c974-20220630x10q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarter Ended June 30, 2022

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number

000-56177

BBX Capital, Inc.

(Exact name of registrant as specified in its charter)


Florida		82-4669146
(State or other jurisdiction of incorporation or organization)		(I.R.S Employer Identification No.)

201 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida		33301
(Address of principal executive office)		(Zip Code)

(954) 940-4900

(Registrant's telephone number, including area code)

Securities Registered pursuant to Section 12(b) of the Act:

None

Not Applicable

(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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit 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 “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer [ ]	Accelerated filer [X]	Non-accelerated filer [ ]	Smaller reporting company [ ]
Emerging growth company[X]

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.[X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES [ ]NO [ X ]

The number of shares outstanding of each of the registrant’s classes of common stock as of August 3, 2022 is as follows:

Class A Common Stock of $.01 par value, 12,364,183 shares outstanding.
‎Class B Common Stock of $.01 par value, 3,871,866 shares outstanding.


BBX Capital, Inc. TABLE OF CONTENTS

Part I.
Item 1.	Financial Statements

	Condensed Consolidated Statements of Financial Condition as of June 30, 2022 and December 31, 2021 - Unaudited	1
	Condensed Consolidated Statements of Operations and Comprehensive Income for the Three and Six Months Ended June 30, 2022 and 2021 - Unaudited	2
	Condensed Consolidated Statements of Changes in Equity for the Three and Six Months Ended June 30, 2022 and 2021 - Unaudited	3
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021 - Unaudited	5
	Notes to Condensed Consolidated Financial Statements - Unaudited	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	55
Item 4.	Controls and Procedures	55

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	56
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56
Item 5.	Other Information	56
Item 6.	Exhibits	57
	Signatures	58

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

BBX Capital, Inc.

Condensed Consolidated Statements of Financial Condition - Unaudited

(In thousands, except share data)



	June 30,		December 31,
	2022		2021
ASSETS
Cash and cash equivalents	$	118,136		118,045
Restricted cash		750		1,000
Trade accounts receivable, net		23,893		29,899
Trade inventory, net		56,374		41,895
Real estate ($5,099 in 2022 and $7,679 in 2021 held for sale)		16,004		22,868
Investments in and advances to unconsolidated real estate joint ventures		51,740		52,966
Note receivable from Bluegreen Vacations Holding Corporation		50,000		50,000
Property and equipment, net		30,888		30,611
Goodwill		18,414		18,414
Intangible assets, net		30,694		31,982
Operating lease assets		100,667		90,639
Deferred tax asset, net		4,246		3,776
Contingent purchase price receivable		18,658		19,925
Other assets		22,733		21,335
Total assets	$	543,197		533,355
LIABILITIES AND EQUITY
Liabilities:
Accounts payable	$	15,930		12,980
Accrued expenses		29,514		33,136
Other liabilities		5,433		5,002
Operating lease liabilities		115,100		103,262
Notes payable and other borrowings		43,564		54,883
Total liabilities		209,541		209,263
Commitments and contingencies (See Note 12)
Redeemable noncontrolling interest		1,502		1,144
Equity:
Class A Common Stock of $0.01 par value; authorized 30,000,000 shares; issued and outstanding 11,792,660 in 2022 and 11,803,842 in 2021		118		118
Class B Common Stock of $0.01 par value; authorized 4,000,000 shares; issued and outstanding 3,666,837 in 2022 and 3,671,437 in 2021		37		37
Additional paid-in capital		312,299		310,588
Accumulated earnings		17,439		9,226
Accumulated other comprehensive income		1,531		1,836
Total shareholders' equity		331,424		321,805
Noncontrolling interests		730		1,143
Total equity		332,154		322,948
Total liabilities and equity	$	543,197		533,355

See Notes to Condensed Consolidated Financial Statements - Unaudited

‎

BBX Capital, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income – Unaudited

(In thousands, except per share data)



