matter pertaining to the Company’s prior agricultural activities on certain of the Company’s land located in Daytona Beach, ~~Florida. Additionally, as part of the resolution of the regulatory matter,~~Florida, as of December 31, 2015, the Company accrued an obligation of approximately $1.7 million, representing the low end of the estimated range of possible wetlands restoration costs for approximately ~~148.35~~148.4 acres within such land, and ~~included~~ such estimated costs were included on the consolidated balance sheets as an increase in the basis of our land and development costs associated with those and benefitting surrounding acres. The final proposal for restoration work was received during the ~~three months ended June 30,~~second quarter of 2016 which totaled approximately $2.0 million. Accordingly, an increase in the accrual of approximately $300,000 was recorded during the ~~three months ended June 30,~~second quarter of 2016. The Company funded approximately ~~$590,000~~$1.0 million of the total $2.0 million of estimated costs ~~during~~through the ~~three months~~period ended ~~June 30, 2016.~~March 31, 2017, leaving a remaining accrual of approximately $1.0 million. This matter is more fully described in Note 18 “Commitments and ~~Contingencies”.~~Contingencies.”

NOTE 15. DEFERRED REVENUE

Deferred revenue consisted of the following:


	As of				As of
	June 30, 2016		December 31, 2015		March 31, 2017		December 31, 2016
Deferred Oil Exploration Lease Revenue	$	279,733	$	885,822	$	386,766	$	585,674
Deferred Land Sale Revenue		3,956,433		12,656,773
Prepaid Rent		879,785		907,325		873,549		1,068,972
Other Deferred Revenue		277,244		274,690		338,827		337,020
Total Deferred Revenue	$	5,393,195	$	14,724,610	$	1,599,142	$	1,991,666

On September ~~22, 2015,~~20, 2016, the Company received an approximate ~~$1.2 million~~$807,000 rent payment for the ~~fifth~~sixth year of the Company’s eight-year oil exploration lease, which is being recognized ratably over the twelve month lease period ending in September ~~2016.~~2017.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~NOTE 15. DEFERRED REVENUE (continued)~~

In connection with the 98.69 acres of land sales in the Town Center which closed during the fourth quarter of 2015 and the first quarter of 2016, approximately $3.9 million of the aggregate $21.4 million sales price is deferred as of June 30, 2016 to be recognized as revenue on a percentage-of-completion basis as the required infrastructure costs are completed. The estimated completion date in or around October 2016.

NOTE 16. STOCK-BASED COMPENSATION

EQUITY-CLASSIFIED STOCK COMPENSATION

~~Market Condition Restricted Shares~~Performance Share Awards – Peer Group Market Condition Vesting

~~Under~~On February 3, 2017, the Company awarded to certain employees, 12,635 Performance Shares under the Amended and Restated 2010 Equity Incentive Plan (the “2010 Plan”) ~~in September 2010 and January 2011,~~. The Performance Shares awards entitle the recipient to receive, upon the vesting thereof, shares of common stock of the Company ~~granted~~equal to ~~certain employees restricted~~between 0% and 150% of the number of Performance Shares awarded. The number of shares of ~~the Company’s~~ common stock ~~which would vest upon the achievement of certain market conditions, including thresholds relating to~~so vesting will be determined based on the Company’s total shareholder return as compared to the total shareholder return of a certain peer group during a ~~five-year~~three-year performance ~~period.~~period commencing on January 1, 2017 and ending on December 31, 2019.

The Company used a Monte Carlo simulation pricing model to determine the fair value of its awards that are based on market conditions. The determination of the fair value of market condition-based awards is affected by the Company’s stock price as well as assumptions regarding a number of other variables. These variables include expected stock price volatility over the requisite performance term of the awards, the relative performance of the Company’s stock price and shareholder returns to companies in its peer group, annual dividends, and a risk-free interest rate assumption. Compensation cost is recognized regardless of the achievement of the market conditions, provided the requisite service period is met.

A summary of activity during the ~~six~~three months ended ~~June 30, 2016,~~March 31, 2017, is presented below:


		Wtd. Avg.
Performance Shares with Market Conditions	Shares	Fair Value
Outstanding at January 1, 2017	—	$	—
Granted	12,635		55.66
Vested	—		—
Expired	—		—
Forfeited	—		—
Outstanding at March 31, 2017	12,635	$	55.66

Market Condition Non-Vested Restricted Shares

Shares

Wtd. Avg.
Grant Date
Fair Value

Outstanding at January 1, 2016

2,400

$
23.42

Granted

—

—

Vested

(2,300
)

23.42

Expired

—

—

Forfeited

(100
)

23.42

Outstanding at June 30, 2016

-

$
-

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As of ~~June 30, 2016,~~March 31, 2017, there ~~is no~~was approximately $645,000 of unrecognized compensation cost, ~~as there are no outstanding shares remaining.~~adjusted for estimated forfeitures, related to Performance Share awards, which will be recognized over a remaining weighted average period of 2.8 years.

Market Condition Restricted Shares – Stock Price Vesting

“Inducement” grants of 96,000 and 17,000 shares of restricted Company common stock were awarded to Mr. Albright and Mr. Patten in 2011 and 2012, respectively. Mr. Albright’s restricted shares were granted outside of the 2010 Plan while Mr. Patten’s restricted shares were awarded under the 2010 Plan. The Company filed a registration statement with the Securities and Exchange Commission on Form S-8 to register the resale of Mr. Albright’s restricted stock under this award. The restricted shares ~~will~~ vest in six increments based upon the price per share of the Company’s common stock during the term of their employment (or within sixty days after termination of employment by the Company without cause) meeting or exceeding the target trailing sixty-day average closing prices ranging from $36 per share for the first increment to $65 per share for the final increment. If any increment of the restricted shares fails to satisfy the applicable stock price condition prior to six years from the grant date, that increment of the restricted shares will be forfeited. As of ~~June 30, 2016,~~March 31, 2017, four increments of Mr. Albright’s and Mr. Patten’s ~~grants~~awards had vested.

Additional grants of 2,500 and 3,000 shares of restricted Company common stock were awarded to Mr. Smith and another officer under the 2010 Plan, during the fourth quarter of 2014 and the first quarter of 2015, respectively. The restricted stock will vest in two increments based upon the price per share of Company common stock during the term of their employment (or within sixty days after termination of employment by the Company without cause), meeting or exceeding the target trailing sixty-day average closing prices of $60 per share and $65 per share for the two increments. If any increment of the restricted shares fails to satisfy the applicable stock price condition prior to six years from the grant date, that increment of the restricted shares will be forfeited. As of ~~June 30, 2016,~~March 31, 2017, no increments of Mr. Smith’s or the other officer’s ~~grants~~awards had vested.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~NOTE 16. STOCK-BASED COMPENSATION (continued)~~

A grant of 94,000 shares of restricted Company common stock was awarded to Mr. Albright under the 2010 Plan during the second quarter of 2015. ~~As more fully described at the end of Note 16 “Stock-Based Compensation,” on~~On February 26, 2016, 72,000 of these shares were surrendered, of which 4,000 were re-granted on February 26, 2016 with identical terms of the surrendered ~~common~~restricted stock and 68,000 were permanently surrendered. The 26,000 shares of restricted Company common stock outstanding from these grants will vest in ~~seven~~four increments based upon the price per share of Company common stock during the term of his employment (or within sixty days after termination of employment by the Company without cause), meeting or exceeding the target trailing thirty-day average closing prices ranging from $60 per share for the first increment to $75 per share for the final increment. If any increment of the restricted shares fails to satisfy the applicable stock price condition prior to January 28, 2021, that increment of the restricted shares will be forfeited. As of ~~June 30, 2016,~~March 31, 2017, no increments of this ~~grant~~award had vested.

On February 26, 2016, the Company entered into amendments to the employment agreements and certain restricted share award agreements to clarify the Company’s intention that the restricted shares granted thereunder, if they are subject to performance-based vesting conditions, will fully vest at any time during the 24-month period following a change in control and termination of the employee subsequent to the change in control.

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A summary of the activity for these awards during the ~~six~~three months ended ~~June 30, 2016,~~March 31, 2017, is presented below:


							Wtd. Avg.
Market Condition Non-Vested Restricted Shares	Shares			Wtd. Avg. Fair Value		Shares	Fair Value
Outstanding at January 1, 2016		137,500		$	30.58
Outstanding at January 1, 2017						69,500	$	27.03
Granted		4,000			38.98	—		—
Vested		—			—	—		—
Expired		—			—	—		—
Forfeited		(72,000	)		34.46	—		—
Outstanding at June 30, 2016		69,500		$	27.03
Outstanding at March 31, 2017						69,500	$	27.03

In connection with the permanent surrender of 68,000 shares of restricted Company common stock, approximately $1.6 million of related stock-based compensation expense was recognized during the six months ended June 30, 2016 to accelerate the remaining expense pertaining the total grant date fair value of these awards.

As of ~~June 30, 2016,~~March 31, 2017, there ~~was approximately $160,000 of~~is no unrecognized compensation cost ~~adjusted for estimated forfeitures,~~ related to market condition ~~non-vested~~ restricted ~~shares, which will be recognized over a remaining weighted average period of 0.2 years.~~stock.

Three Year Vest Restricted Shares

On January 22, 2014, the Company granted to certain employees 14,500 shares of restricted Company common stock under the 2010 Plan. One-third of the restricted shares ~~will~~ vest on each of the first, second, and third anniversaries of the grant date, provided the grantee is an employee of the Company on those dates. In addition, any unvested portion of the restricted shares will vest upon a change in control.

On January 28, 2015, the Company granted to certain employees, which did not include Mr. Albright, 11,700 shares of restricted Company common stock under the 2010 Plan. Additionally, on February 9, 2015, the Company granted 8,000 shares of restricted Company common stock to Mr. Albright under the 2010 Plan. One-third of both awards of restricted shares will vest on each of the first, second, and third anniversaries of the January 28, 2015 grant date, provided the grantee is an employee of the Company on those dates. In addition, any unvested portion of the restricted shares will vest upon a change in control.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~NOTE 16. STOCK-BASED COMPENSATION (continued)~~

On January 27, 2016, the Company granted to certain employees 21,100 shares of restricted Company common stock under the 2010 Plan. One-third of the restricted shares will vest on each of the first, second, and third anniversaries of January 28, 2016, provided the grantee is an employee of the Company on those dates. In addition, any unvested portion of the restricted shares will vest upon a change in control.

On January 25, 2017, the Company granted to certain employees 17,451 shares of restricted Company common stock under the 2010 Plan. One-third of the restricted shares will vest on each of the first, second, and third anniversaries of January 28, 2017 provided the grantee is an employee of the Company on those dates. In addition, any unvested portion of the restricted shares will vest upon a change in control.

The Company’s determination of the fair value of the three year vest restricted stock awards was calculated by multiplying the number of shares issued by the Company’s stock price at the grant date, less the present value of expected dividends during the vesting period. Compensation cost is recognized on a straight-line basis over the vesting period.

A summary of activity during the ~~six~~three months ended ~~June 30, 2016,~~March 31, 2017, is presented below:


							Wtd. Avg.
							Fair Value
Three Year Vest Non-Vested Restricted Shares	Shares			Wtd. Avg. Fair Value Per Share		Shares	Per Share
Outstanding at January 1, 2016		26,900		$	49.73
Outstanding at January 1, 2017						37,504		47.53
Granted		21,100			44.88	17,451		55.06
Vested		(10,363	)		47.89	(17,298)		46.70
Expired		—			—	—		—
Forfeited		—			—	—		—
Outstanding at June 30, 2016		37,637		$	47.52
Outstanding at March 31, 2017						37,657	$	51.40

As of ~~June 30, 2016,~~March 31, 2017, there was approximately ~~$1.4 million~~$900,000 of unrecognized compensation cost, adjusted for estimated forfeitures, related to the three year vest non-vested restricted shares, which will be recognized over a remaining weighted average period of ~~2.1~~1.5 years.

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Non-Qualified Stock Option Awards

Pursuant to the Non-Qualified Stock Option Award Agreements between the Company and Messrs. Albright, Patten, and Smith, each of these Company employees was granted an option to purchase 50,000, 10,000, and 10,000 shares of Company common stock, in 2011, 2012, and 2014, respectively, under the 2010 Plan, with an exercise price per share equal to the fair market value on their respective grant dates. One-third of the options will vest on each of the first, second, and third anniversaries of their respective grant dates, provided the recipient is an employee of the Company on those dates. In addition, any unvested portion of the options will vest upon a change in control. The options expire on the earliest of: (a) the tenth anniversary of the grant date; (b) twelve months after the employee’s death or termination for disability; or (c) thirty days after the termination of employment for any reason other than death or disability.

On January 23, 2013, the Company granted options to purchase 51,000 shares of the Company’s common stock under the 2010 Plan to certain employees of the Company, including 10,000 shares to Mr. Patten, with an exercise price per share equal to the fair market value at the date of grant. One-third of these options vested on each of the first, second, and third anniversaries of the grant date, provided the recipient was an employee of the Company on those dates. The options expire on the earliest of: (a) the fifth anniversary of the grant date; (b) twelve months after the employee’s death or termination for disability; or (c) thirty days after the termination of employment for any reason other than death or disability.

On February 9, 2015, the Company granted to Mr. Albright an option to purchase 20,000 shares of the Company’s common stock under the 2010 Plan with an exercise price of $57.50. The option vested on January 28, 2016. The option expires on the earliest of: (a) January 28, 2025; (b) twelve months after the employee’s death or termination for disability; or (c) thirty days after the termination of employment for any reason other than death or disability.

On May 20, 2015, the Company granted to Mr. Albright an option to purchase 40,000 shares of the Company’s common stock under the 2010 Plan, with an exercise price of $55.62. ~~As more fully described at the end of Note 16 “Stock-Based Compensation,” on~~On February 26, 2016, this option was surrendered and an option to purchase 40,000 shares was granted on February 26, 2016 with identical terms. One-third of the option vested immediately and the remaining two-thirds will vest on January 28, 2017 and January 28, 2018, provided he is an employee of the Company on such dates. In addition, any unvested portion of the option will vest upon a change in control. The option expires on the earliest of: (a) January 28, 2025; (b) twelve months after the employee’s death or termination for disability; or (c) thirty days after the termination of employment for any reason other than death or disability.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~NOTE 16. STOCK-BASED COMPENSATION (continued)~~

On June 29, 2015, the Company granted to an officer of the Company an option to purchase 10,000 shares of the Company’s common stock under the 2010 Plan, with an exercise price of $57.54. One-third of the option will vest on each of the first, second, and third anniversaries of the grant date, provided the recipient is an employee of the Company on such dates. In addition, any unvested portion of the option will vest upon a change in control. The option expires on the earliest of: (a) June 29, 2025; (b) twelve months after the employee’s death or termination for disability; or (c) thirty days after the termination of employment for any reason other than death or disability.

The Company used the Black-Scholes valuation pricing model to determine the fair value of its non-qualified stock option awards. The determination of the fair value of the awards is affected by the stock price as well as assumptions regarding a number of other variables. These variables include expected stock price volatility over the term of the awards, annual dividends, and a risk-free interest rate assumption.

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A summary of the activity for the awards during the ~~six~~three months ended ~~June 30, 2016,~~March 31, 2017, is presented below:


														Wtd. Avg.
														Remaining
														Contractual		Aggregate
												Wtd. Avg.		Term		Intrinsic
Non-Qualified Stock Option Awards	Shares			Wtd. Avg. Ex. Price		Wtd. Avg. Remaining Contractual Term (Years)		Aggregate Intrinsic Value			Shares	Ex. Price		(Years)		Value
Outstanding at January 1, 2016		116,850		$	48.63
Outstanding at January 1, 2017											113,500		49.03
Granted		40,000			55.62						—		—
Exercised		(850	)		34.95						—		—
Expired		—			—						—		—
Forfeited		(40,000	)		55.62						—		—
Outstanding at June 30, 2016		116,000		$	48.73		6.91	$	(145,780	)
Exercisable at June 30, 2016		75,800		$	45.40		1.73	$	157,060
Outstanding at March 31, 2017											113,500	$	49.03	6.35	$	511,865
Exercisable at January 1, 2017											76,600	$	45.94	5.75	$	573,181
Exercisable at March 31, 2017											89,800	$	47.36	5.89	$	554,917

A summary of the non-vested options for these awards during the ~~six~~three months ended ~~June 30, 2016,~~March 31, 2017, is presented below:


							Fair Value
							of Shares
Non-Qualified Stock Option Awards	Shares			Fair Value of Shares Vested		Shares	Vested
Non-Vested at January 1, 2016		88,260
Non-Vested at January 1, 2017						36,900
Granted		40,000				—
Vested		(48,060	)	$	2,478,088	(13,200)	$	734,184
Expired		—				—
Forfeited		(40,000	)			—
Non-Vested at June 30, 2016		40,200
Non-Vested at March 31, 2017						23,700

~~The weighted average grant date fair value of~~No options were granted ~~during the six months ended June 30, 2016 was approximately $13.97 per share. The total intrinsic value of options~~or exercised during the ~~six~~three months ended ~~June 30, 2016 was approximately $30,000.~~March 31, 2017. As of ~~June 30, 2016,~~March 31, 2017, there was approximately ~~$494,000~~$284,000 of unrecognized compensation related to non-qualified, non-vested stock option awards, which will be recognized over a remaining weighted average period of ~~1.8~~1.1 years.

LIABILITY-CLASSIFIED STOCK COMPENSATION

The Company previously had a stock option plan (the “2001 Plan”) pursuant to which 500,000 shares of the Company’s common stock were eligible for issuance. The 2001 Plan expired in 2010, and no new stock options may be issued under the 2001 Plan. Under the 2001 Plan, both stock options and stock appreciation rights were issued in prior years and such issuances were deemed to be liability-classified awards under the Share-Based Payment Topic of FASB ASC, which are required to be remeasured at fair value at each balance sheet date until the award is settled.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~NOTE 16. STOCK-BASED COMPENSATION (continued)~~

A summary of share option activity under the 2001 Plan for the ~~six~~three months ended ~~June 30, 2016~~March 31, 2017 is presented below:

Stock Options


				Wtd. Avg.
				Remaining
				Contractual	Aggregate
		Wtd. Avg.		Term	Intrinsic
Liability-Classified Stock Options	Shares	Ex. Price		(Years)	Value
Outstanding at January 1, 2017	11,000		63.87
Granted	—		—
Exercised	—		—
Expired	(5,000)		77.25
Forfeited	—		—
Outstanding at March 31, 2017	6,000	$	52.73	0.82	$	4,860
Exercisable at March 31, 2017	6,000	$	52.73	0.82	$	4,860

Liability-Classified Stock Options

Shares

Wtd. Avg.
Ex. Price

Wtd. Avg.
Remaining
Contractual
Term
(Years)

Aggregate
Intrinsic
Value

Outstanding at January 1, 2016

18,000

$
64.69

Granted

—

—

Exercised

—

—

Expired

(3,000
)

67.27

Forfeited

—

—

Outstanding at June 30, 2016

15,000

$
64.17

1.10

$
—

Exercisable at June 30, 2016

15,000

$
64.17

1.10

$
—

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In connection with the grant of non-qualified stock options, a stock appreciation right for each share covered by the option was also granted. The stock appreciation right entitles the optionee to receive a supplemental payment, which may be paid in whole or in part in cash or in shares of common stock, equal to a portion of the spread between the exercise price and the fair market value of the underlying shares at the time of exercise. No options were exercised during the ~~six~~three months ended ~~June 30, 2016. All options had vested as of December~~March 31, ~~2013.~~2017.