	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Revenues:
Trade sales	$	72,585		46,532		138,334		92,446
Sales of real estate inventory		8,737		12,390		15,207		25,925
Interest income		1,221		1,667		2,370		3,317
Net gains on sales of real estate assets		—		204		1,329		309
Other revenue		1,150		925		1,929		1,596
Total revenues		83,693		61,718		159,169		123,593
Costs and expenses:
Cost of trade sales		55,598		37,567		106,604		74,460
Cost of real estate inventory sold		3,878		5,568		6,113		13,426
Interest expense		509		294		1,045		584
Recoveries from loan losses, net		(3,289)		(1,137)		(3,937)		(1,645)
Impairment losses		—		—		64		—
Selling, general and administrative expenses		30,061		14,039		57,425		27,237
Total costs and expenses		86,757		56,331		167,314		114,062
Operating (losses) income		(3,064)		5,387		(8,145)		9,531
Equity in net earnings of unconsolidated real estate joint ventures		19,154		4,443		20,686		4,172
Other income		103		129		1,087		192
Gain on the consolidation of IT'SUGAR, LLC		—		15,890		—		15,890
Foreign exchange gain		357		976		168		496
Income before income taxes		16,550		26,825		13,796		30,281
Provision for income taxes		(6,161)		(6,588)		(5,333)		(7,589)
Net income		10,389		20,237		8,463		22,692
Net loss (income) attributable to noncontrolling interests		66		(117)		176		(227)
Net income attributable to shareholders	$	10,455		20,120		8,639		22,465
Basic earnings per share	$	0.68		1.07		0.56		1.18
Diluted earnings per share	$	0.68		1.07		0.56		1.18
Basic weighted average number of common shares outstanding		15,471		18,811		15,473		19,046
Diluted weighted average number of common shares outstanding		15,471		18,811		15,491		19,046

Net income	$	10,389		20,237		8,463		22,692
Other comprehensive (loss) income, net of tax:
Unrealized (loss) income on securities available for sale		(45)		14		(91)		12
Foreign currency translation adjustments		(378)		226		(214)		340
Other comprehensive (loss) income, net		(423)		240		(305)		352
Comprehensive income, net of tax		9,966		20,477		8,158		23,044
Comprehensive loss (income) attributable to noncontrolling interests		66		(117)		176		(227)
Comprehensive income attributable to shareholders	$	10,032		20,360		8,334		22,817

See Notes to Condensed Consolidated Financial Statements – Unaudited

‎



BBX Capital, Inc.
Condensed Consolidated Statements of Changes in Equity - Unaudited
For the Three Months Ended June 30, 2022 and 2021
(In thousands)

	Shares of												Accumulated
	Common Stock				Common								Other
	Outstanding				Stock				Additional				Comprehen-		Non-
	Class				Class				Paid-in		Accumulated		sive		controlling		Total
	A		B		A		B		Capital		(Deficit) Earnings		Income		Interests		Equity
Balance, March 31, 2021		15,285		3,694	$	153		37		310,588		(3,245)		1,942		209		309,684
Net income excluding $72 of loss attributable to redeemable noncontrolling interest		—		—		—		—		—		20,120		—		45		20,165
Other comprehensive income		—		—		—		—		—		—		240		—		240
Purchase and retirement of common stock		(258)		—		(3)		—		—		(1,628)		—		—		(1,631)
Balance, June 30, 2021		15,027		3,694	$	150		37		310,588		15,247		2,182		254		328,458



	Shares of
	Common Stock				Common								Accumulated
	Outstanding				Stock				Additional				Other		Non-
	Class				Class				Paid-in		Accumulated		Comprehensive		controlling		Total
	A		B		A		B		Capital		Earnings		Income		Interests		Equity
Balance, March 31, 2022		11,808		3,667	$	118		37		311,344		7,357		1,954		898		321,708
Net income (loss) excluding $82 of income attributable to redeemable noncontrolling interest		—		—		—		—		—		10,455		—		(148)		10,307
Other comprehensive loss		—		—		—		—		—		—		(423)		—		(423)
Accretion of noncontrolling interest		—		—		—		—		—		(252)		—		—		(252)
Distributions to noncontrolling interests		—		—		—		—		—		—		—		(20)		(20)
Purchase and retirement of common stock		(16)		—		—		—		—		(121)		—		—		(121)
Share-based compensation		—		—		—		—		955		—		—		—		955
Balance, June 30, 2022		11,792		3,667	$	118		37		312,299		17,439		1,531		730		332,154

‎



BBX Capital, Inc.
Condensed Consolidated Statements of Changes in Equity - Unaudited
For the Six Months Ended June 30, 2022 and 2021
(In thousands)

	Shares of
	Common Stock				Common								Accumulated
	Outstanding				Stock				Additional				Other		Non-
	Class				Class				Paid-in		Accumulated		Comprehensive		controlling		Total
	A		B		A		B		Capital		(Deficit) Earnings		Income		Interests		Equity
Balance, December 31, 2020		15,624		3,694	$	156		37		310,588		(3,457)		1,830		99		309,253
Net income excluding $72 of income attributable to redeemable noncontrolling interest		—		—		—		—		—		22,465		—		155		22,620
Other comprehensive income		—		—		—		—		—		—		352		—		352
Purchase and retirement of common stock		(597)		—		(6)		—		—		(3,761)		—		—		(3,767)
Balance, June 30, 2021		15,027		3,694	$	150		37		310,588		15,247		2,182		254		328,458



	Share of
	Common Stock				Common								Accumulated
	Outstanding				Stock				Additional				Other		Non-
	Class				Class				Paid-in		Accumulated		Comprehensive		controlling		Total
	A		B		A		B		Capital		Earnings		Income		Interests		Equity
Balance, December 31, 2021		11,804		3,671	$	118		37		310,588		9,226		1,836		1,143		322,948
Net income excluding $11 of income attributable to redeemable noncontrolling interest		—		—		—		—		—		8,639		—		(187)		8,452
Other comprehensive loss		—		—		—		—		—		—		(305)		—		(305)
Accretion of noncontrolling interest		—		—		—		—		—		(305)		—		—		(305)
Contributions from noncontrolling interest		—		—		—		—		—		—		—		25		25
Distributions to noncontrolling interests		—		—		—		—		—		—		—		(251)		(251)
Purchase and retirement of common stock		(16)		—		—		—		—		(121)		—		—		(121)
Conversion of common stock from Class B to Class A		4		(4)		—		—		—		—		—		—		—
Share-based compensation		—		—		—		—		1,711		—		—		—		1,711
Balance, June 30, 2022		11,792		3,667	$	118		37		312,299		17,439		1,531		730		332,154

See Notes to Condensed Consolidated Financial Statements - Unaudited

‎

BBX Capital, Inc.

Condensed Consolidated Statements of Cash Flows - Unaudited

(In thousands)



	For the Six Months Ended June 30,
	2022		2021
Operating activities:
Net income	$	8,463		22,692
Adjustments to reconcile net income to net cash
provided by operating activities:
Recoveries from loan losses, net		(3,937)		(1,645)
Depreciation, amortization and accretion		5,201		2,238
Net gains on sales of real estate and property and equipment		(2,117)		(367)
Gain on the consolidation of IT'SUGAR, LLC		—		(15,890)
Equity in net earnings of unconsolidated real estate joint ventures		(20,686)		(4,172)
Return on investment in unconsolidated real estate joint ventures		22,698		7,161
(Increase) decrease in deferred income tax asset, net		(470)		952
Impairment losses		64		—
Share-based compensation expense		1,735		—
Increase in trade inventory		(13,512)		(4,878)
(Provision) recovery for excess and obsolete inventory		(967)		43
Decrease in trade receivables		6,006		2,714
Decrease in real estate inventory		2,513		10,238
Net change in operating lease asset and operating lease liability		844		470
Decrease (increase) in contingent purchase price receivable		1,267		(7,819)
Increase in other assets		(1,041)		(1,249)
(Decrease) increase in accrued expenses		(3,622)		1,176
Increase in accounts payable		2,950		1,226
Increase in other liabilities		213		119
Net cash provided by operating activities		5,602		13,009
Investing activities:
Return of investment in unconsolidated real estate joint ventures		3,861		7,954
Investments in unconsolidated real estate joint ventures		(4,647)		(8,221)
Proceeds from repayment of loans receivable		4,147		2,421
Proceeds from sales of real estate held-for-sale		3,937		1,105
Proceeds from sales of property and equipment		2,741		—
Repayment of advances to IT'SUGAR, LLC		—		222
Additions to real estate held-for-sale and held-for-investment		(167)		(30)
Purchases of property and equipment		(5,950)		(2,102)
Cash acquired in the consolidation of IT'SUGAR, LLC		—		6,909
Change in cash from other investing activities		(8)		(217)
Net cash provided by investing activities		3,914		8,041
				(Continued)

‎



	For the Six Months Ended June 30,
	2022		2021
Financing activities:
Repayments of notes payable and other borrowings		(14,336)		(7,257)
Proceeds from notes payable and other borrowings		4,990		1,788
Purchase and retirement of Class A Common Stock		(121)		(3,767)
Capital contributions from noncontrolling interests		43		—
Distributions to noncontrolling interests		(251)		—
Net cash used in financing activities		(9,675)		(9,236)
(Decrease) increase in cash, cash equivalents and restricted cash		(159)		11,814
Cash, cash equivalents and restricted cash at beginning of period		119,045		90,387
Cash, cash equivalents and restricted cash at end of period	$	118,886		102,201

Interest paid on borrowings, net of amounts capitalized	$	829		253
Income taxes paid		12,560		1,908
Supplementary disclosure of non-cash investing and financing activities:
Construction funds receivable transferred to real estate		277		264
Operating lease assets obtained in exchange for new operating lease liabilities		19,162		1,866
Assumption of Community Development District Bonds by homebuilders		2,189		4,157
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents		118,136		101,851
Restricted cash		750		350
Total cash, cash equivalents, and restricted cash	$	118,886		102,201

See Notes to Condensed Consolidated Financial Statements - Unaudited

BBX Capital, Inc.