Stock Appreciation Rights


													Wtd. Avg.
													Remaining
													Contractual	Aggregate
											Wtd. Avg.		Term	Intrinsic
Liability-Classified Stock Appreciation Rights	Shares			Wtd. Avg. Fair Value		Wtd. Avg. Remaining Contractual Term (Years)		Aggregate Intrinsic Value		Shares	Fair Value		(Years)	Value
Outstanding at January 1, 2016		18,000		$	2.64
Outstanding at January 1, 2017										11,000		1.33
Granted		—			—					—		—
Exercised		—			—					—		—
Expired		(3,000	)		—					(5,000)		—
Forfeited		—			—					—		—
Outstanding at June 30, 2016		15,000		$	1.12		1.10	$	—
Exercisable at June 30, 2016		15,000		$	1.12		1.10	$	—
Outstanding at March 31, 2017										6,000	$	1.64	0.82	$	2,617
Exercisable at March 31, 2017										6,000	$	1.64	0.82	$	2,617

No stock appreciation rights were exercised during the ~~six~~three months ended ~~June 30, 2016. All stock appreciation rights had vested as of December~~March 31, ~~2013.~~2017.

The fair value of each share option and stock appreciation right is estimated on the measurement date using the Black-Scholes option pricing model based on assumptions noted in the following table. Expected volatility is based on the historical volatility of the ~~Company~~Company’s share price and other factors. The Company has elected to use the simplified method of estimating the expected term of the options and stock appreciation rights.

Due to the small number of employees included in the 2001 Plan, the Company uses the specific identification method to estimate forfeitures and includes all participants in one group. The risk-free rate for periods within the contractual term of the share option is based on the ~~U.S.~~United States Treasury rates in effect at the time of measurement. The Company issues new, previously unissued, shares as options are exercised.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~NOTE 16. STOCK-BASED COMPENSATION (continued)~~

Following are assumptions used in determining the fair value of stock options and stock appreciation rights:


Assumptions at:	June 30, 2016			December 31, 2015			March 31, 2017		December 31, 2016
Expected Volatility		22.77	%		29.40	%	12.37	%	14.13	%
Expected Dividends		0.17	%		0.15	%	0.30	%	0.22	%
Expected Term	1.1 years			1.3 years			0.82	years	0.61	years
Risk-Free Rate		0.48	%		0.75	%	1.03	%	0.66	%

There were no stock options or stock appreciation rights granted under the 2001 Plan during the ~~six~~three months ended ~~June 30, 2016~~March 31, 2017 or ~~2015.~~2016. The liability for stock options and stock appreciation rights, valued at fair value, reflected on the consolidated balance sheets at ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, was approximately ~~$48,000~~$28,000 and ~~$136,000,~~$42,000, respectively. These fair value measurements are based on Level 2 inputs based on Black-Scholes and market implied volatility. The Black-Scholes determination of fair value is affected by variables including stock price, expected stock price volatility over the term of the awards, annual dividends, and a risk-free interest rate assumption.

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Amounts recognized in the consolidated financial statements for stock options, stock appreciation rights, and restricted stock are as follows:

Three Months Ended

Six Months Ended

June 30,
2016

June 30,
2015

June 30,
2016

June 30,
2015

Total Cost of Share-Based Plans Charged

Against Income Before Tax Effect

$
418,639

$
546,372

$
2,491,621

$
621,724

Income Tax Expense

Recognized in Income

$
(161,490
)

$
(210,763
)

$
(324,843
)

$
(239,830
)


	Three Months Ended
	March 31, 2017		March 31, 2016
Accelerated Charge for Stock-Based Compensation	$	—	$	1,649,513
Recurring Charge for Stock-Based Compensation		353,579		423,469
Total Cost of Share-Based Plans Charged Against Income Before Tax Effect	$	353,579	$	2,072,982

Income Tax Expense Recognized in Income	$	(136,393)	$	(163,353)

As described above, in January 2015, the Compensation Committee awarded to Mr. Albright 8,000 restricted shares of the Company’s common stock. In February 2015, the Compensation Committee awarded to Mr. Albright options to purchase a total of 20,000 shares of the Company’s common stock. In May 2015, in connection with the extension of Mr. Albright’s employment agreement, the Compensation Committee awarded to Mr. Albright 94,000 restricted shares of the Company’s common stock (the “May 2015 Restricted Share Grant”) and options to purchase a total of 40,000 shares of the Company’s common stock (the “May 2015 Option Grant”). Each of these awards were approved by the Company’s Board.

Upon review of the total grant awards to Mr. Albright in 2015 it was determined that the annual per person award limit under the 2010 Plan was inadvertently exceeded. In determining the extent to which the 2010 Plan’s individual annual award limit had been exceeded by the above awards, the Compensation Committee, as the administrator of the 2010 Plan, identified a conflict between Sections 3(d) and 3(e) of the 2010 Plan, the relevant provisions which provide limitations of the 2010 Plan. Section 3(d) of the 2010 Plan could be read to provide an overall limit of 50,000 shares applicable to all awards granted to a participant in any calendar year; however, the Compensation Committee could not disregard Section 3(e) of the 2010 Plan. Section 3(e) could be read to provide for two additional limits of 50,000 shares each for any (a) “Qualified Performance-Based Awards” (as defined in the 2010 Plan) constituting stock options and stock appreciation rights and (b) “Qualified Performance-Based Awards” other than stock options and stock appreciation rights. If the Compensation Committee were to determine that Section 3(e) of the 2010 Plan provides the applicable limits for two categories of “Qualified Performance-Based Awards,” then the Compensation Committee could conclude that Section 3(d) of the 2010 Plan provides the limit for awards other than Qualified Performance-Based Awards.

The Compensation Committee consulted with outside advisors and determined that it was not possible to conclude which interpretation of the 2010 Plan was conclusively correct. Pursuant to its authority to interpret the 2010 Plan, the Compensation Committee elected to comply with the limit in Section 3(d) of the 2010 Plan. As a result of applying this interpretation of the 2010 Plan, the awards granted to Mr. Albright in 2015 exceeded the 2010 Plan’s individual annual award limit by 112,000 shares of our common stock (the “Excess 2015 Awards”).

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~NOTE 16. STOCK-BASED COMPENSATION (continued)~~

On February 26, 2016, the Company notified the NYSE MKT (i) that the Excess 2015 Awards may have violated Rule 711 of the NYSE MKT Company Guide and (ii) of the Company and Mr. Albright’s intention to rectify the Excess 2015 Awards in the manner described below. On March 4, 2016, the NYSE MKT notified the Company that it would not take any action and considered the matter closed.

~~In consultation with the Board, Mr. Albright elected to rectify the Excess 2015 Awards by surrendering, in full, the~~ May 2015 Option Grant and surrendering, in part, the May 2015 Restricted Share Grant. A portion of the surrendered awards has been replaced with new awards under the 2010 Plan in 2016. Effective as of February 26, 2016, the Compensation Committee awarded Mr. Albright (i) an option to purchase an additional ~~40,000 shares of our common stock under the 2010 Plan (the “New Option Grant”) and (ii) a grant of 4,000 restricted shares of our common stock (the “New Restricted Share Grant”).~~

The New Option Grant has an exercise price per share of $55.62, which is equal to the exercise price per share applicable to the May 2015 Option Grant. This option is intended to have the same vesting terms as the May 2015 Option Grant, and as a result has vested with respect to 13,200 shares and will vest with respect to 13,200 shares and 13,600 shares on January 28, 2017 and January 28, 2018, respectively. The New Restricted Share Grant is intended to have the same vesting terms as the May 2015 Restricted Share Grant, and as a result will vest upon the price per share of Company common stock during the term of Mr. Albright’s employment (or within 60 days after termination of his employment by the Company other than for cause, due to death or disability or due to his voluntary resignation) meeting or exceeding the target trailing 30-day average closing price of $75 per share. If the restricted shares fail to satisfy the stock price condition prior to January 28, 2021, the restricted shares will be forfeited. Any unvested restricted shares will vest immediately upon Mr. Albright’s termination of employment without Cause or for his resignation for Good Reason (as such terms are defined in his amended and restated employment agreement), in each case, at any time during the 24-month period following a change in control. Mr. Albright has the right to vote the restricted shares prior to their vesting but is not entitled to dividends paid on any unvested shares. These restricted shares have not yet vested.

Because the Excess 2015 Awards exceeded the 2010 Plan limits, the grants do not qualify, for purposes of calculating the Code Section 162(m) compensation for Mr. Albright for tax purposes, as performance-based awards.

As noted herein, 112,000 shares of the awards granted to Mr. Albright in 2015 exceeded the limits of the 2010 Plan. However, when granted these shares were issued and outstanding as of their grant date and all legal requirements for their issuance under Florida law and the Company’s organizational documents were fulfilled and Mr. Albright’s ability to enforce his rights to such grants could not be negated or otherwise impaired. All requirements under ASC 718-10-20 were met, including a mutual understanding of the key terms and conditions of the awards, the company was contingently liable to issue the awards, and all required approvals for the awards to be legally issued and outstanding were obtained as of the grant date. Consequently, the 112,000 shares were deemed appropriately reflected as stock compensation expense as of the year ended December 31, 2015.

Effective as of February 26, 2016, the Company entered into amendments to the employment agreements and certain restricted share award agreements of Messrs. Albright, Patten, and Smith to clarify the Company’s intention that the restricted shares granted thereunder, if they are subject to performance-based vesting conditions, will fully vest upon the executive’s termination of employment without cause or his resignation for good reason (as such terms are defined in his employment agreement), in each case, at any time during the 24-month period following a change in control. There was no impact to the valuation established at the original date of grant of the modification of the restricted share award agreements of Messrs. Albright, Patten, and Smith.

NOTE 17. INCOME TAXES

The Company’s effective income tax rate was ~~52.1%~~38.7% and ~~39.2%~~62.2% for the ~~six~~three months ended ~~June 30,~~March 31, 2017 and 2016, ~~and 2015,~~ respectively. The provision for income taxes reflects the Company’s estimate of the effective rate expected to be applicable for the full fiscal year, adjusted for any discrete events, which are reported in the period that they occur. During the first quarter of 2016, 68,000 shares of restricted Company common stock were permanently surrendered, which constituted a discrete event in which the total related stock compensation expense charged to earnings under GAAP of approximately $2.3 million, of which approximately $1.6 million was recognized during the first quarter of 2016 and approximately $676,000 was recognized during the year ended December 31, 2015, became permanently non-deductible for tax purposes as the surrendered shares will not vest. Accordingly, no income tax benefit was recorded related to the approximately $2.3 million of stock compensation expense.

The Company files a consolidated income tax return in the United States Federal jurisdiction and the ~~States~~states of Arizona, Colorado, California, Florida, Illinois, Georgia, Maryland, North Carolina, Texas, and Washington. The Internal Revenue Service has audited the federal tax returns through the year 2012, with all proposed adjustments settled. The Florida Department of Revenue has audited the Florida tax returns through the year 2014, with all proposed adjustments settled. The Company recognizes all potential accrued interest and penalties to unrecognized tax benefits in income tax expense.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

NOTE 18. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time, the Company may be a party to certain legal proceedings, incidental to the normal course of its business. While the outcome of the legal proceedings cannot be predicted with certainty, the Company does not expect that these proceedings will have a material effect upon our financial condition or results of operations.

On November 21, 2011, the Company, Indigo Mallard Creek LLC and Indigo Development LLC, as owners of the property leased to Harris Teeter, Inc. (“Harris Teeter”) in Charlotte, North Carolina, were served with pleadings filed in the General Court of Justice, Superior Court Division for Mecklenburg County, North Carolina, for a highway condemnation action involving ~~the~~this property. The proposed road modifications would impact access to the ~~Company’s property that is leased to Harris Teeter.~~property. The Company does not believe the road modifications provided a basis for Harris Teeter to terminate the Lease. Regardless, in January 2013, the North Carolina Department of Transportation (“NCDOT”) proposed to redesign the road modifications to keep the all access intersection open for ingress with no change to the planned limitation on egress to the right-in/right-out only. Additionally, NCDOT and the City of Charlotte proposed to build and maintain a new access road/point into the property. Construction has ~~begun.~~begun and is not expected to be completed before the second quarter of 2017. Harris Teeter has expressed satisfaction with the redesigned project and indicated that it will not attempt to terminate its lease if this project is built as currently redesigned. Because the redesigned project will not be completed until late 2017 to mid-2018, the condemnation case has been placed in administrative closure. As a result, the trial and mediation will not likely be scheduled until requested by the parties, most likely in ~~2017.~~late 2018.

Table of Contents

Although the Company’s Board of Directors believed that the Wintergreen Complaint had no legal merit, on March 6, 2017, the Company’s Board of Directors approved the Company’s entering into a Settlement Agreement. Pursuant to the terms of the Settlement Agreement, Wintergreen’s nominees may stand for election at the 2017 Annual Meeting and the Company agreed not to amend its Bylaws prior to the 2017 Annual Meeting. The Wintergreen Complaint was voluntarily dismissed on April 4, 2017.

Contractual Commitments – Expenditures

In conjunction with the Company’s sale of approximately 3.4 acres of land to RaceTrac ~~Petroleum, Inc. (“RaceTrac”)~~ in December 2013, the Company agreed to reimburse RaceTrac for a portion of the costs for road improvements and the other costs associated with bringing multiple ingress/egress points to the entire ~~approximately 23 acre~~23-acre Williamson Crossing site, including the Company’s remaining ~~approximately~~ 19.6 acres. The estimated cost for the improvements equals approximately $1.26 million and the Company’s commitment is to reimburse RaceTrac in an amount equal to the lesser of 77.5% of the actual costs or ~~$976,500, and~~$976,500. The Company’s commitment to fund the improvement costs benefiting the remaining acres of Company land can be paid over five years from sales of the remaining land or at the end of the fifth year. ~~During the year ended December 31,~~In 2013 the Company deposited $283,500 of cash in escrow related to the improvements, which is classified as restricted cash in the consolidated balance sheets. The total amount in escrow as of ~~June 30, 2016~~March 31, 2017 was approximately ~~$286,000,~~$287,000, including accrued interest. Accordingly, as of ~~June 30, 2016,~~March 31, 2017, the remaining maximum commitment is approximately ~~$691,000.~~

In connection with the acquisition of the Lowes on April 22, 2014, the Company was credited approximately $651,000 at closing for certain required tenant improvements, some of which are not required to be completed until December 2016. As of June 30, 2016, $100,000 of these tenant improvements had been completed and funded, leaving approximately $551,000 remaining to be funded as of June 30, 2016.$690,000.

In conjunction with the Company’s sale of approximately 98.69 acres within the Town Center, the Company is obligated to complete certain infrastructure improvements, including, but not limited to, the addition or expansion of roads and underlying utilities, and storm water retention (the “Infrastructure Work”). The Company entered into a construction agreement for approximately $9.1 million, including change orders through June 30, 2016, for the substantial portion of the Infrastructure Work. Approximately $7.0 million of the costs under this agreement have been incurred through June 30, 2016 and therefore, the remaining maximum commitment as of June 30, 2016 under this agreement is approximately $2.1 million. The anticipated completion for the Infrastructure Work is in or around October 2016.

~~In conjunction with the Company’s sale of approximately 18.10~~18.1 acres of land to an affiliate of Sam’s Club (“Sam’s”) in December 2015, the Company agreed to reimburse Sam’s for a portion of their construction costs applicable to adjacent outparcels retained by the Company. As a result, in December 2015, the Company deposited $125,000 of cash in escrow related to construction work which is classified as restricted cash in the consolidated balance sheets. The total amount in escrow as of ~~June 30, 2016~~March 31, 2017 was approximately $125,000, including accrued interest. Accordingly, the Company’s maximum commitment related to the construction work benefitting the outparcels adjacent to Sam’s land parcel is approximately $125,000, to be paid from escrow upon completion.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~NOTE 18. COMMITMENTS AND CONTINGENCIES (continued)~~

In conjunction with the Company’s sale of approximately ~~14.98~~15.0 acres of land to an affiliate of Integra Land Company (“Integra”) in December 2015, the Company agreed to reimburse Integra approximately $276,000 for a portion of the costs for road access and related utility improvements that will benefit the ~~14.98~~15.0 acre land parcel sold to Integra as well as the surrounding acreage still owned by the Company. The Company also agreed to reimburse Integra approximately $94,000 for site relocation costs. Accordingly, in December 2015, the Company deposited a combined $370,000 of cash in escrow related to these reimbursements, which ~~are~~was classified as restricted cash in the consolidated balance sheets. ~~During~~As of March 31, 2017, the ~~six months ended June 30, 2016, approximately $277,000 was~~entire $370,000 had been disbursed from the escrow account. Accordingly, as of ~~June 30, 2016,~~March 31, 2017, there is no remaining commitment.

In conjunction with the Company’s ~~maximum remaining commitment related~~January 2017 Golf Course Land Purchase, the Company agreed to ~~these reimbursements~~renovate the greens on the Jones course within one year of the agreement. The Company expects to incur the cost of this renovation, which is estimated between approximately ~~$93,000~~$200,000 and $300,000, prior to ~~be paid from escrow as costs are incurred.~~the fourth quarter of 2017.

Contractual Commitments – Land Pipeline

As of ~~July 29, 2016,~~May 8, 2017, the ~~Company had executed ten~~Company’s pipeline of potential land sales transactions included the following eight definitive purchase and sale agreements with eight different buyers, ~~whose intended use for the land under contract includes residential (including multi-family), retail and mixed-use retail, and office. These agreements, in aggregate, represent the potential sale of~~representing approximately ~~4,100 acres, or 39%~~26% of our land ~~holdings, with anticipated sales proceeds totaling approximately $103 million, or an average~~holdings:


			Contract
		No. of	Amount		Price		Estimated
	Contract (or Buyer) / Parcel	Acres	($000's)		per Acre		Timing
1	Commercial/Retail - Buc'ees (1)	35	$	14,000	$	400,000	'18 - '19
2	Commercial/Retail	9		2,700		300,000	'18 - '19
3	Commercial/Retail	22		5,574		253,000	'17 - '18
4	Mixed-Use Retail (NADG)	82		20,187		246,000	'17 - '18
5	Commercial/Retail - Option Parcel	13		2,032		156,000	'17
6	Minto II (AR Residential)	1,686		31,360		19,000	'18 - '19
7	Residential (SF)	129		2,750		21,000	'18 - '19
8	ICI (SF) - Option Parcel	146		1,400		10,000	'18 - '19
	Total (Average)	2,122	$	80,003	$	38,000

⁽¹⁾

Contract amount and price per acre may be reduced by potential costs incurred for wetlands mitigation, if any.