Notes to Condensed Consolidated Financial Statements - Unaudited

1. Organization and Basis of Financial Statement Presentation

Organization

BBX Capital, Inc. and its subsidiaries (the “Company” or, unless otherwise indicated or the context otherwise requires, “we,” “us,” or “our”) is a Florida-based diversified holding company. BBX Capital, Inc. as a standalone entity without its subsidiaries is referred to as “BBX Capital.”

Principal Investments

BBX Capital’s principal holdings are BBX Capital Real Estate, LLC (“BBX Capital Real Estate” or “BBXRE”), BBX Sweet Holdings, LLC (“BBX Sweet Holdings”) and Renin Holdings, LLC (“Renin”).

BBX Capital Real Estate

BBX Capital Real Estate is engaged in the acquisition, development, construction, ownership, financing, and management of real estate and investments in real estate joint ventures, including investments in multifamily rental apartment communities, single-family master-planned for sale housing communities, and commercial properties located primarily in Florida. In addition, BBX Capital Real Estate currently owns a 50% equity interest in The Altman Companies, LLC (the “Altman Companies”), a developer and manager of multifamily rental apartment communities, and anticipates acquiring an additional 40% of the Altman Companies in 2023. BBXRE also manages the legacy assets acquired in connection with the Company’s sale of BankAtlantic in 2012, including portfolios of loans receivable, real estate properties, and judgments against past borrowers.

BBX Sweet Holdings

BBX Sweet Holdings is engaged in the ownership and management of operating businesses in the confectionery industry, including (i) IT’SUGAR, a specialty candy retailer that whose products include bulk candy, candy in giant packaging, and licensed and novelty items and which operates in retail locations which include a mix of high-traffic resort and entertainment, lifestyle, mall/outlet, and urban locations throughout the United States, (ii) Las Olas Confections and Snacks, a manufacturer and wholesaler of chocolate and other confectionery products, and (iii) Hoffman’s Chocolates, a retailer of gourmet chocolates with retail locations in South Florida.

BBX Sweet Holdings owns over 90% of the equity interests in IT’SUGAR. On September 22, 2020, IT’SUGAR and its subsidiaries filed voluntary petitions to reorganize under Chapter 11 of Title 11 of the U.S. Code (the “Bankruptcy Code”) in the U.S. Bankruptcy Court for the Southern District of Florida (the “Bankruptcy Court”) (the cases commenced by such filings, the “Bankruptcy Cases”), and as a result of the filings and the uncertainties surrounding the nature, timing, and specifics of the bankruptcy proceedings, the Company deconsolidated IT’SUGAR on September 22, 2020. On June 16, 2021, the Bankruptcy Court confirmed IT’SUGAR’s plan of reorganization, and the plan became effective on June 17, 2021 (the “Effective Date”). Pursuant to the terms of the plan, BBX Sweet Holdings’ equity interests in IT’SUGAR were revested on the Effective Date. As a result of the confirmation and effectiveness of the plan and the revesting of its equity interests in IT’SUGAR, the Company was deemed to have reacquired a controlling financial interest in IT’SUGAR and consolidated the results of IT’SUGAR into its consolidated financial statements as of the Effective Date. See Note 16 for further discussion.

Renin

Renin is engaged in the design, manufacture, and distribution of sliding doors, door systems and hardware, and home décor products and operates through its headquarters in Canada and manufacturing and distribution facilities in the United States and Canada. In addition to its own manufacturing activities, Renin also sources various products and raw materials from China, Brazil, and certain other countries.

Other

In addition to its principal holdings, the Company has investments in other operating businesses, including a restaurant located in South Florida that was acquired through a loan foreclosure and an insurance agency.

Basis of Financial Statement Presentation

The accompanying condensed consolidated financial statements of the Company include the condensed consolidated financial statements of BBX Capital and its subsidiaries, including BBX Capital Real Estate, BBX Sweet Holdings, and Renin. Due to the deconsolidation of IT’SUGAR in September 2020 as a result of its bankruptcy filings and the Company’s reconsolidation of IT’SUGAR’s subsequent to its emergence from bankruptcy in June 2021 as discussed above, the Company’s condensed consolidated statement of operations and comprehensive income, condensed consolidated statement of changes in equity, and condensed consolidated statement of cash flows from January 1, 2021 to June 17, 2021 do not include the operations of IT’SUGAR, while the Company’s condensed consolidated statement of operations and comprehensive income, condensed consolidated statement of changes in equity, and condensed consolidated statement of cash flows for the three months and six months ended June 30, 2022 include the operations of IT’SUGAR. The Company’s statements of financial condition include IT’SUGAR’s assets and liabilities as of June 30, 2022 and December 31, 2021.