Table of ~~approximately $25,000 per acre. All of~~Contents

As noted above, these agreements contemplate closing dates ranging from the ~~third~~second quarter of ~~2016~~2017 through ~~2018, and the~~fiscal year 2019. The Company expects some of the transactions to close in ~~2016,~~2017, although some of the buyers are not contractually obligated to close until after ~~2016.~~2017. Each of the transactions are in varying stages of due diligence by the various buyers including, in some instances, having made submissions to the planning and development departments of the City of Daytona Beach, and other permitting activities with other applicable governmental authorities. In addition to other customary closing conditions, the majority of these transactions are conditioned upon the receipt of approvals or permits from those various governmental authorities, as well as other matters that are beyond our control. If such approvals are not obtained, the prospective buyers may have the ability to terminate their respective agreements prior to closing. As a result, there can be no assurances regarding the likelihood or timing of any one of these potential land transactions being completed or the final terms thereof, including the sales price.

~~Minto Communities~~

One of the definitive purchase and sale agreements is with an affiliate of Minto Communities for Minto’s development of a 3,400-unit master planned age restricted residential community on an approximately 1,600-acre parcel of the Company’s land holdings west of Interstate 95. Minto received zoning and entitlement approvals from the City of Daytona Beach, Florida in April 2016 for the 3,400 residential units and approximately 215,000 square feet of commercial space. In addition, the contract with Minto currently contemplates the Company would provide seller financing for a portion of the sales price (the “Minto Note”). The Company anticipates utilizing the proceeds from the transaction in a 1031 like-kind exchange and therefore would be required to sell the Minto Note prior to the completion of the 1031 exchange which could be up to 180 days after the closing of the transaction with Minto. With the Company having resolved certain regulatory matters related to the Company’s prior agricultural activities on the land that includes the property under contract with Minto, and with Minto’s filing of its permit application with the U.S. Army Corps of Engineers (the “ACOE”), the Company now expects this transaction to close in late 2016 subject to Minto’s receipt of their permit from the ACOE.

~~Tomoka Town Center~~

The NADG First Parcel and Outparcel sales represent the first two of multiple transactions contemplated under the NADG Agreement. The NADG Agreement provides NADG with the ability to acquire the Remaining Option Parcels during the Option Period. The Remaining Option Parcels represent a total of approximately 81.55 acres and total potential proceeds to the Company of approximately $20.2 million, or approximately $248,000 per acre. Pursuant to the NADG Agreement, NADG can close on any or all of the Remaining Option Parcels at any time during the Option Period, should certain conditions be met. The NADG Agreement also establishes a price escalation percentage that would be applied to any of the Remaining Option Parcels that are acquired after January 2017, and an additional price escalation percentage that would be applied to any Remaining Option Parcels acquired in 2018.

Other Matters

In connection with a certain land sale contract to which the Company is a party, the purchaser’s pursuit of customary development entitlements gave rise to an inquiry by federal regulatory agencies regarding prior agricultural activities by the Company on such land. During the second quarter of 2015, we received a written information request regarding such activities. We submitted a written response to the information request along with supporting documentation. We believe the issues raised by, and the land which was the subject of, this inquiry are similar to or the same as those which were addressed and resolved by the settlement agreement executed in December 2012 between the Company and the St. Johns River Water Management District (the “District”) and the permit which the District subsequently issued to the Company. During the fourth quarter of 2015, based on discussions with the agency, a penalty related to this matter was deemed probable, and accordingly the estimated penalty of $187,500 ~~has been~~was accrued as of December 31, 2015, ~~with no adjustment to that accrual being~~for which payment was made during the ~~six months~~quarter ended ~~June~~September 30, 2016. Also during the fourth quarter of 2015, the agency advised the Company that the resolution to the inquiry would likely require the Company to incur costs associated

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~NOTE 18. COMMITMENTS AND CONTINGENCIES (continued)~~

with wetlands restoration relating to approximately ~~148.35~~148.4 acres of the Company’s land. At December 31, 2015, the Company’s third-party environmental engineers estimated the cost for such restoration activities to range from approximately $1.7 million to approximately $1.9 million. Accordingly, as of December 31, 2015, the Company accrued an obligation of approximately $1.7 million, representing the low end of the estimated range of possible restoration costs, and included such estimated costs on the consolidated balance sheets as an increase in the basis of our land and development costs associated with those and benefitting surrounding acres. As of June 30, 2016, the final proposal from the Company’s third-party environmental engineer was received ~~for~~reflecting a total cost of approximately $2.0 million. Accordingly, an increase in the accrual of approximately $300,000 was made during the ~~three months ended June 30,~~second quarter of 2016. The Company has funded approximately ~~$590,000~~$1.0 million of the total $2.0 million of estimated costs ~~during the three months ended June 30, 2016.~~through March 31, 2017. The Company believes there is at least a reasonable possibility that the estimated remaining liability of approximately ~~$1.4~~$1.0 million could change within one year of the date of the consolidated financial statements, which in turn could have a material impact on the Company’s consolidated balance sheets and future cash flows. The Company evaluates its estimates on an ongoing basis; however, actual results may differ from those estimates. During the first quarter of 2017, the Company completed the sale of approximately 1,581 acres of land to Minto Communities LLC which acreage represents a portion of the Company’s remaining $1.0 million obligation. Accordingly, the Company deposited $423,000 of cash in escrow to secure performance on the obligation. The funds in escrow can be drawn upon completion of certain milestones including completion of restoration and annual required monitoring. Additionally, resolution of the regulatory matter required the Company to apply for an additional permit pertaining to an additional approximately 54.66 acres, which permit may require mitigation activities which the Company anticipates could be satisfied through the utilization of existing mitigation credits owned by the Company or the acquisition of mitigation credits. ~~The Company anticipates that resolution~~Resolution of this matter ~~will allow~~allowed the Company to obtain certain permits from the applicable federal or state regulatory agencies needed in connection with the closing of the land sale contract that gave rise to this matter. The number of mitigation credits that may be required is not currently estimable and as the utilization or purchase of such credits would be incorporated into the basis of the land under contract, no amounts related to mitigation credits have been accrued as of ~~June 30, 2016.~~March 31, 2017. In addition, in connection with other land sale contracts to which the Company is or may become a party, the pursuit of customary development entitlements by the potential purchasers may require the Company to utilize or acquire mitigation credits for the purpose of obtaining certain permits from the applicable federal or state regulatory agencies. Any costs incurred in connection with utilizing or acquiring such credits would be incorporated into the basis of the land under contract and, accordingly, no amounts related to such potential future costs have been accrued as of ~~June 30, 2016.~~March 31, 2017.

Du~~ring~~ theDuring the period from the fourth qu~~arter of 2~~015 a~~nd the fi~~rst quarter of ~~201~~6,2015 through the Com~~pany rece~~ived comm~~unicat~~i~~ons~~first quarter of 2017, the Company received communications from a single institutional shareholder, some of which have been filed publicly. In investigating the shareholder’s allegations contained in certain communications, pursuing the strategic alternatives process suggested by the shareholder, and engaging in a proxy contest, the Company has incurred costs of approximately ~~$1.3~~$2.4 million, to date, through ~~June 30, 2016~~March 31, 2017. Approximately $936,000 of ~~which~~the approximately ~~$1.2~~$2.4 million was incurred during the ~~six~~three months ended ~~June 30, 2016,~~March 31, 2017, of which approximately $563,000 is specifically for legal representation ~~accounting services, additional director~~ and ~~committee meeting fees, or other~~ third party ~~costs.~~

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costs related to the proxy contest. To date, none of the shareholder’s allegations regarding inadequate disclosure or other wrong-doings by the Company or its directors or officers have been found to have any basis or merit; however, such costs could continue to be incurred and, while not reasonably estimable, may represent significant costs for for the Comp~~any~~ wh~~ich w~~o~~uld h~~ave an adve~~rse i~~m~~pact~~Company which would have an adverse impact on the Company~~’s re~~su~~lts~~the Company’s results of op~~eratio~~nsoperations and cash flows.

NOTE 19. BUSINESS SEGMENT DATA

The Company operates in four primary business segments: income properties, commercial loan investments, real estate operations, and golf operations. Our income property operations consist primarily of income-producing properties, and our business plan is focused on investing in additional income-producing properties. Our income property operations accounted for ~~66.8%~~78.0% and ~~68.6%~~74.1% of our identifiable assets as of ~~June 30, 2016~~March 31, 2017 and December 31, ~~2015,~~2016, respectively, and ~~39.9%~~18.3% and ~~56.3%~~35.0% of our consolidated revenues for the ~~six~~three months ended ~~June 30,~~March 31, 2017 and 2016, ~~and 2015,~~ respectively. As of ~~June 30, 2016,~~March 31, 2017, we ~~had~~have three commercial loan investments including one fixed-rate and one variable-rate mezzanine commercial mortgage loan and a variable-rate B-Note representing a secondary tranche in a commercial mortgage loan. Our real estate operations primarily consist of revenues generated from land transactions and leasing, royalty income, and revenue from the release of surface entry rights from our subsurface interests. Our golf operations consist of a single property located in the City, with two 18-hole championship golf courses, a practice facility, and clubhouse facilities, including a restaurant and bar operation, fitness facility, and pro-shop with retail merchandise. The majority of the revenues generated by our golf operations are derived from members and public customers playing golf, club memberships, and food and beverage operations.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~NOTE 19. BUSINESS SEGMENT DATA (continued)~~

The Company ~~evaluates~~reports performance based on profit or loss from operations before income taxes. The Company’s reportable segments are strategic business units that offer different products. They are managed separately because each segment requires different management techniques, knowledge, and skills.

Information about the Company’s operations in the different segments for the three ~~and six~~ months ended ~~June 30,~~March 31, 2017 and 2016 ~~and 2015~~ is as follows:


	Three Months Ended						Six Months Ended						Three Months Ended
	June 30, 2016			June 30, 2015			June 30, 2016			June 30, 2015			March 31, 2017		March 31, 2016
Revenues:
Income Properties	$	6,033,082		$	4,132,052		$	12,462,323		$	8,392,727		$	7,073,240	$	6,429,241
Commercial Loan Investments		635,050			638,710			1,516,295			1,270,194			536,489		881,245
Real Estate Operations		4,774,620			1,368,141			14,335,518			2,227,942			29,474,460		9,560,898
Golf Operations		1,412,196			1,448,567			2,876,555			2,985,993			1,474,944		1,464,359
Agriculture and Other Income		18,990			20,738			37,682			39,677			154,151		18,692
Total Revenues	$	12,873,938		$	7,608,208		$	31,228,373		$	14,916,533		$	38,713,284	$	18,354,435
Operating Income:
Income Properties	$	4,829,042		$	3,449,165		$	10,081,576		$	7,068,994		$	5,661,527	$	5,252,534
Commercial Loan Investments		635,050			638,710			1,516,295			1,270,194			536,489		881,245
Real Estate Operations		3,649,979			1,062,288			10,953,836			1,323,366			20,317,611		7,303,857
Golf Operations		(34,980	)		(7,665	)		24,791			140,149			(23,734)		59,771
Agriculture and Other Income		(33,664	)		(22,457	)		(63,023	)		(58,669	)		113,714		(29,359)
General and Corporate Expense		(4,312,559	)		(2,933,880	)		(11,387,291	)		(6,063,986	)		(3,756,196)		(7,074,732)
Total Operating Income	$	4,732,868		$	2,186,161		$	11,126,184		$	3,680,048		$	22,849,411	$	6,393,316
Depreciation and Amortization:
Income Properties	$	1,724,573		$	992,172		$	3,705,623		$	2,077,809		$	2,686,312	$	1,981,050
Golf Operations		68,619			67,130			137,268			125,906			65,367		68,649
Agriculture and Other		12,367			12,450			30,035			23,776			10,896		17,668
Total Depreciation and Amortization	$	1,805,559		$	1,071,752		$	3,872,926		$	2,227,491		$	2,762,575	$	2,067,367
Capital Expenditures:
Income Properties	$	122,260		$	9,959,693		$	2,918,580		$	10,013,957		$	21,937,532	$	2,730,714
Commercial Loan Investments		—			733,083			—			894,879
Golf Operations		13,161			90,400			13,161			106,417			1,607,742		—
Agriculture and Other		—			2,334			15,867			13,406			12,083		15,867
Total Capital Expenditures	$	135,421		$	10,785,510		$	2,947,608		$	11,028,659		$	23,557,357	$	2,746,581

As of

June 30,
2016

December 31,
2015

Identifiable Assets:

Income Properties

$
258,494,674

$
277,519,902

Commercial Loan Investments

24,076,474

38,487,119

Real Estate Operations

65,252,380

59,787,157

Golf Operations

3,257,527

3,607,259

Agriculture and Other

36,049,083

24,952,207

Total Assets

$
387,130,138

$
404,353,644

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	As of
	March 31, 2017		December 31, 2016
Identifiable Assets:
Income Properties	$	323,512,072	$	302,757,565
Commercial Loan Investments		24,034,727		24,032,885
Real Estate Operations		49,157,129		58,868,298
Golf Operations		5,852,607		3,675,842
Agriculture and Other		12,384,525		19,288,836
Total Assets	$	414,941,060	$	408,623,426

Operating income represents income from continuing operations before loss on early extinguishment of debt, interest expense, investment income, and income taxes. General and corporate expenses are an aggregate of general and administrative expenses, impairment charges, depreciation and amortization expense, land lease termination, and gains (losses) on the disposition of assets. Identifiable assets by segment are those assets that are used in the Company’s operations in each segment. Other assets consist primarily of cash, property, plant, and equipment related to the other operations, as well as the general and corporate operations.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

NOTE 20. RECENTLY ISSUED ACCOUNTING POLICIES

In May 2014, the FASB issued ASU 2014-09, which amends its guidance on the recognition and reporting of revenue from contracts with customers. The amendments in this update are effective for annual reporting periods beginning after December 15, ~~2018.~~2017. The Company is currently evaluating the provisions ~~to determine the potential impact, if any, the adoption~~and has determined that ASU 2014-09 will have little to no impact on ~~its~~the Company’s consolidated financial statements. The Company plans to implement ASU 2014-09 effective January 1, ~~2019.~~

In April 2015, the FASB issued ASU 2015-03, related to simplifying the presentation of debt issuance costs. The amendments in this update are effective for annual reporting periods beginning after December 15, 2015. The amendment requires entities to present debt issuance costs related to a recognized debt liability as a direct deduction from the carrying amount of the debt liability, whereas previously, debt issuance costs were presented as a deferred charge in the asset section of the balance sheet. The Company has adopted ASU 2015-03 effective January 1, 2016. The amount of unamortized debt issuance costs as of December 31, 2015 that were reclassified to be included as a direct deduction from the carrying amount of the debt liability was approximately $1.7 million.2018.

In January 2016, the FASB issued ASU 2016-01, relating to the recognition and measurement of financial assets and financial liabilities. The amendments in this update are effective for annual reporting periods beginning after December 15, 2017. The Company is currently evaluating the provisions to determine the potential impact, if any, the adoption will have on its consolidated financial statements. The Company plans to implement ASU 2016-01 effective January 1, 2018.

In February 2016, the FASB issued ASU 2016-02, which requires entities to recognize assets and liabilities that arise from financing and operating leases and to classify those finance and operating lease payments in the financing or operating sections, respectively, of the statement of cash flows. The amendments in this update are effective for annual reporting periods beginning after December 15, 2018. The Company is currently evaluating the provisions to determine the potential impact, if any, the adoption will have on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, which amends certain aspects of the stock-based compensation guidance. The amendments in this update are effective for annual reporting periods beginning after December 15, 2016. The Company adopted ASU 2016-09 effective January 1, 2017.

In August 2016, the FASB issued ASU 2016-15, which clarifies the appropriate classification of certain cash receipts and payments in the statement of cash flows. The amendments in this update are effective for annual reporting periods beginning after December 15, 2017. The Company is currently evaluating the provisions to determine the potential impact, if any, the adoption will have on its consolidated ~~financial statements.~~statements of cash flows. The Company plans to implement ASU ~~2016-09~~2016-15 effective January 1, ~~2017.~~2018.

~~NOTE 21. VARIABLE INTEREST ENTITY~~

~~During~~In November 2016, the ~~year ended December 31, 2015,~~FASB issued ASU 2016-18, which addresses diversity in the ~~Company entered into a real estate venture with an unaffiliated third party institutional investor, whereby~~classification and presentation of changes in restricted cash in the ~~venture acquired approximately six acres~~statement of ~~vacant beachfront property located in Daytona Beach, Florida.~~cash flows as operating, investing, or financing activities. The Company ~~acquired~~is currently evaluating the provisions to determine the potential impact, if any, the adoption will have on its ~~50% interest~~consolidated statements of cash flows. The amendments in ~~the real estate venture~~this update are effective for ~~approximately $5.7 million and serves as its general partner with day-to-day management responsibilities.~~annual reporting periods beginning after December 15, 2017. The ~~venture is structured such that the~~ Company ~~earns a base management fee~~plans to implement ASU 2016-18 effective January 1, 2018 and will ~~receive a preferred interest as well as a promoted interest if certain return hurdles are achieved. The Company’s preferred interest represents~~classify the ~~first 9% of the investment return achieved at the disposition of the property. GAAP requires consolidation of a variable interest entity (“VIE”)~~changes in ~~which an enterprise has a controlling financial interest~~restricted cash between operating, investing, and is the primary beneficiary. Upon entering into the venture described above and as of June 30, 2016, the Company determined it has a controlling financial interest and is the primary beneficiary; therefore, the venture is a VIE and has been consolidated in the Company’s financial statements.

As of June 30, 2016, the VIE has one asset totaling $11,484,560 consisting of the six acre vacant beachfront property. During the year ended December 31, 2015, the Company contributed 50%, or $5,664,787, to the VIE for the initial property acquisition, with the other 50% contributed by the noncontrolling interestfinancing in the consolidated ~~VIE. This consolidated venture has been accounted for in real estate operations with~~statements of cash flows as applicable per the ~~inter-company management fees totaling approximately $12,000 during the six months ended June 30, 2016, eliminated upon consolidation.~~new guidance.

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NOTE ~~22.~~21. SUBSEQUENT EVENTS

On April 5, ~~2016,~~2017, the Company ~~entered into~~completed the sale of approximately 28 acres of land to an affiliate of VanTrust for approximately $3.2 million, or approximately $117,000 per acre, resulting in an estimated gain of approximately $3.0 million, or $0.32 per share, after tax. On April 6, 2017, the Company utilized the majority of the proceeds from this sale to acquire a ~~15-year~~replacement asset, as described below, through the 1031 like-kind exchange structure with approximately $900,000 remaining to be utilized to acquire another replacement asset.