The accompanying condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, these financial statements do not include all of the information and disclosures required by GAAP for complete financial statements.

Financial statements prepared in conformity with GAAP require the Company to make estimates based on assumptions about current and, for some estimates, future economic and market conditions which affect reported amounts and related disclosures in the Company’s financial statements. Due to, among other things, the impact and potential future impact of the current inflationary and geopolitical environment, rising interest rates, labor shortages, supply chain issues, ongoing economic uncertainty, and the COVID-19 pandemic, actual conditions could differ from the Company’s expectations and estimates, which could materially affect the Company’s results of operations and financial condition. The severity, magnitude, and duration, as well as the economic consequences, of the above conditions and economic trends, are uncertain, rapidly changing, and difficult to predict. As a result, the Company’s accounting estimates and assumptions may change over time in response to changes in, and the impact of, external factors. Such changes could result in, among other adjustments, future impairments of intangibles, long-lived assets, and investments in unconsolidated subsidiaries and future reserves for inventory and receivables.

These unaudited condensed consolidated financial statements and related notes are presented as permitted by Form 10-Q and should be read in conjunction with the Company’s audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Annual Report”) filed with the SEC on March 16, 2022.

The condensed consolidated financial statements include the accounts of BBX Capital’s wholly-owned subsidiaries, other entities in which BBX Capital or its wholly-owned subsidiaries hold controlling financial interests, and any variable interest entities (“VIEs”) in which BBX Capital or one of its consolidated subsidiaries is deemed the primary beneficiary of the VIE. All significant inter-company accounts and transactions have been eliminated in consolidation.

Impact of the COVID-19 Pandemic and Current Economic Issues

The COVID-19 pandemic resulted in an unprecedented disruption in the U.S. and global economies and the industries in which the Company operates. While the impact of the COVID-19 pandemic on our businesses has generally subsided, it is not possible to accurately assess the expected duration and effects of COVID-19 on our businesses. Further, our businesses are also impacted by general economic conditions, including, among other things, (i) disruptions in global supply chains, (ii) a general labor shortage and employee absenteeism, (iii) increased economic uncertainty and its impact on demand for our products, and (iv) higher interest rates. The duration and severity of economic and market conditions and the pandemic are uncertain, and the Company may be adversely impacted by these conditions in future periods. At this time, we are also not able to predict whether economic factors and the COVID-19 pandemic will result in permanent changes in our customers’ behavior, which may include continued or permanent decreases in discretionary spending and reductions in demand for retail store and confectionery products, home improvement products, or real estate, each of which would have a material adverse impact on our business, operating results and financial condition.

Current inflationary and economic trends have and may continue to adversely impact our results of operations. BBXRE has experienced a significant increase in commodity and labor prices, which has resulted in higher development and construction costs, and increasing interest rates may adversely impact homebuyer demand in BBXRE’s housing communities, the availability of financing for BBXRE or its customers, and the costs of any

financing BBXRE or its joint venture partners incur in connection with acquisition and development activities. IT’SUGAR has experienced an increase in the cost of inventory and freight, and Renin has experienced significant supply chain challenges and increases in costs related to shipping and raw materials. These factors have had a material effect on the Company’s results of operations and financial condition and may continue to do so if the Company is not able to increase prices to its customers to offset the increase in its costs.

Further, a downturn in the economic environment may have a significant adverse impact on the gross margins of the Company’s operating businesses, particularly if an economic downturn (i) is prolonged in nature and impacts consumer demand, (ii) materially disrupts the supply chain for the Company’s operating businesses’ products and raw materials, (iii) delays the production and shipment of products and raw materials from foreign suppliers, or (iv) increases shipping costs.

Labor is one of the primary components of our expenses. A number of factors may adversely affect the labor force available to us or increase our labor costs, including high unemployment levels, federal unemployment subsidies and other government regulations. A sustained labor shortage or increased turnover rates, whether caused by COVID-19, inflationary pressures, or as a result of general macroeconomic conditions or other factors, could lead to increased costs, such as increased overtime pay to meet demand and increased wage rates to attract and retain employees, and may negatively affect our operations or adversely impact our business and results. Further, any mitigation measures we take in response to a decrease in labor availability or an increase in labor costs may be unsuccessful and could have negative effects.

As of June 30, 2022, the Company’s consolidated cash balances were $118.1 million.

Recently Adopted and Future Adoption of Recently Issued Accounting Pronouncements

There were no Accounting Standards Updates issued by the Financial Accounting Standards Board (“FASB”) that were adopted as of January 1, 2022, and the Company has adopted all relevant FASB pronouncements and guidance as of June 30, 2022.

2. Trade Receivables

The Company’s trade receivables consisted of the following (in thousands):



	June 30,		December 31,
	2022		2021
Trade receivables	$	24,131		30,124
Allowance for expected credit losses		(238)		(225)
Total trade receivables	$	23,893		29,899

3. Trade Inventory

The Company’s trade inventory consisted of the following (in thousands):



	June 30,		December 31,
	2022		2021
Raw materials	$	10,022		8,545
Paper goods and packaging materials		2,345		1,777
Finished goods		46,721		35,255
Total trade inventory		59,088		45,577
Inventory reserve		(2,714)		(3,682)
Total trade inventory, net	$	56,374		41,895

‎

4. Real Estate

The Company’s real estate consisted of the following (in thousands):


	June 30,		December 31,
	2022		2021
Real estate held-for-sale	$	5,099		7,679
Real estate held-for-investment		6,254		6,113
Real estate inventory		3,213		8,884
Predevelopment costs		1,438		192
Total real estate	$	16,004		22,868

5. Investments in and Advances to Unconsolidated Real Estate Joint Ventures

As of June 30, 2022, the Company had equity interests in and advances to unconsolidated real estate joint ventures involved in the development of multifamily rental apartment communities and single-family master planned for sale housing communities. In addition, the Company owns a 50% equity interest in the Altman Companies, a developer and manager of multifamily apartment communities.

Investments in unconsolidated real estate joint ventures are accounted for as unconsolidated VIEs under the equity method of accounting.

The Company’s investments in and advances to unconsolidated real estate joint ventures consisted of the following (in thousands):



	June 30,		December 31,
	2022		2021
Altis Grand Central	$	706	$	730
Altis Ludlam Trail⁽¹⁾		11,469		10,831
Altis Grand at The Preserve		—		194
Altis Little Havana		300		1,021
Altis Lake Willis Phase 1		712		437
Altis Lake Willis Phase 2		3,002		2,538
Altis Miramar East/West		2,852		2,878
Altis Grand at Suncoast		4,386		2,780
Altis Blue Lake		620		260
Altis Santa Barbara		415		—
The Altman Companies		15,764		16,716
ABBX Guaranty		3,750		3,750
Bayview		—		1,308
Marbella		781		974
The Main Las Olas		1,744		1,990
Sky Cove		431		1,686
Sky Cove South		4,643		4,708
Other		165		165
Total	$	51,740	$	52,966

(1)The carrying value of BBXRE’s investment at June 30, 2022 and December 31, 2021 includes $10.9 million and $10.3 million, respectively, related to BBXRE’s investment in the preferred equity associated with the Altis Ludlam Trail project, which is accounted for as a loan receivable.

See Note 7 to the Company’s consolidated financial statements for the year ended December 31, 2021 included in the 2021 Annual Report for the Company’s accounting policies relating to its investments in unconsolidated real estate joint ventures, including the Company’s analysis and determination that such entities are VIEs in which the Company is not the primary beneficiary.

In February 2022, BBXRE invested $0.4 million in the managing member of a joint venture sponsored by the Altman Companies that was formed to develop Altis Santa Barbara, a 242-unit multifamily apartment community located in Naples, Florida.

As of June 30, 2022, BBRE had invested $8.1 million in a joint venture with CC Homes to develop Marbella, a residential community expected to be comprised of 158 single-family homes in Miramar, Florida. As of June 30, 2022, the joint venture had executed contracts to sell all of the 158 single-family homes comprising Marbella and had closed on the sale of 89 homes. During the three and six months ended June 30, 2022, BBXRE recognized $3.4 million and $5.2 million, respectively, of equity earnings and received $3.4 million and $5.4 million, respectively, of distributions from the joint venture.

In June 2022, the Altis Little Havana joint venture sold Altis Little Havana, its 224-unit multifamily apartment community located in Miami, Florida. As a result of the transaction, BBXRE received a net cash distribution of approximately $9.4 million from the joint venture and recognized $8.4 million of equity earnings from its investment in the joint venture during the three and six months ended June 30, 2022.

In June 2022, BBXRE sold its equity interest in the Bayview joint venture to its joint venture partner. As a result of the transaction, BBXRE received net cash proceeds of approximately $8.8 million and recognized a net gain from the sale of its investment in the venture of approximately $7.3 million, which is included in equity in net earnings of unconsolidated real estate joint ventures in the Company’s condensed consolidated statements of operations for the three and six months ended June 30, 2022.