On April 6, 2017, the Company acquired an approximately 22,500 square-foot retail building in the metropolitan Boston, Massachusetts area at a purchase price of $6.3 million. The property is situated on approximately 2.6 acres and is 100% leased to Jo-Ann Stores, Inc. under a triple-net lease with a ~~national fitness center for the anchor space~~remaining term at ~~The Grove at Winter Park located in Winter Park, Florida. The lease is for~~acquisition of approximately ~~40,000 square feet, or 36%~~12 years. As a result of the approximately 112,000 square foot multi-tenant retail center. On July 6, 2016, the Company funded approximately $4.0 million into an escrow account for customary tenant improvements for the fitness center, which could open as early as the fourth quarter of 2016. The tenant will draw funding from escrow as construction progresses.

~~Under the $10 million stock repurchase program, subsequent to June 30, 2016 through July 28, 2016,~~this acquisition, the Company has ~~repurchased 8,611 shares~~re-invested 100% of ~~its common stock on~~ the ~~open market for a total cost~~proceeds from the Minto sale utilizing the 1031 like-kind exchange structure.

On April 13, 2017, the Company completed the sale of approximately ~~$417,000,~~4.5 acres of land for approximately $1.2 million, or approximately $274,000 per acre.

On April 25, 2017, the Company completed the sale of approximately 30 acres of land for approximately $2.9 million, or approximately $98,000 per acre, resulting in an ~~average price~~estimated gain of approximately $622,000, or $0.07 per share, ~~of $48.48, and placed those shares in treasury.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~

~~NOTE 22. SUBSEQUENT EVENTS (continued)~~after tax.

On ~~July 20, 2016,~~April 28, 2017, the ~~Company’s Board of Directors approved the implementation of a quarterly dividend effective~~Company acquired an approximately 45,000 square-foot single-tenant retail building and an approximately 6,715 square-foot, multi-tenant building in the ~~third quarter~~metropolitan Tampa, Florida area at a purchase price of ~~2016 in place~~approximately $14.7 million. The buildings are situated on approximately 5.3 acres. The single-tenant building is 100% leased to LA Fitness and the multi-tenant building is 100% leased to two tenants, with a weighted average remaining term at acquisition of ~~the present semi-annual dividend. The Board~~approximately 14 years.

Table of Directors declared a quarterly dividend of $0.04 for shareholders of record on August 10, 2016, to be paid on August 30, 2016, representing an annualized dividend of $0.16 per share, which would be a 100% increase over our present $0.08 per share annual dividend. The payment of the quarterly dividend is expected to impact the conversion rate applicable to the Notes pursuant to the terms and conditions thereof. Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

When the Company uses any of the words “anticipate,” “assume,” “believe,” “estimate,” “expect,” “intend,” or similar expressions, the Company is making forward-looking statements. Although management believes that the expectations reflected in such forward-looking statements are based upon present expectations and reasonable assumptions, the Company’s actual results could differ materially from those set forth in the forward-looking statements. Certain factors that could cause actual results or events to differ materially from those the Company anticipates or projects are described in “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K, for year ended December 31, ~~2015.~~2016. Given these uncertainties, readers are cautioned not to place undue reliance on such statements, which speak only as of the date of this Quarterly Report on Form 10-Q or any document incorporated herein by reference. The Company undertakes no obligation to publicly release any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q, or the aforementioned risk factors. The terms “us,” “we,” “our,” and “the Company” as used in this report refer to Consolidated-Tomoka Land Co. together with our consolidated subsidiaries.

OVERVIEW

Income Property Operations. We have pursued a strategy of investing in income-producing properties, when possible by utilizing the proceeds from real estate transactions qualifying for income tax deferral through like-kind exchange treatment for tax purposes.

During the ~~six~~three months ended ~~June 30, 2016,~~March 31, 2017, the Company acquired one single-tenant income property and one multi-tenant income property, for an ~~acquisition cost~~aggregate purchase price of approximately ~~$2.5~~$19.1 million.

Our current portfolio of ~~twenty-nine~~twenty-two single-tenant income properties generates approximately ~~$13.4~~$13.5 million of revenues from lease payments on an annualized basis and had an average remaining lease term of ~~9.5~~9.1 years as of ~~June 30, 2016.~~March 31, 2017. Our current portfolio of ~~eight~~eleven multi-tenant properties generates approximately ~~$5.7~~$9.9 million of revenue from lease payments on an annualized basis and has a weighted average remaining lease term of ~~5.6~~5.2 years as of ~~June 30, 2016.~~March 31, 2017. We expect to continue to focus on acquiring additional income-producing properties during fiscal year ~~2016,~~2017, and in the near term thereafter, maintaining our use of the aforementioned tax deferral structure whenever possible.

As part of our overall strategy for investing in income-producing investments, we have self-developed five of our multi-tenant properties which are located in Daytona Beach, ~~Florida.~~Florida, four of which we still own as of March 31, 2017. The first self-developed property, located at the northeast corner of LPGA and Williamson Boulevards in Daytona Beach, Florida, is an approximately 22,000 square foot, two-story, building, known as the Concierge Office Building, which was 100% leased as of ~~June 30, 2016.~~March 31, 2017. The second two properties, known as the Mason Commerce Center, consists of two buildings totaling approximately 31,000 square-feet (15,360 each), which ~~was~~were 100% leased as of ~~June 30, 2016.~~March 31, 2017. During the year ended December 31, 2014, construction was completed on two additional properties, known as the Williamson Business Park, which are adjacent to the Mason Commerce Center. ~~Williamson Business Park consists of two buildings totaling approximately 31,000 square-feet (15,360 each).~~ One of the two ~~buildings in the~~15,360 square-foot Williamson Business Park buildings was sold onin April ~~22, 2016 for a gain of approximately $822,000.~~2016. The remaining Williamson Business Park building was approximately 50% leased as of ~~June 30, 2016.~~March 31, 2017. Of the ~~eight~~eleven multi-tenant properties owned as of ~~June 30, 2016,~~March 31, 2017, four were self-developed.

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Our focus on acquiring income-producing investments includes a continual review of our existing income property portfolio to identify opportunities to recycle our capital through the sale of income properties based on, among other possible factors, the current or expected performance of the property and favorable market conditions. ~~Pursuant to our on-going review, four~~No income-producing properties were ~~sold during the six months ended June 30, 2016. Another single-tenant property in Altamonte Springs, Florida leased to PNC Bank is under contract for sale as~~disposed of ~~June 30, 2016 (the “PNC Sale”), for which an impairment charge of approximately $942,000 was recognized~~ during the three months ended June 30, 2016. In addition, fourteen properties as described below are classified as held for sale. The Company intends to use the proceeds from the sale of its non-core income-producing properties to make future investments in income-producing assets, utilizing the tax-deferred like-kind exchange structure, as circumstances permit.

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~March 31, 2017.

Real Estate Operations. As of ~~June 30, 2016,~~March 31, 2017, the Company owned approximately ~~10,500~~8,200 acres of undeveloped land in Daytona Beach, Florida, along six miles of the west and east ~~sides~~side of Interstate 95. ~~Presently,~~Currently, the majority of this land is used for agricultural purposes. Approximately ~~1,200~~1,100 acres of our land holdings are located on the east side of Interstate 95 and are generally well suited for commercial development. Approximately ~~8,300~~7,100 acres of our land holdings are located on the west side of Interstate 95 and the majority of this land is generally well suited for residential development. Included in the western land is approximately ~~1,000~~1,100 acres which are located further west of Interstate 95 and a few miles north of Interstate 4 ~~which~~and this land is generally well suited for industrial purposes. ~~Beginning in 2012, we have observed an increase in residential and commercial real~~

Real estate ~~activity in~~operations revenue consisted of the ~~area surrounding our land holdings.~~

~~During~~following for the ~~six~~three months ended ~~June 30,~~March 31, 2017 and 2016, the Company sold approximately 7.46 acres of land for approximately $2.2 million for total gains of approximately $1.4 million. In addition, gains totaling approximately $3.0 million and $8.8 million were recognized during the three and six months ended June 30, 2016, respectively, for the sales within the 235-acrerespectively:


	Three Months Ended March 31, 2017		Three Months Ended March 31, 2016
Revenue Description	($000's)		($000's)
Land Sales Revenue	$	28,707	$	190
Tomoka Town Center - Percentage of Completion Revenue		—		8,958
Revenue from Reimbursement of Infrastructure Costs		320		—
Impact Fee and Mitigation Credit Sales		217		105
Subsurface Revenue		230		308
Total Real Estate Operations Revenue	$	29,474	$	9,561

The Tomoka Town Center consists of approximately 235 acres of which approximately 180 acres are developable. Land sales with a gross sales price totaling approximately $21.4 million within the Tomoka Town Center consisted of sales of approximately 99 acres to Tanger, Sam’s Club, and North American Development Group (“NADG”) in 2015 and 2016 (the ~~“Town Center”~~“Tomoka Town Center Sales Agreements”) ~~which closed during~~. The remaining developable acreage of approximately 82 acres is currently under contract with NADG as described in the land pipeline in Note 18, “Commitment and Contingencies.” The Company performed certain infrastructure work, beginning in the fourth quarter of 2015 ~~and first~~through completion in the fourth quarter of 2016, ~~for~~ which ~~revenue is being~~required the sales price on the Tomoka Town Center Sales Agreements to be recognized on the percentage-of-completion ~~basis~~basis. All revenue related to the Tomoka Town Center Sales Agreements had been recognized as ~~related~~of December 31, 2016. The timing of the reimbursements of the remaining infrastructure ~~costs are incurred.~~worth approximately $2.4 million is more fully described in Note 9, “Other Assets.”

Land Sales. During the three months ended March 31, 2017, a total of approximately 1,587.4 acres were sold for approximately $28.7 million as described below:


					Gross Sales				Gain
			Date of	No. of	Price		Price		on Sale
	Buyer (or Description)	Location	Sale	Acres	($000's)		per Acre		($000's)
1	Minto Communities, LLC	West of I-95	02/10/17	1,581.00	$	27,151	$	17,000	$	20,041
2	Commercial	East of I-95	03/22/17	6.35		1,556		245,000		11
				1,587.35	$	28,707	$	18,000	$	20,052

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During the ~~six~~three months ended ~~June 30, 2015, the Company sold approximately 3.9 acres. On June 1, 2015, the Company sold~~

~~approximately 3.0 acres of land located on the south side of LPGA Boulevard, just east of Clyde Morris Boulevard, at~~March 31, 2016, a ~~sales price of $505,000, or approximately $167,000 per acre, for a gain~~total of approximately ~~$476,000. On June 17, 2015, the Company~~7.5 acres were sold for approximately ~~0.9 acres of land located in Highlands County, at a sales price of $250,000 for a gain of approximately $223,000.~~$2.2 million as described below:


					Gross Sales				Gain
			Date of	No. of	Price (1)		Price		on Sale
	Buyer (or Description)	Location	Sale	Acres	($000's)		per Acre		($000's)
1	Commercial / Retail	East of I-95	02/12/16	3.1	$	190	$	61,000	$	145
2	NADG - OutParcel	East of I-95	03/30/16	4.4		2,000		455,000		1,304
				7.5	$	2,190	$	292,000	$	1,449

Land Pipeline Update.As of ~~July 29, 2016,~~May 8, 2017, the ~~Company had executed ten~~Company’s pipeline of potential land sales transactions included the following eight definitive purchase and sale agreements with eight different buyers, ~~whose intended use for the land under contract includes residential (including multi-family), retail and mixed-use retail, and office. These agreements, in aggregate, represent the potential sale of~~representing approximately ~~4,100 acres, or 39%~~26% of our land ~~holdings, with anticipated sales proceeds totaling approximately $103 million, or an average of approximately $25,000 per acre. All of~~holdings:


			Contract
		No. of	Amount		Price		Estimated
	Contract (or Buyer) / Parcel	Acres	($000's)		per Acre		Timing
1	Commercial/Retail - Buc'ees (1)	35	$	14,000	$	400,000	'18 - '19
2	Commercial/Retail	9		2,700		300,000	'18 - '19
3	Commercial/Retail	22		5,574		253,000	'17 - '18
4	Mixed-Use Retail (NADG)	82		20,187		246,000	'17 - '18
5	Commercial/Retail - Option Parcel	13		2,032		156,000	'17
6	Minto II (AR Residential)	1,686		31,360		19,000	'18 - '19
7	Residential (SF)	129		2,750		21,000	'18 - '19
8	ICI (SF) - Option Parcel	146		1,400		10,000	'18 - '19
	Total (Average)	2,122	$	80,003	$	38,000

⁽¹⁾

Contract amount and price per acre may be reduced by potential costs incurred for wetlands mitigation, if any.

~~Minto Communities~~

~~One of the definitive purchase and sale agreements is with an affiliate of Minto Communities for Minto’s development of a 3,400-unit master planned age restricted residential community~~Land Impairments. There were no impairment charges on ~~an approximately 1,600-acre parcel of~~ the Company’s undeveloped land holdings west of Interstate 95. Minto received zoning and entitlement approvals from the City of Daytona Beach, Florida in April 2016 for the 3,400 residential units and approximately 215,000 square feet of commercial space. In addition, the contract with Minto currently contemplates the Company would provide seller financing for a portion of the sales price (the “Minto Note”). The Company anticipates utilizing the proceeds from the transaction in a 1031 like-kind exchange and therefore would be required to sell the Minto Note prior to the completion of the 1031 exchange which could be up to 180 days after the closing of the transaction with Minto. With the Company having resolved certain regulatory matters related to the Company’s prior agricultural activities on the land that includes the property under contract with Minto, and with Minto’s filing of its permit application with the U.S. Army Corps of Engineers (the “ACOE”), the Company now expects this transaction to close in late 2016 subject to Minto’s receipt of their permit from the ACOE.

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~

~~Tomoka Town Center~~

The NADG First Parcel and Outparcel sales represent the first two of multiple transactions contemplated under a single purchase and sale agreement (the “NADG Agreement”) with an affiliate of North American Development Group (“NADG”). The NADG Agreement provides NADG with the ability to acquire portions of the remaining acreage under contract within the Town Center (the “Remaining Option Parcels”) in multiple, separate transactions through 2018 (the “Option Period”). The Remaining Option Parcels represent a total of approximately 81.55 acres and total potential proceeds to the Company of approximately $20.2 million, or approximately $248,000 per acre. Pursuant to the NADG Agreement, NADG can close on any and all of the Remaining Option Parcels at any time during the ~~Option Period. The NADG Agreement also establishes a price escalation percentage that would be applied to any of the Remaining Option Parcels that are acquired after January~~three months ended March 31, 2017 ~~and an additional price escalation percentage that would be applied to any Remaining Option Parcels acquired in 2018.~~or 2016.

~~Variable Interest Entity.~~Beachfront Venture. During the year ended December 31, 2015, the Company acquired, through a real estate venture with an unaffiliated third party institutional investor, an interest in approximately six acres of vacant beachfront property located in Daytona Beach, ~~Florida~~Florida. The property was acquired for approximately $11.3 million of which the Company contributed approximately $5.7 million. ~~Upon entering into~~As of December 31, 2015, the real estate venture ~~described above and~~was fully consolidated as the Company determined that it was the primary beneficiary of ~~June 30,~~the variable interest entity. On November 17, 2016, the Company ~~determined it has~~acquired the unaffiliated third party’s 50% interest for approximately $4.8 million, a ~~controlling financial~~discount of approximately $879,000. The discount was recorded through equity on the consolidated balance sheet during the quarter and year ended December 31, 2016. The Company evaluated its interest ~~and is the primary beneficiary; therefore, the venture is a VIE and has been consolidated~~ in the ~~Company’s financial statements.~~six-acre vacant beachfront property for impairment and determined that no impairment was necessary as of December 31, 2016. As the Company owns the entire real estate venture as of December 31, 2016, there is no longer a consolidated VIE. The cost basis of the six acre vacant beachfront property asset totaled approximately $11.7 million as of March 31, 2017 which costs for entitlement. The beachfront property received approval of the rezoning and entitlement of the site to allow for the development of two restaurants and also for up to approximately 1.2 million square feet of vertical density. In the first quarter of 2017,

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the Company executed a 15-year lease agreement with the operator of LandShark Bar & Grill, for an approximately 6,264 square foot restaurant property the Company will develop on the parcel. The annual rent under the lease is based on a percentage of the tenant’s net operating income (“NOI”) until the Company has received its investment basis in the property and thereafter, the Company will receive a lower percentage of the tenant’s NOI during the remaining lease term. In April 2017, the Company executed a 15-year lease agreement with the tenant, Cocina 214 Restaurant & Bar, for the second restaurant property to be developed on the parcel. The annual rent is equal to the greater of $360,000 per year or a certain percentage of gross sales. The lease also provides for additional percentage rent upon the achievement of certain gross sales thresholds. The Company expects the development of the two restaurant properties to be completed in time for the tenants to commence operations during the first quarter of 2018.

Other Real Estate ~~Impairments.~~Assets. The Company owns impact fees with a cost basis of approximately $709,000 and mitigation credits with a cost basis of approximately $1.4 million for a combined total of approximately $2.1 million as of March 31, 2017. As of December 31, 2016, the Company owned impact fees with a cost basis of approximately $925,000 and mitigation credits with a cost basis of approximately $1.4 million for a combined total of approximately $2.3 million. During the three months ended ~~June 30,~~March 31, 2017 and 2016, ~~impairment charges totaled~~the Company received cash payments of approximately ~~$1.0 million on our land holdings. Two of the ten aforementioned executed purchase~~$217,000 and ~~sale agreements, of which one was executed during the quarter ended June 30, 2016 and the other was executed subsequent to June 30, 2016, include approximately 8 acres of land that have~~$105,000, respectively, for impact fees with a ~~higher~~ cost basis ~~than the remainder~~that was generally of the Company’s historic land holdings as these acres were repurchased by the Company in previous years from the prior purchasers thereof (the “Repurchased Land”). In connection with those two contracts, the Company recognized impairment charges of approximately $717,000 and $311,000, respectively, in the quarter ended June 30, 2016. The total impairment charges represent the anticipated losses on the sales plus estimated closing costs.equal value.

Subsurface ~~Interests~~Interests. . The Company owns full or fractional subsurface oil, gas, and mineral interests underlying approximately 500,000 “surface” acres of land owned by others in 20 counties in ~~Florida.~~Florida (the “Subsurface Interests”). The Company leases ~~its interests~~the Subsurface Interests to mineral exploration firms for exploration. Our subsurface operations consist of revenue from the leasing of exploration rights and in some instances, additional revenues from royalties applicable to production from the leased acreage.

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~

Lease payments on the respective acreages and drilling penalties received through lease year ~~five~~six are as follows:


								Acreage
Lease Year	Acreage (Approximate)		Florida County	Lease Payment ⁽¹⁾		Drilling Penalty ⁽¹⁾		(Approximate)	Florida County	Lease Payment (1)		Drilling Penalty (1)
Lease Year 1 - 9/23/2011 - 9/22/2012		136,000	Lee and Hendry	$	913,657	$	-	136,000	Lee and Hendry	$	913,657	$	—
Lease Year 2 - 9/23/2012 - 9/22/2013		136,000	Lee and Hendry		922,114		-	136,000	Lee and Hendry		922,114		—
Lease Year 3 - 9/23/2013 - 9/22/2014		82,000	Hendry		3,293,000		1,000,000	82,000	Hendry		3,293,000		1,000,000
Lease Year 4 - 9/23/2014 - 9/22/2015		42,000	Hendry		1,866,146		600,000	42,000	Hendry		1,866,146		600,000
Lease Year 5 - 9/23/2015 - 9/22/2016		25,000	Hendry		1,218,838		175,000	25,000	Hendry		1,218,838		175,000
Lease Year 6 - 9/23/2016 - 9/22/2017								15,000	Hendry		806,683		150,000
Total Payments Received to Date				$	8,213,755	$	1,775,000			$	9,020,438	$	1,925,000

⁽¹⁾Cash payment for the Lease Payment and Drilling Penalty is received on or before the first day of the lease year. The Drilling Penalty is recorded as revenue when received, while the Lease Payment is recognized on a straight-line basis over the respective lease term. See separate disclosure of the revenue per year below.

⁽¹⁾

Cash payment for the Lease Payment and Drilling Penalty is received on or before the first day of the lease year. The Drilling Penalty is recorded as revenue when received, while the Lease Payment is recognized on a straight-line basis over the respective lease term. See separate disclosure of the revenue per year below.

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The Company is not prohibited from ~~oil royalties totaled approximately $16,000 and $49,000, during~~ the ~~six months ended June 30, 2016 and 2015, respectively.~~

Golf Operations. Golf operations consist of the LPGA International ~~golf club,~~Golf Club, a semi-private golf club consisting of two 18-hole championship golf courses, one designed by Rees Jones and the other designed by Arthur Hills, with a three-hole practice facility also designed by Rees Jones, a clubhouse facility, food and beverage operations, and a fitness facility located within the LPGA International mixed-use residential community on the west side of Interstate 95 in Daytona Beach, Florida. In 2012 and 2013, we completed approximately $534,000 of capital expenditures to renovate the clubhouse facilities, including a significant upgrade of the food and beverage operations, addition of fitness facilities, and renovations to public areas.

The Company entered into a management agreement with an affiliate of ClubCorp America (“ClubCorp”), effective January 25, 2012, to manage the LPGA International golf and clubhouse facilities. We believe ClubCorp, which owns and operates clubs and golf courses worldwide, brings substantial golf and club management expertise and knowledge to the LPGA International golf operations, including the utilization of national marketing capabilities, aggregated purchasing programs, and implementation of an affiliate member program, which has improved, and is expected to continue to improve, membership levels through the access to other member clubs in the affiliate program. Effective May 1, 2016, the Company and ClubCorp entered into the first amendment to extend the term of the management agreement from December 27, 2016 to September 30, 2022.

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~

In July 2012, the Company entered into an agreement with the City ~~of Daytona Beach, Florida (the “City”)~~ to, among other things, amend the lease payments under its golf course lease (the “Lease Amendment”). Under the Lease Amendment, the base rent payment, which was scheduled to increase from $250,000 to $500,000 as of September 1, 2012, ~~will remain~~remained at $250,000 for the remainder of the lease term and any extensions would behave been subject to an annual rate increase of 1.75% beginning September 1, 2013. The Company also agreed to invest $200,000 prior to September 1, 2015 for certain improvements to the facilities. In addition, pursuant to the Lease Amendment, beginning September 1, 2012, and continuing throughout the initial lease term and any extension option,As described below, on January 24, 2017, the Company ~~will pay additional~~acquired the land and improvements comprising the golf courses, previously leased from the City, for approximately $1.5 million (the “Golf Course Land Purchase”). In conjunction with the Golf Course Land Purchase, the lease between the Company and the City was terminated. Therefore, during the three months ended March 31, 2017, the Company eliminated the remaining accrued liability of approximately $2.2 million, resulting in the recognition of approximately $0.40 per share in non-cash earnings, or $0.24 per share after tax, which comprises the land lease termination in the consolidated statements of operations. The $2.2 million consisted of approximately $1.7 million which reflects the acceleration of the remaining amount of accrued rent that was no longer owed to the City ~~equal to 5.0% of gross revenues exceeding $5,500,000 and 7.0% of gross revenues exceeding $6,500,000. Since the inception of the lease, the Company has recognized the rent expense on~~as a ~~straight-line basis resulting in an estimated accrual for deferred rent. Upon the effective date~~result of the Lease Amendment, ~~the Company’s straight-line rent was revised to reflect the lower rent levels through expiration of the lease. As a result, approximately $3.0 million of the rent previously deferred will not be due~~which prior to the ~~City, and will be~~Golf Course Land Purchase was being recognized into income over the remaining lease term which ~~expires~~was originally to expire in 2022. AsThe remaining approximately $500,000 reflects the amount of ~~June 30, 2016,~~rent accrued pursuant to the lease, as amended, which will no longer be owed to the City due to the lease termination on January 24, 2017.

On January 24, 2017, the Company acquired the land and improvements comprising the golf courses, previously leased from the City for approximately $1.5 million (the “Golf Course Land Purchase”). As a part of the ~~rent, previously deferred that will not be due~~Golf Course Land Purchase, the Company donated to the City ~~remained~~three land parcels totaling approximately 14.3 acres located on the west side of Interstate 95 that are adjacent to ~~be amortized through September 2022.~~the City’s Municipal Stadium. The Company had a cost basis of $0 in the donated land and paid approximately $100,000 to satisfy the community development district bonds associated with the acreage. Other terms of the Golf Course Land Purchase include the following:

The Company is obligated to pay the City additional consideration in the form of an annual surcharge of $1 per golf round played each year (the “Per-Round Surcharge”) with an annual minimum Per-Round Surcharge of $70,000 and a maximum aggregate amount of the Per-Round Surcharges paid equal to $700,000;

Within one year following the date of the closing of the Golf Course Land Purchase, unless extended due to weather related delays outside the Company’s control, the Company is obligated to renovate the greens on the Jones Course; and

If the Company sells the LPGA International Golf Club within six years of the closing of the Golf Course Land Purchase, the Company is obligated to pay the City an amount equal to 10% of the difference between the sales price, less closing costs and any other costs required to be incurred in connection with the sale, and $4.0 million.

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Commercial Loan Investments. Our investments in commercial loans or similar structured finance investments, such as mezzanine loans or other subordinated debt, have been and are expected to continue to be secured by commercial or residential real estate ~~or land~~ or the borrower’s pledge of its ownership interest in the entity that owns the real estate. The first mortgage loans we invest in or originate are for commercial real estate located in the United States and its territories, and are current or performing with either a fixed or floating rate. Some of these loans may be syndicated in either a pari-passu or senior/subordinated structure. Commercial first mortgage loans generally provide for a higher recovery rate due to their senior position in the underlying collateral. Commercial mezzanine loans are typically secured by a pledge of the borrower’s equity ownership in the underlying commercial real estate. Unlike a mortgage, a mezzanine loan is not secured by a lien on the property. An investor’s rights in a mezzanine loan are usually governed by an intercreditor agreement that provides holders with the rights to cure defaults and exercise control on certain decisions of any senior debt secured by the same commercial property.

On May 26, 2016, the Company’s $14.5 million first mortgage loan secured by the Sheraton Old San Juan Hotel located in San Juan, Puerto Rico was paid off at a discount of approximately $218,000. On payoff, the remaining loan origination fee net of loan costs was accreted into income.

Agriculture and Other Income. Effectively all of our agriculture and other income consists of revenues generated by our agricultural operations. The Company’s agricultural lands encompass approximately ~~9,300~~7,100 acres on the west side of Daytona Beach, Florida. Our agricultural operations are managed by a third-party and consist of leasing land for hay production and timber harvesting, as well as hunting leases.

SUMMARY OF OPERATING RESULTS FOR THE QUARTER ENDED ~~JUNE 30, 2016~~MARCH 31, 2017 COMPARED TO ~~JUNE 30, 2015~~MARCH 31, 2016

REVENUE

Total revenue for the three months ended March 31, 2017 and 2016 is presented in the following summary and indicates the changes as compared to three months ended March 31, 2016:



	Revenue for		Revenue for
	Three Months		Three Months		Increase (Decrease)
	Ended		Ended		Vs. Same Period		Vs. Same Period
Operating Segment	3/31/2017		3/31/2016		in 2016		in 2016 (%)
Income Properties	$	7,073,204	$	6,429,241	$	643,963		10%
Interest Income from Commercial Loan Investments		536,489		881,245		(344,756)		-39%
Real Estate Operations		29,474,460		9,560,898		19,913,562		208%
Golf Operations		1,474,944		1,464,359		10,585		1%
Agriculture & Other Income		154,151		18,692		135,459		725%
Total Revenue	$	38,713,248	$	18,354,435	$	20,358,813		111%

Total revenue for the quarter ended ~~June 30, 2016~~March 31, 2017 increased ~~69%~~ to approximately ~~$12.9~~$38.7 million ~~as compared to~~from approximately ~~$7.6~~$18.3 million during the same period in ~~2015.~~2016, an increase of approximately $20.4 million, or 111%. This increase was primarily the result of ~~an increase~~the following elements of the Real Estate Operations and the Income Property Operations, respectively:


	Revenue for		Revenue for
	Three Months		Three Months		Increase (Decrease)
	Ended		Ended		Vs. Same Period		Vs. Same Period
	3/31/2017		3/31/2016		in 2016		in 2016
Real Estate Operations Revenue	($000's)		($000's)		($000's)		(%)
Land Sales Revenue	$	28,707	$	190	$	28,517		15009%
Tomoka Town Center - Percentage of Completion Revenue		—		8,958		(8,958)		-100%
Revenue from Reimbursement of Infrastructure Costs		320		—		320		100%
Impact Fee and Mitigation Credit Sales		217		105		112		107%
Subsurface Revenue		230		308		(78)		-25%
Total Real Estate Operations Revenue	$	29,474	$	9,561	$	19,913		208%

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	Revenue for		Revenue for
	Three Months		Three Months		Increase (Decrease)
	Ended		Ended		Vs. Same Period		Vs. Same Period
	3/31/2017		3/31/2016		in 2016		in 2016
Income Property Operations Revenue	($000's)		($000's)		($000's)		(%)
Multi-Tenant Acquisitions: Century Reno/Peterson/Westcliff	$	995	$	—	$	995		100%
Accretion of Above Market (Below Market) Intangibles		531		607		(76)		-13%
Revenue from Remaining Portfolio (Includes Impact of 2016 Dispositions)		5,547		5,822		(275)		-5%
Total Income Property Operations Revenue	$	7,073	$	6,429	$	644		10%

NET INCOME

Net income for the quarter ended March 31, 2017 was approximately ~~$3.4~~$12.7 million, ~~from our real estate operations primarily related~~compared to approximately ~~$3.8~~$1.4 million in revenue from the percentage-of-completion revenue recognition during the quarter for the Town Center land sales closed in the fourth quarter of 2015 and first quarter of 2016 noted above, which was an increase of approximately $3.1 million versus the land sales revenue recognized in the same period in ~~2015,~~2016, an increase of approximately $11.3 million, or approximately 795%. Basic net income per share for the quarter ended March 31, 2017 was $2.28 per share, as compared to $0.25 per share during the same period in 2016, an increase of $2.03 per share, or approximately 812%.

The results in the first quarter of 2017 reflected increased revenues of approximately $20.4 million as described above, offset by the associated increase in direct cost of revenues of approximately $7.2 million primarily related to the increase in the direct cost of revenues for the real estate operations of approximately $6.9 million, which primarily reflects the cost basis for increased land sales revenue during the quarter, as well as the following other elements of the Company’s operating results:

A decrease in general and administrative expenses of approximately $1.6 million primarily due to the following:

A decrease in non-cash stock compensation expense of approximately $1.7 million which, in part, is due to the accelerated stock compensation expense of approximately $1.6 million recognized in the first quarter of 2016 relating to certain stock awards that were forfeited;

Reduced legal and other costs of approximately $87,000 which stem from what were anticipated to be non-recurring expenses incurred in the first quarter of 2016 of approximately $1.0 million relating to the investigating of certain claims made by Wintergreen Advisers in a series of public and private letters that were determined to be without merit, offset by an aggregate of approximately $936,000 in costs incurred in the first quarter of 2017 associated with Wintergreen Advisers communications which included approximately $563,000 specifically related to the Company’s proxy contest for the 2017 Annual Meeting of Shareholders;

An increase in depreciation and amortization of approximately $695,000 resulting from the growth in our income property portfolio;

Income of approximately $2.2 million recognized in connection with the Company’s purchase of the golf leased fee interest in the 690-acre golf course which terminated the land lease affiliated with the golf operations and triggered an elimination of the previously recognized straight-line rent under the lease;

A decrease in investment loss primarily due to the loss of approximately $576,000 that was recognized in the first quarter of 2016 related to the disposition of certain investment securities; and

The recognition of approximately $210,000 in impairment charges in the first quarter of 2016.

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INCOME PROPERTIES

Revenues and operating income from our income property operations totaled approximately ~~$450,000 in revenue from the surface release transaction~~$7.1 million and $5.7 million, respectively, during the quarter ended ~~June 30,~~March 31, 2017, compared to total revenue and operating income of approximately $6.4 million and $5.3 million, respectively, for the quarter ended March 31, 2016. The ~~remaining~~direct costs of revenues for our income property operations totaled approximately $1.4 million and $1.2 million for the three months ended March 31, 2017 and 2016, respectively. The increase in ~~total revenue is primarily~~revenues of approximately $644,000, or 10%, during the quarter ended March 31, 2017 reflects our expanded portfolio of income properties including increases of approximately $995,000 due to ~~an increase of approximately $1.9 million, or 46%, in revenue generated by~~ our ~~income properties, reflecting our increased portfolio of properties including approximately $1.7 million of incremental rent revenue due to the addition~~recent additions of the ~~245 Riverside Avenue property, acquired~~following multi-tenant properties: Century Theatre in ~~July 2015,~~Reno, Nevada; 3600 Peterson in Santa Clara, California; and ~~the Wells Fargo property, acquired~~Westcliff in ~~November 2015,~~Fort Worth, Texas, partially offset by a reduction of approximately ~~$425,000~~$275,000 in single-tenant rent revenue due to ~~recent dispositions.~~our income property dispositions during the second and third quarter of 2016. Revenue from our income properties during the ~~quarter~~quarters ended ~~June 30,~~March 31, 2017 and 2016 also includes approximately ~~$556,000~~$531,000 and $607,000, respectively, in revenue from the accretion of the below-market lease intangible, which is primarily attributable to the Wells Fargo property.

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~

Net income for the quarter ended June 30, 2016 was approximately $1.6 million, compared to approximately $225,000 in the same period in 2015. Net income per share for the quarter ended June 30, 2016 was $0.28 per share, as compared to $0.04 per share during the same period in 2015, an increase of $0.24 per share, or 600%. Our results in the second quarter of 2016 benefited from approximately $3.0 million in gains from the aforementioned percentage-of-completion revenue recognition on the Town Center land sales. Our second quarter 2016 results also benefited from an increase of approximately $1.9 million in revenue from our income property portfolio as well as an increase of approximately $1.4 million related to the gains on the sales of three of the four income properties disposed of during the quarter. These increases were offset by increases in the direct costs of revenues of approximately $1.3 million, or 54%, the recognition of impairment charges of approximately $2.0 million during the quarter versus no impairment charges incurred in the same period in 2015, increased depreciation and amortization of approximately $734,000, or 69%, and increased interest expense of approximately $266,000, or 14%. Included in the net increase in direct cost of revenues of approximately $1.3 million was approximately $805,000 of direct costs of real estate operations primarily related to the recognition of cost basis for the aforementioned percentage-of-completion revenue recognition on the Town Center land sales and approximately $521,000 of increased direct costs of revenues for our income properties, which was primarily comprised of approximately $515,000 in increased operating expenses related to our acquisitions of the 245 Riverside Avenue property and the Wells Fargo property. In addition, our net income was impacted by increased depreciation and amortization expense of approximately $734,000, or 69%, resulting from our increased income property portfolio. The impairment charges totaling approximately $2.0 million include the impairment on the PNC Sale and the Repurchased Land.

~~INCOME PROPERTIES~~

Revenues and operating income from our income property operations totaled approximately $6.0 million and $4.8 million, respectively, during the quarter ended June 30, 2016, compared to total revenue and operating income of approximately $4.1 million and $3.4 million, respectively, for the quarter ended June 30, 2015. The direct costs of revenues for our income property operations totaled approximately $1.2 million and $683,000 for the quarters ended June 30, 2016 and 2015, respectively. The approximately $1.9 million increase, or 46%, in revenues during the quarter ended June 30, 2016 reflects our expanded portfolio of income properties including approximately $1.7 million from our 245 Riverside and Wells Fargo acquisitions, partially offset by our recent income property dispositions of which all of the proceeds have not yet been re-invested into income-producing properties. Our increased operating income from our income property operations reflects increased rent revenues offset by an increase of approximately ~~$521,000~~$235,000 in our direct costs of revenues which was primarily comprised of approximately ~~$515,000~~$202,000 in increased operating expenses related to our recent ~~investments including the 245 Riverside Avenue property~~multi-tenant acquisitions mentioned previously in Reno, Santa Clara, and ~~the Wells Fargo property.~~Fort Worth.

REAL ESTATE OPERATIONS

During the quarter ended ~~June 30, 2016,~~March 31, 2017, operating income from real estate operations was approximately ~~$3.6~~$20.3 million on revenues totaling approximately ~~$4.8~~$29.5 million. During the quarter ended ~~June 30, 2015,~~March 31, 2016, operating income was approximately ~~$1.1~~$7.3 million on revenues totaling approximately ~~$1.4~~$9.6 million. The increase in revenue of approximately ~~$3.4~~$19.9 million and operating income of approximately ~~$2.6~~$13.0 million is primarily attributable to the revenue totaling approximately ~~$3.8~~$27.2 million recognized for the Minto land sale of approximately 1,581 acres and the approximately $1.6 million recognized for the commercial land sale east of I-95 for approximately 6 acres, which both closed during the quarter ended March 31, 2017. These were offset by the revenue recognized during the quarter ended March 31, 2016 on the sales within the Town Center which closed during the fourth quarter of 2015 and the first quarter of 2016, for which revenue is being recognized on the percentage-of-completion basis as related infrastructure costs are incurred, offset by approximately $755,000 in revenue from two land sales that closed during the second quarter of 2015. Additionally, during the second quarter of 2016, a surface entry release on approximately 960 acres generated approximately $450,000 in revenue. These increases were partially offset by the decrease in revenue generated from the eight-year oil exploration lease which totaled approximately $303,000 and $465,000 during the quarters ended June 30, 2016 and 2015, respectively, a decrease of approximately ~~$162,000.~~$9.0 million. The increase of approximately $6.9 million in direct costs of real estate operations ~~are a~~is primarily the result of the cost basis recognized during the first quarter of 2017 related to the land sales closed during quarter totaling approximately $7.7 million offset by the cost basis recognized during the first quarter of 2016 totaling approximately $1.9 million related to sales within the Town Center which closed during the fourth quarter of 2015 and first quarter of ~~2016 which, in the aggregate, totaled approximately $809,000.~~2016.