In June 2022, the Miramar East/West joint venture entered into an agreement to sell Altis Miramar, a 320-unit multifamily apartment community located in Miramar, Florida, and Altra Miramar, a 330-unit multifamily apartment community adjacent to Altis Miramar. In July 2022, the joint venture completed the sale, and BBXRE received a net cash distribution of approximately $16.4 million from the joint venture in connection with the closing of the transaction.

Summarized Financial Information of Certain Unconsolidated Real Estate Joint Ventures

The tables below set forth financial information, including condensed statements of financial condition and operations, related to the Company’s current 50% interest in the Altman Companies joint venture (in thousands):



	June 30,		December 31,
	2022		2021
Assets
Cash	$	1,005		995
Properties and equipment		398		387
Investment in unconsolidated subsidiaries		6,968		7,153
Goodwill		16,683		16,683
Due from related parties		6,397		4,462
Predevelopment costs		8,405		6,036
Other assets		2,777		2,626
Total assets	$	42,633		38,342
Liabilities and Equity
Notes payable	$	4,000		3,250
Other liabilities		10,677		5,213
Total liabilities		14,677		8,463
Total equity		27,956		29,879
Total liabilities and equity	$	42,633		38,342

‎



	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Total revenues	$	2,210	$	1,618	$	4,378	$	3,444
Other expenses		(3,024)		(3,203)		(6,056)		(5,728)
Operating loss		(814)		(1,585)		(1,678)		(2,284)
Equity in (losses) earnings from unconsolidated investment in Altman Glenewinkel Construction, LLC		(473)		242		(932)		609
Net loss		(1,287)		(1,343)		(2,610)		(1,675)
Equity in net losses of unconsolidated real estate joint venture - The Altman Companies	$	(644)	$	(672)	$	(1,305)	$	(838)

The tables below set forth financial information, including condensed statements of financial condition and operations, related to the Marbella joint venture (in thousands):



	June 30,		December 31,
	2022		2021
Assets
Cash	$	1,708		4,371
Real estate inventory		36,188		49,928
Other assets		1,099		1,673
Total assets	$	38,995		55,972
Liabilities and Equity
Notes payable	$	20,766		30,987
Customer deposits		14,698		21,255
Other liabilities		2,250		2,698
Total liabilities		37,714		54,940
Total equity		1,281		1,032
Total liabilities and equity	$	38,995		55,972




	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Total revenues	$	32,228		—	$	48,020		—
Cost of goods sold		(24,360)		—		(35,649)		—
Other expenses		(989)		(368)		(1,716)		(709)
Net earnings (loss)		6,879		(368)		10,655		(709)
Equity in net earnings (losses) of unconsolidated real estate joint venture - Marabella	$	3,362		(184)	$	5,211		(355)

The tables below set forth financial information, including condensed statements of financial condition and operations, related to the Altis Little Havana joint venture (in thousands):



	June 30,		December 31,
	2022		2021
Assets
Cash	$	999		40
Real estate		—		58,254
Other assets		387		610
Total assets	$	1,386		58,904
Liabilities and Equity
Notes payable	$	—		32,536
Other liabilities		1,386		3,116
Total liabilities		1,386		35,652
Total equity		—		23,252
Total liabilities and equity	$	1,386		58,904



	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Total revenues	$	200		—	$	200		—
Gain on sale		55,836		—		55,836		—
Other expenses		(258)		(1)		(361)		(1)
Net earnings (loss)		55,778		(1)		55,675		(1)
Equity in net earnings of unconsolidated real estate joint venture - Little Havana	$	8,406		—	$	8,398		—

6. Notes Payable and Other Borrowings

The table below sets forth information regarding the Company’s notes payable and other borrowings (dollars in thousands):



	June 30, 2022						December 31, 2021
					Carrying						Carrying
					Amount of						Amount of
	Debt		Interest		Pledged		Debt		Interest		Pledged
	Balance		Rate		Assets		Balance		Rate		Assets
Community Development District Obligations	$	4,099		2.40-3.75%	$	3,529	$	7,657		2.40-6.00%	$	9,669
TD Bank Term Loan and Line of Credit		37,853		5.45%		⁽¹⁾		44,363		3.78%		⁽¹⁾
IberiaBank Revolving Line of Credit ⁽²⁾		2,000		5.25%		⁽⁴⁾		2,041		3.75%		⁽⁴⁾
IberiaBank Note ⁽³⁾		—		—		—		1,418		3.50%		1,802
Other		18		4.22%		—		26		4.22%		—
Unamortized debt issuance costs		(406)		—				(622)
Total notes payable and other borrowings	$	43,564					$	54,883

(1)The collateral is a blanket lien on Renin’s assets and the Company’s ownership interest in Renin.