GOLF OPERATIONS

Revenues from golf operations totaled approximately ~~$1.4~~$1.5 million for the ~~quarters~~three months ended ~~June 30,~~March 31, 2017 and 2016, ~~and 2015.~~respectively. The total direct cost of golf operations revenues ~~also~~ totaled approximately $1.5 million and $1.4 million for the ~~quarters~~three months ended ~~June 30,~~March 31, 2017 and 2016, ~~and 2015.~~respectively. The Company’s golf operations had a net operating loss of approximately ~~$35,000~~$24,000 and ~~$8,000~~net operating income of approximately $60,000 during the ~~quarters~~three months ended ~~June 30,~~March 31, 2017 and 2016, ~~and 2015,~~ respectively, a decrease in operating results of approximately ~~$27,000.~~$84,000. The primary reason for the decrease in operating results was increased operating supply costs and increased cost of sales as well as a ~~decline~~decrease in golf revenue due to fewer rounds as a result of ~~approximately $65,000 which was partially offset by increased membership revenue~~more rain days during the first quarter of ~~approximately $22,000.~~

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~2017 as compared to the same period in 2016.

INTEREST INCOME FROM COMMERCIAL LOAN INVESTMENTS

Interest income from our commercial loan investments totaled approximately ~~$635,000~~$536,000 and $881,000 during the ~~quarter~~three months ended ~~June 30,~~March 31, 2017 and 2016, ~~compared~~respectively. The decrease is attributable to approximately ~~$639,000~~$357,000 of revenue in the ~~same period in 2015. The interest income in the~~first quarter ~~ended June 30,~~of 2016 ~~reflected the interest earned from our portfolio of three remaining commercial loan investments of approximately $526,000 as well as approximately $109,000~~ from the ~~loan secured by property in~~ San Juan ~~Puerto Rico~~loan that was repaid during the quarter ended June 30, 2016. The interest income in the quarter ended June 30, 2015 reflected interest earned from our portfolio of three remaining commercial loan investments of approximately $509,000 as well as approximately $130,000 of revenue from two loans that were paid off during the second quarter of ~~2015.~~2016.

AGRICULTURE AND OTHER INCOME

For the ~~quarters~~three months ended ~~June 30,~~March 31, 2017 and 2016, ~~and 2015,~~ revenues from agriculture and other income ~~primarily our agriculture operations,~~ totaled approximately $154,000 and $19,000, ~~and $21,000, respectively.~~respectively, for which the increase is due to a timber harvesting contract during the first quarter of 2017 that generated approximately $143,000 in revenue. For the ~~quarters~~three months ended ~~June 30,~~March 31, 2017 and 2016, ~~and 2015,~~ the direct cost of revenues totaled approximately ~~$53,000~~$40,000 and ~~$43,000,~~$48,000, respectively.

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GENERAL AND ADMINISTRATIVE ~~AND OTHER CORPORATE~~ EXPENSES

General and administrative expenses totaled approximately ~~$1.9~~$3.2 million and $4.8 million for the ~~quarters~~three months ended ~~June 30,~~March 31, 2017 and 2016, ~~and 2015. Although total general and administrative expenses remained consistent, non-cash~~respectively, a decrease of approximately $1.6 million. Non-cash stock compensation expense decreased by approximately ~~$128,000~~$1.7 million, which in part, is due to the ~~full recognition~~accelerated stock compensation expense of approximately $1.6 million recognized in the first quarter of 2016 relating to certain stock awards that were forfeited. In addition, reduced legal and other costs of approximately $87,000 which stem from what were anticipated to be non-recurring expenses incurred in the first quarter of 2016 of approximately $1.0 million relating to the investigating of certain ~~prior year grants~~claims made by Wintergreen Advisers in a series of ~~market-condition restricted stock. Legal fees increased~~public and private letters that were determined to be without merit, offset by ~~approximately $125,000 which is made up~~an aggregate of approximately ~~$200,000~~$936,000 in ~~expense~~legal and other costs incurred ~~for shareholder matters during~~in the first quarter ~~ended June 30, 2016 offset by~~of 2017 associated with recent Wintergreen Advisers communications which included approximately ~~$75,000~~$563,000 specifically related to the Company’s proxy contest in connection with the 2017 Annual Meeting of ~~expense incurred for environmental matters during the quarter ended June 30, 2015.~~Shareholders.

~~Four~~

GAINS ON DISPOSITION OF ASSETS AND IMPAIRMENT CHARGES

No income properties were disposed of during the ~~quarter ended June 30, 2016, of which~~ three of the sales generated gains totaling approximately $1.4 million. The other sale during the quarter ended June 30, 2016 was for a loss of approximately $210,000 which was recognized as an impairment charge during the quartermonths ended March 31, 2017 or 2016. Also during the three months ended June 30, 2016, impairment charges totaling approximately $2.0 million included the impairment on the anticipated PNC Sale and the Repurchased Land. This represents an increase in impairment charges of approximately $2.0 million as there

There were no impairment charges during the three months ended ~~June 30, 2015.~~March 31, 2017. During the three months ended March 31, 2016, an impairment charge of approximately $210,000 was recognized on an income property held for sale as of March 31, 2016 for which the sale closed on April 6, 2016. The total impairment charge represented the loss on the sale of approximately $134,000 plus closing costs of approximately $76,000.

INTEREST EXPENSE

Interest expense totaled approximately ~~$2.2~~$2.1 million ~~and $1.9 million~~ for the quarters ended June 30, 2016 and 2015, respectively. The increased interest expense during the quarter ended June 30, 2016, as compared to the same quarter in 2015, primarily reflects additional interest on the $25.0 million mortgage note payable secured by the Wells Fargo property in Raleigh issued in April 2016. Also, included in interest expense in the consolidated financial statements is the amortization of loan costs incurred in connection with the Company’s long-term debt and the amortization of the discount on the Notes (as hereinafter defined).

~~SUMMARY OF OPERATING RESULTS FOR SIX MONTHS ENDED JUNE 30, 2016 COMPARED TO JUNE 30, 2015~~

Total revenue for the six months ended June 30, 2016 increased 109% to approximately $31.2 million, as compared to approximately $14.9 million during the same period in 2015. This increase was primarily the result of an increase of approximately $12.1 million from our real estate operations primarily related to approximately $12.8 million in revenue from the percentage-of-completion revenue recognition during the six months ended June 30, 2016 on the Town Center land sales which was an increase of approximately $12.1 million versus the land sales revenue recognized in the same period in 2015, and approximately $450,000 in revenue from the surface release transaction during the six months ended June 30, 2016. The remaining increase in total revenue is primarily due to an increase of approximately $4.1 million, or 49%, in revenue generated by our income properties, reflecting our increased portfolio of properties including approximately $3.4 million of incremental rent revenue due to the addition of the 245 Riverside Avenue property and the Wells Fargo property, offset by a reduction of approximately $680,000 in single-tenant rent revenue due to recent dispositions. Revenue from our income properties during the six months ended June 30, 2016 also includes approximately $1.2 million in revenue from the accretion of the below-market lease intangible, which is primarily attributable to the Wells Fargo property.

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~

Net income for the six months ended June 30, 2016 was approximately $3.0 million, compared to approximately $578,000 in the same period in 2015. Net income per share for the six months ended June 30, 2016 was $0.52 per share, as compared to $0.10 per share during the same period in 2015, an increase of $0.42 per share, or 420%. Our results in the six months ended June 30, 2016 benefited from approximately $10.1 million in gains from the aforementioned percentage-of-completion revenue recognition. The six months ended June 30, 2016 also benefited from an increase of approximately $4.1 million in revenue from our income property portfolio as well as an increase of approximately $1.3 million related to the gains on the sales of three of the four income properties disposed of during the six months ended June 30, 2016. These increases were offset by increases in the direct costs of revenues of approximately $3.5 million, or 69%, increased general and administrative expenses of approximately $3.4 million, or 100%, increased impairment charges of approximately $1.7 million, or 328%, increased depreciation and amortization of approximately $1.6 million, or 74%, and increased interest expense of approximately $1.3 million, or 44%. Included in the net increase in direct cost of revenues of approximately $3.5 million was approximately $2.7 million of direct costs of real estate operations primarily related to the recognition of cost basis for the aforementioned percentage-of-completion revenue recognition on land transactions and approximately $1.1 million of increased direct costs of revenues for our income properties, which was primarily comprised of approximately $1.0 million in increased operating expenses related to our acquisitions of the 245 Riverside Avenue property and the Wells Fargo property. In addition, our net income was impacted by increased depreciation and amortization expense of approximately $1.6 million, or 74%, reflecting our increased income property portfolio. The increase in general and administrative expenses of approximately $3.4 million is primarily due to an increase in non-cash stock compensation expense of approximately $1.9 million, of which approximately $1.6 million is related to the acceleration of non-cash stock compensation expense in connection with the cancellation of certain grants in the first quarter of 2016, and increased legal costs of approximately $1.2 million, primarily related to certain shareholder matters. The impairment charges totaling approximately $2.2 million during the six months ended June 30, 2016 included a charge of approximately $210,000 which was recognized on an income property in Sebring, Florida leased to a subsidiary of CVS which was sold in April 2016 and the impairment charges related to the PNC Sale and the Repurchased Land totaling approximately $2.0 million. The impairment charges totaling approximately $510,000 during the six months ended June 30, 2015 were recognized as a result of two non-core income properties that were sold on April 17, 2015. The increased interest expense of approximately $1.3 million primarily reflects additional interest on the $25.0 million mortgage loan secured by our Wells Fargo property and our Notes, for which only a partial quarter of interest expense was incurred in the first quarter of 2015.

~~INCOME PROPERTIES~~

Revenues and operating income from our income property operations totaled approximately $12.5 million and $10.1 million, respectively, during the six months ended June 30, 2016, compared to total revenue and operating income of approximately $8.4 million and $7.1 million, respectively, during the six months ended June 30, 2015. The direct costs of revenues for our income property operations totaled approximately $2.4 million and $1.3 million for the six months ended June 30, 2016 and 2015, respectively. The increase in revenues of approximately $4.1 million, or 49%, during the six months ended June 30, 2016 reflects our expanded portfolio of income properties including approximately $3.5 million from our 245 Riverside and Wells Fargo acquisitions, partially offset by our recent income property dispositions of which all of the proceeds have not yet been re-invested into more income-producing properties. Our increased operating income from our income property operations reflects increased rent revenues offset by an increase of approximately $1.1 million in our direct costs of revenues which was primarily comprised of approximately $1.0 million in increased operating expenses related to our recent investments including the 245 Riverside Avenue property and the Wells Fargo property.

~~REAL ESTATE OPERATIONS~~

During the six months ended June 30, 2016, operating income from real estate operations was approximately $11.0 million on revenues totaling approximately $14.3 million. During the six months ended June 30, 2015, operating income was approximately $1.3 million on revenues totaling approximately $2.2 million. The increase in revenue of approximately $12.1 million and operating income of approximately $9.6 million is primarily attributable to the revenue totaling approximately $12.8 million recognized for the sales within the Town Center which closed during the fourth quarter of 2015 and the first quarter of 2016, for which revenue is being recognized on the percentage-of-completion basis as related infrastructure costs are incurred, offset by approximately $755,000 in revenue from two land sales that closed during the six months ended June 30, 2015. Additionally, during the six months ended June 30, 2016 a surface entry release on approximately 960 acres generated approximately $450,000 in revenue. These increases were partially offset by the decrease in revenue generated from the eight-year oil exploration lease which totaled approximately $606,000 and $925,000 during the six months ended June 30, 2016 and 2015, respectively, a decrease of approximately $319,000. The increase in direct costs of real estate operations are a result of the cost basis related to the sales within the Town Center which closed during the fourth quarter of 2015 and first quarter of 2016 which, in the aggregate, totaled approximately $2.7 million.

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~

~~GOLF OPERATIONS~~

Revenues from golf operations totaled approximately $2.9 million and $3.0 million for the six months ended June 30, 2016 and 2015, respectively. The total direct cost of golf operations revenues totaled approximately $2.8 million for the six months ended June 30, 2016 and 2015. The Company’s golf operations had net operating income of approximately $25,000 and $140,000 during the six months ended June 30, 2016 and 2015, respectively, a decrease in operating results of approximately $115,000. The primary reason for the decrease was a decline in golf revenue of approximately $163,000 which was partially offset by increased membership revenue of approximately $37,000.

~~INTEREST INCOME FROM COMMERCIAL LOAN INVESTMENTS~~

Interest income from our commercial loan investments totaled approximately $1.5 million during the six months ended June 30, 2016 compared to approximately $1.3 million in the same period in 2015. The interest income in the six months ended June 30, 2016 reflected the interest earned from our portfolio of three remaining commercial loan investments of approximately $1.1 million as well as approximately $466,000 from the loan secured by property in San Juan, Puerto Rico that was repaid during the six months ended June 30, 2016. The interest income during the six months ended June 30, 2015 reflected interest earned from our portfolio of three remaining commercial loan investments of approximately $1.0 million as well as approximately $259,000 of revenue from two loans that were paid off during the second quarter of 2015.

~~AGRICULTURE AND OTHER INCOME~~

For the six months ended June 30, 2016 and 2015, revenues from agriculture and other income, primarily our agriculture operations, totaled approximately $38,000 and $40,000, respectively. For the six months ended June 30, 2016 and 2015, the direct cost of revenues totaled approximately $101,000 and $98,000, respectively.

~~GENERAL AND ADMINISTRATIVE AND OTHER CORPORATE EXPENSES~~

General and administrative expenses totaled approximately $6.7 million and $3.3 million for the six months ended June 30, 2016 and 2015, respectively. The increase of approximately $3.4 million, or 100%, includes an increase in our non-cash stock compensation expense of approximately $1.9 million primarily due to the approximately $1.6 million of expense which was recognized during the first quarter of 2016 to accelerate the remaining expense of the total grant date fair value of the 68,000 shares of restricted Company common stock that were permanently surrendered in February 2016. See Note 16, “Stock-Based Compensation.” Additional increases were attributable to an increase in legal and related costs of approximately $1.3 million which was primarily comprised of approximately $1.2 million incurred in connection with investigating and responding to claims made by one of the Company’s shareholders. See Note 18, “Commitments and Contingencies.”

Four income properties were disposed of during the six months ended June 30, 2016, of which three of the sales generated gains totaling approximately $1.4 million. The other sale during the six months ended June 30, 2016 was for a loss of approximately $210,000 which was recognized as an impairment charge during the three months ended March 31, 2016. Also during the six months ended June 30, 2016, impairment charges totaled approximately $2.2 million, an increase of approximately $1.7 million from the same period of 2015. The $2.2 million of impairments charges during the six months ended June 30, 2016 included a charge of approximately $210,000 recognized in the first quarter of 2016 on an income property in Sebring, Florida leased to a subsidiary of CVS which was sold in April 20162017 and impairment charges totaling approximately $2.0 million recognized in the second quarter of 2016 on the anticipated PNC Sale and the Repurchased Land. The impairment charge totaling approximately $510,000 during the six months ended June 30, 2015 was recognized as a result of two non-core income properties that were sold on April 17, 2015.

~~INTEREST EXPENSE~~

Interest expense totaled approximately $4.3 million and $3.0 million for the six months ended June 30, 2016 and 2015, respectively. The approximately $1.3 million of increased interest expense during the six months ended June 30, 2016, as compared to the same period in 2015, primarily reflects additional interest on the $25.0 million mortgage note payable secured by the Wells Fargo property in Raleigh issued in April 2016 and our Notes, for which only a partial quarter of interest expense was incurred in the first quarter of 2015. Also, included in interest expense in the consolidated financial statements is the amortization of loan costs incurred in connection with the Company’s long-term debt and the amortization of the discount on the Notes.

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~2016.

LIQUIDITY AND CAPITAL RESOURCES

Cash and equivalents totaled approximately ~~$24.7~~$4.4 million at ~~June 30, 2016,~~March 31, 2017, excluding restricted cash. Restricted cash totaled ~~$10.6~~approximately $5.9 million at ~~June 30, 2016~~March 31, 2017 of which approximately ~~$9.1~~$4.1 million of cash is being held in escrow, ~~from the sale of an income property and a surface entry right release, to be~~which was reinvested through the like-kind exchange structure into ~~one or more additional~~an income ~~properties.~~property in April 2017. Approximately ~~$306,000~~$253,000 is being held in a reserve primarily for property taxes and insurance escrows in connection with our financing of two properties acquired in January 2013; approximately ~~$504,000~~$835,000 is being held in three separate escrow accounts related to three separate land transactions of which one closed in each of December 2013, December 2015, and ~~two closed in December 2015; approximately $17,000 is being held by the consolidated variable interest entity in which the Company is the primary beneficiary;~~February 2017; and approximately ~~$634,000~~$672,000 is being held in a reserve primarily for certain required tenant improvements for the ~~Lowes~~Lowe’s in Katy, Texas. ~~Cash and cash equivalents totaled approximately $4.1 million at December 31, 2015, excluding restricted cash.~~

Our total cash balance at ~~June 30, 2016 reflects~~March 31, 2017 benefited from cash flows ~~used in~~provided by our operating activities totaling approximately ~~$2.2~~$29.5 million during the ~~six~~three months then ended, compared to the prior year’s cash flows ~~provided by~~used in operating activities totaling approximately $1.2 million operations in the same period, ~~totaling~~of which the increase is primarily the result of our increase in net income of approximately ~~$2.4~~$11.3 million. ~~A portion of~~Included in the ~~$2.2~~$29.5 million ~~used in~~provided by our operating activities during the ~~six~~three months ended ~~June 30, 2016~~March 31, 2017 is ~~related to~~ the ~~receipt~~decrease in land and development costs of ~~cash in~~approximately $7.5 million which reflects the ~~fourth quarter~~impact of ~~2015~~the cost basis disposed of for land sales ~~in which~~closed during the ~~remaining revenue and gain is being recognized on the percentage-of-completion basis in 2016.~~quarter.

Our cash flows used in investing activities totaled approximately $19.6 million for the three months ended March 31, 2017, compared to the prior year’s cash flows provided by investing activities ~~totaled~~totaling approximately ~~$40.0 million for the six months ended June 30, 2016, reflecting approximately $18.8~~$2.4 million in ~~proceeds from~~ the ~~disposition of four non-core income properties, approximately $14.3 million received from the repayment of the commercial loan investment secured by real estate in San Juan, Puerto Rico, and proceeds~~same period, a decrease of approximately ~~$6.3 million received from~~$22.0 million. The decrease in cash provided by investing activities reflects the ~~sales of investment securities, offset by an~~ investment of approximately ~~$2.5~~$19.1 million to acquire one single-tenant income property and one multi-tenant income ~~property.~~property and approximately $1.6 million related to the LPGA International land acquisition. In addition, restricted cash decreased by approximately ~~$3.5~~$4.0 million due, primarily, to the timing of the completion of certain 1031 transactions.

Our cash flows used in financing activities totaled approximately ~~$17.1~~$13.2 million for the ~~six~~three months ended ~~June 30, 2016,~~March 31, 2017, compared to the prior year’s cash flows provided by financing activities totaling approximately $2.1 million in the same period, a decrease of approximately $15.3 million. The decrease in cash provided by financing activities is primarily related to approximately ~~$38.3~~$9.8 million in net pay downs on our revolving credit facility and stock repurchases during the ~~six~~three months ended ~~June 30, 2016~~March 31, 2017 which totaled approximately ~~$3.0 million, offset by the approximately $25.0 million in proceeds received from the mortgage loan secured by the Wells Fargo property.~~$2.9 million.

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Our long-term debt balance, at face value, totaled approximately ~~$160.4~~$161.8 million at ~~June 30, 2016,~~March 31, 2017, representing a decrease of approximately ~~$13.3~~$9.8 million from the face value balance of approximately ~~$173.7~~$171.6 million at December 31, ~~2015.~~2016. The decrease was due to the approximately ~~$38.3~~$9.8 million in net pay downs on our revolving credit ~~facility, offset by approximately $25.0 million in proceeds received from the mortgage loan secured by the Wells Fargo property.~~facility.

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~

The Company was in compliance with all of its debt covenants as of December 31, 2015 and March 31, 2016. As of June 30, 2016, the Company was in compliance with all of its debt covenants but for a default with respect to a covenant under the Credit Facility which requires the Company to maintain a borrowing base value of $75 million for income properties included in the borrowing base. Subsequent to our disposition of the income property leased to Lowe’s in Lexington, North Carolina in June 2016, the value of income properties on the borrowing base was approximately $71 million. The total value of the calculated borrowing base was also impacted by a provision of the Credit Facility which limits the value for a single income property to no more than 20% of the total borrowing base value. As a result, our $25.1 million investment in the 245 Riverside property in Jacksonville, Florida, which is included in the borrowing base, had a value of approximately $14 million in the borrowing base calculation. The Company obtained a waiver from the lending group effective until the earlier of (i) the date on which the Company adds one or more properties to the borrowing base sufficient to establish compliance with the covenant or (ii) December 31, 2016. As of May 13, 2016, the Credit Facility had a zero balance after the Company paid off all outstanding draws. If the Company fails to become compliant with the covenant by December 31, 2016, its liquidity could be adversely affected if another waiver from the lending group is not obtained or the lending group elects to terminate the Credit Facility. The Company expects to become compliant with the covenant through the acquisition of income-producing properties prior to December 31, 2016. As of July 29, 2016, the Company is under contract to acquire certain income-producing properties, some of which we expect to close before the end of the third quarter 2016. We expect the acquisition of these properties would result in the Company satisfying the borrowing base covenant; however, there can be no assurances regarding the likelihood or timing of any one of these potential acquisition transactions being completed or the final terms thereof.

Table of Contents~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~

~~Net proceeds from issuance~~The Company was in compliance with all of the Notes was approximately $72.4 million (net of the cash discount paid of approximately $2.6 million) of which approximately $47.5 million was used to repay the outstanding balance of our Credit Facilityits debt covenants as of March ~~11, 2015. We utilized the remaining amount for investments in income-producing properties or investments in commercial loans secured by commercial real estate.~~31, 2017 and December 31, 2016.

Section 1031 Like-Kind Exchange. Our sources of liquidity ~~includes~~include the release of restricted cash ~~from~~for Section 1031 like-kind exchange transactions upon completion of the exchange. As of ~~June 30, 2016, we had~~March 31, 2017, approximately ~~$9.1~~$4.1 million of cash was being held in escrow, ~~from the sale of an income property and a surface entry release, to be~~which was reinvested through the like-kind exchange structure into ~~one or more additional~~an income ~~properties. This restricted cash will become unrestricted upon the completion of the Section 1031 like-kind exchange related to the future acquisition of income-producing properties.~~property in April 2017.

Acquisitions and Investments. During the ~~six~~three months ended ~~June 30, 2016,~~March 31, 2017, the Company acquired one single-tenant income property and one multi-tenant income property, for an ~~acquisition cost~~aggregate purchase price of approximately ~~$2.5~~$19.1 million. During the remainder of ~~2016,~~2017, we are targeting investments totaling between approximately ~~$67.5~~$30.9 million and ~~$82.5~~$50.9 million in income-producing properties. ~~If certain land sale transactions were to close in 2016 and we complete the Portfolio Sale, our targeted investment amount for the remainder of 2016 would likely increase substantially.~~ We expect to fund these acquisitions utilizing our cash on hand; the available capacity under the credit facility; cash from operations; proceeds from land sales ~~transactions;~~transactions, the dispositions of income properties and potentially the sale of our subsurface interests, each of which we expect will qualify under the like-kind exchange deferred-tax structure; and may include additional funding ~~sources.~~sources such as the sale of impact fees and mitigation credits. Subsequent to ~~June 30, 2016,~~March 31, 2017, the Company is under contract to acquire certain income-producing properties; however, there can be no assurances regarding the likelihood or timing of any one of these potential acquisition transactions being completed or the final terms thereof.

Dispositions. ~~Four~~There were no income ~~properties were disposed of~~property dispositions during the ~~six~~three months ended ~~June 30, 2016, of which three were classified as held for sale as of~~ March 31, ~~2016. Proceeds from these sales totaled approximately $18.8 million. Additionally, fourteen single-tenant properties were classified as held for sale as~~2017.

Table of ~~March 31, 2016 and June 30, 2016 as previously described.~~Contents

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~

Capital Expenditures. In conjunction with the Company’s sale of approximately 3.4 acres of land to RaceTrac ~~Petroleum, Inc. (“RaceTrac”)~~ in December 2013, the Company agreed to reimburse RaceTrac for a portion of the costs for road improvements and the other costs associated with bringing multiple ingress/egress points to the entire ~~approximately 23 acre~~23-acre Williamson Crossing site, including the Company’s remaining ~~approximately~~ 19.6 acres. The estimated cost for the improvements equals approximately $1.26 million and the Company’s commitment is to reimburse RaceTrac in an amount equal to the lesser of 77.5% of the actual costs or ~~$976,500, and~~$976,500. The Company’s commitment to fund the improvement costs benefiting the remaining acres of Company land can be paid over five years from sales of the remaining land or at the end of the fifth year. ~~During the year ended December 31,~~In 2013 the Company deposited $283,500 of cash in escrow related to the improvements, which is classified as restricted cash in the consolidated balance sheets. The total amount in escrow as of ~~June 30, 2016~~March 31, 2017 was approximately ~~$286,000,~~$287,000, including accrued interest. Accordingly, as of ~~June 30, 2016,~~March 31, 2017, the remaining maximum unfunded commitment is approximately ~~$691,000.~~$690,000.

In conjunction with the Company’s sale of approximately ~~14.98~~15.0 acres of land to an affiliate of Integra Land Company (“Integra”) in December 2015, the Company agreed to reimburse Integra approximately $276,000 for a portion of the costs for road access and related utility improvements that will benefit the ~~14.98~~15.0 acre land parcel sold to Integra as well as the surrounding acreage still owned by the Company. The Company also agreed to reimburse Integra approximately $94,000 for site relocation costs. Accordingly, in December 2015, the Company deposited a combined $370,000 of cash in escrow related to these reimbursements which ~~are~~was classified as restricted cash in the consolidated balance sheets. ~~During~~As of March 31, 2017, the ~~six months ended June 30, 2016, approximately $277,000 was~~entire $370,000 had been disbursed from the escrow account. Accordingly, as of ~~June 30, 2016,~~March 31, 2017, there is no remaining commitment.

In conjunction with the Company’s ~~maximum remaining commitment related~~January 2017 Golf Course Land Purchase, the Company agreed to ~~these reimbursements~~renovate the greens on the Jones course within one year of the agreement. The Company expects to incur the cost of this renovation, which is ~~approximately $93,000~~currently estimated to be ~~paid from escrow as costs are incurred.~~

~~On April 5, 2016, the Company entered into a 15-year lease with a national fitness center for the anchor space at The Grove at Winter Park located in Winter Park, Florida. The lease is for~~between approximately 40,000 square feet, or 36% of the approximately 112,000 square foot multi-tenant retail center. On July 6, 2016, the Company funded approximately $4.0 million into an escrow account for customary tenant improvements for the fitness center, which could open as early as$300,000 and $400,000, prior to the fourth quarter of ~~2016.~~ 2017.

The ~~tenant will draw funding from escrow as construction progresses.~~Company currently leases space for its corporate offices subject to a lease that expires on September 30, 2017. The Company does not intend to renew the existing lease and plans to build-out the remaining approximately 7,700 square feet at the Company’s Williamson Business Park property to relocate its corporate offices. The Company currently estimates the build-out of the space at Williamson Business Park could total approximately $800,000. The build-out commenced in the second quarter of 2017.

As of ~~June 30, 2016,~~March 31, 2017, we have no other contractual requirements to make capital expenditures.

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~

2015, the agency advised the Company that the resolution to the inquiry would likely require the Company to incur costs associated with wetlands restoration relating to approximately 148.35 acres of the Company’s land. At December 31, 2015, the Company’s third-party environmental engineers estimated the cost for such restoration activities to range from approximately $1.7 million to approximately $1.9 million. Accordingly, as of December 31, 2015, the Company accrued an obligation of approximately $1.7 million, representing the low end of the estimated range of possible restoration costs, and included such estimated costs on the consolidated balance sheets as an increase in the basis of our land and development costs associated with those and benefitting surrounding acres. As of June 30, 2016, the final proposal from the Company’s third-party environmental engineer was received ~~for~~reflecting a total cost of approximately $2.0 million. Accordingly, an increase in the accrual of approximately $300,000 was made during the ~~three months ended June 30,~~second quarter of 2016. The Company has

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funded approximately ~~$590,000~~$1.0 million of the total $2.0 million of estimated costs ~~during the three months ended June 30, 2016.~~through March 31, 2017. The Company believes there is at least a reasonable possibility that the estimated remaining liability of approximately ~~$1.4~~$1.0 million could change within one year of the date of the consolidated financial statements, which in turn could have a material impact on the Company’s consolidated balance sheets and future cash flows. The Company evaluates its estimates on an ongoing basis; however, actual results may differ from those estimates. During the first quarter of 2017, the Company completed the sale of approximately 1,581 acres of land to Minto Communities LLC which acreage represents a portion of the Company’s remaining $1.0 million obligation. Accordingly, the Company deposited $423,000 of cash in escrow to secure performance on the obligation. The funds in escrow can be drawn upon completion of certain milestones including completion of restoration and annual required monitoring. Additionally, resolution of the regulatory matter required the Company to apply for an additional permit pertaining to an additional approximately 54.66 acres, which permit may require mitigation activities which the Company anticipates could be satisfied through the utilization of existing mitigation credits owned by the Company or the acquisition of mitigation credits. ~~The Company anticipates that resolution~~Resolution of this matter ~~will allow~~allowed the Company to obtain certain permits from the applicable federal or state regulatory agencies needed in connection with the closing of the land sale contract that gave rise to this matter. The number of mitigation credits that may be required is not currently estimable and as the utilization or purchase of such credits would be incorporated into the basis of the land under contract, no amounts related to mitigation credits have been accrued as of ~~June 30, 2016.~~March 31, 2017. In addition, in connection with other land sale contracts to which the Company is or may become a party, the pursuit of customary development entitlements by the potential purchasers may require the Company to utilize or acquire mitigation credits for the purpose of obtaining certain permits from the applicable federal or state regulatory agencies. Any costs incurred in connection with utilizing or acquiring such credits would be incorporated into the basis of the land under contract and, accordingly, no amounts related to such potential future costs have been accrued as of ~~June 30, 2016.~~March 31, 2017.

Du~~ring~~ theDuring the period from the fourth qu~~arter of 2~~015 a~~nd the fi~~rst quarter of ~~201~~62015 through the first quarter of 2017, the Company received communications from Wintergreen Advisors (“Wintergreen”), ~~the Co~~m~~pany rece~~ived comm~~unicat~~i~~ons from a single institutional~~who manages funds of our Company’s largest shareholder, some of which have been filed publicly. In investigating Wintergreen’s allegations contained in certain communications, pursuing the ~~shareholder’s allegations,~~strategic alternatives process suggested by Wintergreen, and engaging in a proxy contest, the Company has incurred costs of approximately ~~$1.3~~$2.4 million, to date, through ~~June 30, 2016~~March 31, 2017. Approximately $936,000 of ~~which~~the approximately ~~$1.2~~$2.4 million was incurred during the ~~six~~three months ended ~~June 30, 2016,~~March 31, 2017, of which approximately $536,000 is specifically for legal representation ~~accounting services, additional director~~ and ~~committee meeting fees, or other~~ third party ~~costs.~~costs related to the proxy contest. To date, none of Wintergreen’s allegations regarding inadequate disclosure or other wrong-doings by the ~~shareholder’s allegations~~Company or its directors or officers have been found to have any basis or merit; however, such costs could continue to be incurred and, while not reasonably estimable, may represent significant costs for for the Comp~~any~~ wh~~ich w~~o~~uld h~~ave an adve~~rse i~~m~~pact~~Company which would have an adverse impact on the Company~~’s re~~su~~lts~~the Company’s results of op~~eratio~~nsoperations and cash flows.

We believe we will have sufficient liquidity to fund our operations, capital requirements, and debt service requirements over the next twelve months and into the foreseeable future, with our cash on hand, cash flow from our operations, cash from the completion of 1031 like-kind exchanges, and the available borrowing capacity of approximately ~~$42.3~~$50.5 million under the Credit Facility, based on the level of borrowing base ~~requirements,~~assets, as of ~~June 30, 2016.~~

In the fourth quarter of 2015, the Company announced a ~~new~~ $10 million stock repurchase ~~program. Under~~program (the “$10 Million Repurchase Program”). As of March 29, 2017, the $10 Million Repurchase Program had been completed. In the first quarter of 2017, the Company announced a new $10 million stock repurchase program (the “New $10 Million Repurchase Program”) of which approximately $331,000 had been repurchased as of March 31, 2017. In the aggregate, during the ~~six~~three months ended ~~June 30, 2016,~~March 31, 2017, under both programs, the Company repurchased ~~62,751~~56,243 shares of its common stock on the open market for a total cost of approximately ~~$3.0~~$2.9 million, or an average price per share of ~~$47.78,~~$52.05, and placed those shares in treasury. ~~In July 2016, the Company announced its intent to complete, by the end of 2016, the remaining approximately $7.0 million of the $10 million stock repurchase program, depending upon market conditions.~~

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)~~

Our Board of Directors and management consistently review the allocation of capital with the goal of providing the best long-term return for our shareholders. These reviews consider various alternatives, including increasing or decreasing regular dividends, repurchasing stock, and retaining funds for reinvestment.

On July 20, 2016, the Company announced the conclusion to the evaluation of strategic alternatives for the Company to enhance shareholder value (the “Strategic Review”), which included the consideration of a wide range of potential alternatives, including sale of the Company, the sale of all or a portion of certain of the Company’s asset portfolios, and other actions including the ~~continuation~~continued execution of the Company’s business plan. While the comprehensive Strategic

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Review process has concluded, the Company and its Board of Directors intend to continue discussions with some interested parties who have indicated interest in certain of the Company’s assets. However, there is no set time line or formal process to these continued discussions and there can be no assurances that our efforts will lead to a transaction or the timing or terms thereof. The Board ~~of Directors~~ ~~remains~~remain committed to maximizing long-term value for all of its shareholders.

Otherwise, at least annually, the Board of Directors reviews our business plan and corporate strategies and makes adjustments as circumstances warrant.

Management’s focus is to continue to execute on our strategy, which is to ~~diversify~~monetize our ~~portfolio by redeploying~~land holdings and redeploy the proceeds, when possible from like-kind exchange transactions, and utilizing leverage including the borrowing capacity available under our Credit Facility and possibly the disposition or payoffs on our commercial loan investments to increase and diversify our portfolio of income-producing properties, to provide stabilized cash flows with good risk adjusted returns primarily in larger metropolitan areas.

We believe that we currently have a reasonable level of leverage. Proceeds from closed land transactions provide us with investible capital. Our strategy is to utilize leverage, when appropriate and necessary, and proceeds from land transactions, sales of income properties, and certain transactions in our subsurface interests, to acquire income properties. We may also acquire or originate commercial loan investments, invest in securities of real estate companies, or make other shorter term investments. Our targeted investment classes may include the following:

Single-tenant retail and office ~~double-or-triple~~double or triple net leased properties in major metropolitan ~~areas;~~areas and growth markets;

Multi-tenant office and retail properties in major metropolitan areas and growth markets, typically stabilized;

Purchase or origination of ground leases;

Self-developed properties on Company owned land including select office, flex, industrial, and retail;

Joint venture development using Company owned land;

Origination or purchase of 1-10 year term loans with strong risk-adjusted yields with property types to include hotel, office, retail, land and industrial;

Select regional area investments using Company market knowledge and expertise to earn good risk-adjusted yields; and

Real estate related investment securities, including commercial mortgage backed securities, preferred or common stock, and corporate bonds.

CRITICAL ACCOUNTING POLICIES

The consolidated financial statements are prepared in conformity with ~~U.S.~~United States generally accepted accounting principles (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses. Actual results could differ from those estimates.

Our significant accounting policies are described in the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year-ended December 31, ~~2015.~~2016. Judgments and estimates of uncertainties are required in applying our accounting policies in many areas. During the ~~six~~three months ended ~~June 30, 2016,~~March 31, 2017, there have been no material changes to the critical accounting policies affecting the application of those accounting policies as noted in our Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016.

ITEM 3. ~~QUANTITATIVE~~QUANTITATIVE AND ~~QUALITATI~~VEQUALITATIVE DISCLOSURES ABOUT MARKET RISKS

The principal market risk (i.e. the risk of loss arising from adverse changes in market rates and prices), to which we are exposed is interest rate risk, relating to our debt. We may utilize overnight sweep accounts and short-term investments as a means to minimize the interest rate risk. We do not believe that interest rate risk related to cash equivalents and short-term investments, if any, is material due to the nature of the investments.

We are primarily exposed to interest rate risk relating to our own debt in connection with our credit facility, as this facility carries a variable rate of interest. Our borrowings on our $75.0 million revolving credit facility bear a variable rate of interest based on the 30-day LIBOR plus a rate of between 135 basis points and 225 basis points based on our level of borrowing as a percentage of our total asset value. ~~There was no~~As of March 31, 2017, the outstanding balance on our credit

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facility ~~at June 30, 2016.~~was $24.5 million. A hypothetical change in the interest rate of 100 basis points (i.e., 1%) would affect our financial position, results of operations, and cash flows by approximately $245,000. The $25.0 million mortgage loan which closed on April 15, 2016, bears a variable rate of interest based on the 30-day LIBOR plus a rate of 190 basis points. The interest rate for this mortgage loan has been fixed through the use of an interest rate swap that fixed the rate at 3.17%. By virtue of fixing the variable rate, our exposure to changes in interest rates is minimal but for the impact on Other Comprehensive Income. Management’s objective is to limit the impact of interest rate changes on earnings and cash flows and to manage our overall borrowing costs.

ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, an evaluation, as required by Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934 (the “Exchange Act”), was carried out under the supervision and with the participation of the Company’s management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act). Based on that evaluation, our CEO and CFO have concluded that the design and operation of the Company’s disclosure controls and procedures were effective as of ~~June 30, 2016,~~March 31, 2017, to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to provide reasonable assurance that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the ~~six~~three months ended ~~June 30, 2016,~~March 31, 2017, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On February 15, 2017, Wintergreen Advisers, LLC (“Wintergreen”) filed a complaint in the Circuit Court of the Seventh Judicial Circuit in Volusia County, Florida (the “Wintergreen Complaint”) against the Company and each of its directors. The Wintergreen Complaint sought an order compelling the Company to either include Wintergreen’s four director nominees, all of whom are employees or hired consultants of Wintergreen, in the Company’s proxy statement as nominees to be voted on at the Company’s 2017 Annual Meeting of Shareholders (the “2017 Annual Meeting”) or permit Wintergreen to bring their proposed nominees before the Company’s shareholders at the 2017 Annual Meeting. Although the Company’s Board of Directors believed that the Wintergreen Complaint had no legal merit, on March 6, 2017, the Company’s Board of Directors approved the Company’s entering into a Settlement Agreement. Pursuant to the terms of the Settlement Agreement, Wintergreen’s nominees may stand for election at the 2017 Annual Meeting and the Company agreed not to amend its Bylaws prior to the 2017 Annual Meeting. The Wintergreen Complaint was voluntarily dismissed on April 4, 2017.

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ITEM 1A. RISKRISK FACTORS

Certain statements contained in this report (other than statements of historical fact) are forward-looking statements. The words “believe,” “estimate,” “expect,” “intend,” “anticipate,” “will,” “could,” “may,” “should,” “plan,” “potential,” “predict,” “forecast,” “project,” and similar expressions and variations thereof identify certain of such forward-looking statements, which speak only as of the dates on which they were made. Forward-looking statements are made based upon management’s expectations and beliefs concerning future developments and their potential effect upon the Company.

There can be no assurance that future developments will be in accordance with management’s expectations or that the effect of future developments on the Company will be those anticipated by management.

We wish to caution readers that the assumptions, which form the basis for forward-looking statements with respect to or that may impact earnings for the year-ended December 31, ~~2016,~~2017, and thereafter, include many factors that are beyond the Company’s ability to control or estimate precisely. These risks and uncertainties include, but are not limited to, the strength of the real estate market in the City and Volusia County, Florida; the impact of a prolonged recession or downturn in economic conditions; our ability to successfully execute acquisition or development strategies; any loss of key management personnel; changes in local, regional, and national economic conditions affecting the real estate development business and income properties; the impact of environmental and land use regulations generally and on certain land sale transactions specifically; extreme or severe weather conditions; the impact of competitive real estate activity; variability in quarterly results due to the unpredictable timing of land transactions; the loss of any major income property tenants; the timing of land sale transactions; and the availability of capital. These risks and uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016. There have been no material changes to those risk factors. The risks described in the Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially adversely affect the Company.

While we periodically reassess material trends and uncertainties affecting our results of operations and financial condition, we do not intend to review or revise any particular forward-looking statement referenced herein in light of future events.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no unregistered sales of equity securities during the ~~six~~three months ended ~~June 30, 2016,~~March 31, 2017, which were not previously reported.

The following share repurchases were made during the ~~six~~three months ended ~~June 30, 2016:~~

March 31, 2017:

Total Number
of Shares
Purchased

Average Price
Paid per Share

Total Number of
Shares Purchased as
a Part of Publicly
Announced Plans
or Programs

Maximum Number (or
Approximate Dollar
Value) of Shares that
May Yet be Purchased
Under the Plans or
Programs

1/1/2016 - 1/31/2016

—

$
—

—

$
10,028,941

2/1/2016 - 2/29/2016

24,024

46.21

24,024

$
8,918,687

3/1/2016 - 3/31/2016

4,838

47.41

4,838

$
8,689,328

4/1/2016 - 4/30/2016

832

49.25

832

$
8,648,352

5/1/2016 - 5/31/2016

33,057

48.94

33,057

$
7,030,406

6/1/2016 - 6/30/2016

—

—

—

$
7,030,406

Total

62,751

$
47.78

62,751

$
7,030,406


	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as a Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plans or Programs
1/1/2017 - 1/31/2017	2,062	$	53.00	2,062	$	2,487,759
2/1/2017 - 2/28/2017	4,847		53.71	4,847		2,227,447
3/1/2017 - 3/31/2017	49,334		51.85	49,334		9,669,489
Total	56,243	$	52.05	56,243	$	9,669,489

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

Not applicable

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ITEM 6. EXHIBITS

(a) Exhibits:


Exhibit 3.1		Amended and Restated Articles of Incorporation of Consolidated-Tomoka Land Co., dated October 26, 2011, filed as Exhibit 3.1 to the registrant’s Current Report Form 8-K filed October 28, 2011, and incorporated herein by reference.

Exhibit ~~10.1~~10.29		~~Purchase and sale agreement by and between Consolidated-Tomoka Land Co. and Land Venture Partners, LLC for the sale~~Form of ~~the Company’s subsurface interests, dated April 13, 2016,~~February 3, 2017 Performance Share Award Agreement, filed as Exhibit ~~10.1~~10.29 to ~~the registrant’s Current~~this Quarterly Report on Form ~~8-K filed April 18, 2016, and incorporated herein by reference.~~

~~Exhibit 10.2~~		~~Second Amendment to~~10-Q for the Amended and Restated Credit Agreement with Bank of Montreal and the other lenders thereunder, with Bank of Montreal acting as Administrative Agent, dated April 13, 2016, filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed April 19, 2016, and incorporated herein by reference.quarterly period ended March 31, 2017.

Exhibit 31.1		Certification ~~furnished~~filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 31.2		Certification ~~furnished~~filed pursuant to Section 302 of Sarbanes-Oxley Act of 2002.

Exhibit 32.1		Certification furnished pursuant to 18 U.S.C. Section 1350, as Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.2		Certification furnished pursuant to 18 U.S.C. Section 1350, as Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 101.INS		XBRL Instance Document

Exhibit 101.SCH		XBRL Taxonomy Extension Schema Document

Exhibit 101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

Exhibit 101.DEF		XBRL Taxonomy Definition Linkbase Document

Exhibit 101.LAB		XBRL Taxonomy Extension Label Linkbase Document

Exhibit 101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

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Signatures~~Signatures~~

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


	CONSOLIDATED-TOMOKA LAND CO.
	(Registrant)

~~July 29, 2016~~May 9, 2017	By:	/s/ John P. Albright
		John P. Albright President and Chief Executive Officer (Principal Executive Officer)

~~July 29, 2016~~May 9, 2017	By:	/s/ Mark E. Patten
		Mark E. Patten, Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2016			2015			2016			2015
Revenues
Income Properties	$	6,033,082		$	4,132,052		$	12,462,323		$	8,392,727
Interest Income from Commercial Loan Investments		635,050			638,710			1,516,295			1,270,194
Real Estate Operations		4,774,620			1,368,141			14,335,518			2,227,942
Golf Operations		1,412,196			1,448,567			2,876,555			2,985,993
Agriculture and Other Income		18,990			20,738			37,682			39,677
Total Revenues		12,873,938			7,608,208			31,228,373			14,916,533
Direct Cost of Revenues
Income Properties		(1,204,040	)		(682,887	)		(2,380,747	)		(1,323,733	)
Real Estate Operations		(1,124,641	)		(305,853	)		(3,381,682	)		(904,576	)
Golf Operations		(1,447,176	)		(1,456,232	)		(2,851,764	)		(2,845,844	)
Agriculture and Other Income		(52,654	)		(43,195	)		(100,705	)		(98,346	)
Total Direct Cost of Revenues		(3,828,511	)		(2,488,167	)		(8,714,898	)		(5,172,499	)
General and Administrative Expenses		(1,899,126	)		(1,874,877	)		(6,696,583	)		(3,344,643	)
Impairment Charges		(1,970,822	)		—			(2,180,730	)		(510,041	)
Depreciation and Amortization		(1,805,559	)		(1,071,752	)		(3,872,926	)		(2,227,491	)
Gain on Disposition of Assets		1,362,948			12,749			1,362,948			18,189
Total Operating Expenses		(8,141,070	)		(5,422,047	)		(20,102,189	)		(11,236,485	)
Operating Income		4,732,868			2,186,161			11,126,184			3,680,048
Investment Income (Loss)		2,691			74,818			(563,693	)		225,277
Interest Expense		(2,154,437	)		(1,888,434	)		(4,246,203	)		(2,954,936	)
Income Before Income Tax Expense		2,581,122			372,545			6,316,288			950,389
Income Tax Expense		(1,000,480	)		(147,928	)		(3,343,081	)		(372,416	)
Net Income		1,580,642			224,617			2,973,207			577,973
Less: Net Loss (Income) Attributable to Noncontrolling Interest in Consolidated VIE		(10,199	)		—			21,954
Net Income Attributable to Consolidated-Tomoka Land Co.	$	1,570,443		$	224,617		$	2,995,161		$	577,973

Per Share Information- See Note 10:
Basic and Diluted
Net Income Attributable to Consolidated-Tomoka Land Co.	$	0.28		$	0.04		$	0.52		$	0.10

Dividends Declared and Paid	$	0.04		$	0.04		$	0.04		$	0.04

	Consolidated-Tomoka Land Co. Shareholders
	Common Stock		Treasury Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Consolidated-Tomoka Land Co. Shareholders’ Equity			Noncontrolling Interest in Consolidated VIE			Total Shareholders' Equity
Balance January 1, 2016		5,901,510		(7,866,410	)		16,991,257			120,444,002			(688,971	)		134,781,388			5,606,938			140,388,326
Net Income		—		—			—			2,995,161			—			2,995,161			(21,954	)		2,973,207
Stock Repurchase		—		(2,998,535	)		—			—			—			(2,998,535	)		—			(2,998,535	)
Exercise of Stock Options		850		—			28,858			—			—			29,708			—			29,708
Vested Restricted Stock		8,884		—			(205,090	)		—			—			(196,206	)		—			(196,206	)
Stock Issuance		358		—			17,093			—			—			17,451			—			17,451
Stock Compensation Expense from Restricted Stock Grants and Equity Classified Stock Options		—		—			2,579,175			—			—			2,579,175			—			2,579,175
Cash Dividends ($0.04 per share)		—		—			—			(228,600	)		—			(228,600	)		—			(228,600	)
Other Comprehensive Income, Net of Tax		—		—			—			—			353,700			353,700			—			353,700
Balance June 30, 2016	$	5,911,602	$	(10,864,945	)	$	19,411,293		$	123,210,563		$	(335,271	)	$	137,333,242		$	5,584,984		$	142,918,226

	Six Months Ended
	June 30			June 30
	2016			2015
Cash Flow from Operating Activities:
Net Income	$	2,973,207		$	577,973
Adjustments to Reconcile Net Income to Net Cash Provided by (Used In) Operating Activities:
Depreciation and Amortization		3,872,926			2,227,491
Amortization of Intangible Liabilities to Income Property Revenue		(1,162,780	)		—
Loan Cost Amortization		227,293			167,036
Amortization of Discount on Convertible Debt		551,489			318,197
Amortization of Discount on Debt Securities within Investment Securities		—			(4,228	)
Gain on Disposition of Property, Plant, and Equipment and Intangible Assets		(1,362,948	)		(18,189	)
Impairment Charges		2,180,730			510,041
Accretion of Commercial Loan Origination Fees		(164,893	)		(58,424	)
Amortization of Fees on Acquisition of Commercial Loan Investments		36,382			—
Discount on Commercial Loan Investment Payoff		217,500			—
Realized Loss (Gain) on Investment Securities		575,567			(130,791	)
Realized Gain on Put Option Derivative		—			(24,915	)
Deferred Income Taxes		2,108,493			229,744
Non-Cash Compensation		2,491,621			621,724
Decrease (Increase) in Assets:
Refundable Income Taxes		741,392			(440,488	)
Land and Development Costs		(4,584,904	)		(440,607	)
Impact Fees and Mitigation Credits		276,460			422,731
Other Assets		(2,678,702	)		(1,167,489	)
Increase (Decrease) in Liabilities:
Accounts Payable		290,713			532,273
Accrued and Other Liabilities		514,524			613,782
Deferred Revenue		(9,331,415	)		(1,571,266	)
Net Cash Provided By (Used In) Operating Activities		(2,227,345	)		2,364,595
Cash Flow from Investing Activities:
Acquisition of Property, Plant, and Equipment		(422,002	)		(1,499,328	)
Acquisition of Property, Plant, and Equipment and Intangible Lease Assets and Liabilities through Business Combinations		(2,460,000	)		(8,634,452	)
Acquisition of Commercial Loan Investments		—			(894,878	)
Decrease in Restricted Cash		3,491,905			2,946,703
Proceeds from Sale of Investment Securities		6,252,362			834,964
Proceeds from Sale of Put Options		—			78,995
Acquisition of Investment Securities		—			(6,927,254	)
Proceeds from Disposition of Property, Plant, and Equipment		18,828,578			6,185,947
Principal Payments Received on Commercial Loan Investments		14,282,500			7,200,909
Net Cash Provided By (Used In) Investing Activities		39,973,343			(708,394	)
Cash Flow from Financing Activities:
Proceeds from Long-Term Debt		28,750,000			76,375,000
Payments on Long-Term Debt		(42,050,000	)		(47,540,011	)
Cash Paid for Loan Fees		(388,257	)		—
Cash Proceeds from Exercise of Stock Options		47,159			423,480
Cash Used to Purchase Common Stock		(2,998,535	)		(858,695	)
Cash From (Used for) Excess Tax Benefit (Expense) from Vesting of Restricted Stock		2,507			(29,563	)
Cash Paid for Vesting of Restricted Stock		(198,713	)		—
Dividends Paid		(228,600	)		(233,187	)
Net Cash Provided By (Used In) Financing Activities		(17,064,439	)		28,137,024
Net Increase in Cash		20,681,559			29,793,225
Cash, Beginning of Year		4,060,677			1,881,195
Cash, End of Period	$	24,742,236		$	31,674,420

Land Tract	Date Closed	No. of Acres		Sales Price		Avg. Sales Price per Acre		Revenue ⁽¹⁾Recognized in Q2 2016		Revenue ⁽¹⁾Recognized in YTD Q2 2016		Gain ⁽²⁾Recognized in Q2 2016		Gain ⁽²⁾ Recognized in YTD Q2 2016		Deferred Revenue ⁽³⁾as of June 30, 2016
Tanger Outlet	11/12/2015		38.93	$	9,700,000	$	249,165	$	1,633,919	$	5,129,130	$	1,314,682	$	4,106,231	$	1,773,019
Sam's Club	12/23/2015		18.10		4,500,000		248,619		837,596		2,627,483		689,171		2,151,898		770,425
NADG - First Parcel	12/29/2015		37.26		5,168,335		138,710		1,040,527		3,269,246		734,984		2,290,225		1,018,759
NADG - Outparcel	3/30/2016		4.40		2,000,000		454,545		330,730		1,775,334		294,649		1,546,609		394,230
Total Tomoka Town Center Sales			98.69	$	21,368,335	$	216,520	$	3,842,772	$	12,801,193	$	3,033,486	$	10,094,963	$	3,956,433

Land Tract	No. of Acres		Sales Price (In $000's)		Sales Price per Acre		Infrastructure Reimbursement (in $000s)
Tanger Outlet [Closed] ⁽¹⁾		38.93	$	9,700	$	249,165	$	5,500
Sam's Club [Closed] ⁽²⁾		18.10		4,500		248,619		1,100
NADG - First Parcel [Closed]⁽³⁾		37.26		5,168		138,710		1,800
NADG - Outparcel [Closed]⁽³⁾		4.40		2,000		454,545		211
NADG - Option Parcels ⁽⁴⁾		81.55		20,196		247,645		3,889
Total Developable Area		180.24		41,564		230,602		12,500
Common Area ⁽⁵⁾		54.32	N/A		N/A			(12,800	)
Total Town Center		234.56	$	41,564	$	177,199	$	(300	)

	As of December 31, 2015
	Cost⁽¹⁾		Gains in Accumulated Other Comprehensive Income		Losses in Accumulated Other Comprehensive Income			Estimated Fair Value (Level 1 and 2 Inputs)
Debt Securities	$	843,951	$	—	$	(41,451	)	$	802,500
Total Debt Securities		843,951		-		(41,451	)		802,500
Common Stock		5,981,464		—		(1,080,197	)		4,901,267
Total Equity Securities		5,981,464		—		(1,080,197	)		4,901,267
Total Available-for-Sale Securities	$	6,825,415	$	-	$	(1,121,648	)	$	5,703,767


	12/31/2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-Sale Securities
Available-for-Sale Debt Securities	$	802,500	$	-	$	802,500	$	-
Available-for-Sale Equity Securities		4,901,267		4,901,267		-		-
Total Available-for-Sale Securities		5,703,767		4,901,267		802,500		-
Total	$	5,703,767	$	4,901,267	$	802,500	$	-

	June 30, 2016
	Total			Due Within One Year
Credit Facility	$	—		$	—
Mortgage Note Payable (originated with UBS)		7,300,000			—
Mortgage Note Payable (originated with BOA)		23,100,000			—
Mortgage Note Payable (originated with Wells Fargo)		30,000,000			—
Mortgage Note Payable (originated with Wells Fargo)		25,000,000
4.50% Convertible Senior Notes due 2020, net of discount		70,311,211			—
Loan Costs, net of accumulated amortization		(1,823,833	)		—
Total Long-Term Debt	$	153,887,378		$	—

Market Condition Non-Vested Restricted Shares	Shares			Wtd. Avg. Grant Date Fair Value
Outstanding at January 1, 2016		2,400		$	23.42
Granted		—			—
Vested		(2,300	)		23.42
Expired		—			—
Forfeited		(100	)		23.42
Outstanding at June 30, 2016		-		$	-

	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as a Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plans or Programs
1/1/2016 - 1/31/2016		—	$	—		—	$	10,028,941
2/1/2016 - 2/29/2016		24,024		46.21		24,024	$	8,918,687
3/1/2016 - 3/31/2016		4,838		47.41		4,838	$	8,689,328
4/1/2016 - 4/30/2016		832		49.25		832	$	8,648,352
5/1/2016 - 5/31/2016		33,057		48.94		33,057	$	7,030,406
6/1/2016 - 6/30/2016		—		—		—	$	7,030,406
Total		62,751	$	47.78		62,751	$	7,030,406