(2)BBX Capital is the guarantor of the line of credit.

(3)BBX Capital was the guarantor of the note.

(4)The collateral is a blanket lien on LOC’s assets.

See Note 11 to the Company’s consolidated financial statements included in the 2021 Annual Report for additional information regarding the above listed notes payable and other borrowings.

Toronto-Dominion Bank (“TD Bank”) Term Loan and Revolving Line of Credit

In connection with the acquisition of Colonial Elegance in 2020, Renin amended and restated its credit facility with TD Bank to include a $30.0 million term loan, increase the availability under its existing revolving operating line of credit with TD Bank to $20.0 million, and extend the maturity of the facility to October 2025.

In 2021, Renin’s credit facility with TD Bank was amended to temporarily increase the availability under the revolving line of credit from $20.0 million to $24.0 million through December 31, 2022, at which time the availability under the line of credit was to revert to $20.0 million and any amounts outstanding in excess of $20.0 million were to be repaid by Renin. The amendments to the credit facility also (i) waived the requirement for Renin to comply with certain ratios included in the financial covenants of the facility, (ii) temporarily increased the maximum total leverage ratio included in the financial covenants of the facility through December 31, 2022, (iii) modified the calculation of the maximum total leverage ratio, and (iv) included an additional financial covenant related to Renin meeting certain minimum levels of specified operating results from November 2021 through December 2022. Further, the amendments prohibited Renin from making distributions to BBX Capital through December 31, 2022. On January 1, 2023, the financial covenants under the facility and Renin’s ability to make distributions to the Company were to revert to the requirements under the facility prior to the amendments in 2021.

However, as Renin was not in compliance with certain financial covenants under the facility from January through March 2022, Renin’s credit facility with TD Bank was further amended effective March 31, 2022 to (i) require $13.5 million of funding from BBX Capital to provide Renin funds to prepay $10.0 million of the term loan and to provide additional working capital to Renin of $3.5 million, (ii) waive compliance with the maximum total leverage ratio and fixed charge coverage ratio included in the financial covenants of the facility until December 31, 2022, (iii) waive compliance with the financial covenant requiring Renin to meet certain minimum levels of specified operating results for January through March 2022, (iv) adjust the required minimum levels of specified operating results through December 31, 2022 beginning in April 2022, and (v) amend the modification period to the later of December 31, 2022 or upon Renin’s compliance with specified financial covenant ratios. The amendment also increased the interest rates on amounts outstanding under the term loan and revolving line of credit during the modification period to (i) the Canadian Prime Rate plus a spread of 3.375% per annum, (ii) the United States Base Rate plus a spread of 3.00% per annum, or (iii) Term SOFR or Canadian Bankers’ Acceptance Rate plus a spread of 4.875% per annum. Under the terms of the amendment, the Term SOFR Rate for loans with one to six-months terms are also subject to an additional credit spread adjustment of 10 to 25 basis points per annum. Renin issued a $13.5 million promissory note to BBX Capital upon execution of the amendment on May 9, 2022, and pursuant to the terms of the amendment, BBX Capital funded $13.5 million of the note to Renin in May 2022. BBX Capital and Renin entered into a subordination, assignment, and postponement agreement with TD Bank that requires all present and future loans or advances from BBX Capital to Renin (including the $13.5 million promissory note) be subordinated and postponed until the TD Bank credit facility has been satisfied in full.

As of June 30, 2022, Renin was not in compliance with the financial covenants under the credit facility which required Renin to meet certain minimum levels of specified operating results, and Renin does not expect to be in compliance with certain of the financial covenants in future periods as a result of its actual and expected operating results for 2022. Renin has notified TD Bank about the non-compliance and is currently in discussions with TD Bank to further amend the credit facility. While TD Bank has continued to allow Renin to utilize its revolving line of credit and has not to date accelerated any payments required under the loan agreements, on August 3, 2022, TD Bank sent a formal notice of default and confirmed that the parties’ continued discussions do not constitute a waiver by TD Bank of any existing or future defaults or breaches or prevent TD Bank from exercising any rights or remedies it may have. If Renin is unable to obtain a waiver in relation to its covenants or amend the covenants under the facility to reflect its expected operating results, Renin may lose availability under its line of credit, may be required to provide additional collateral, or may be required to repay all or a portion of its borrowings, any of which would have a material adverse effect on the Company’s liquidity, financial position, and results of operations.

The risks and uncertainties associated with the matters described above, as well as those described in the Company’s 2021 Annual Report, could have a material adverse impact on Renin’s results of operations, cash flows, and financial condition in future periods.

IberiaBank Note

In August 2021, BBX Sweet Holdings and certain of its subsidiaries, including The Hoffman Commercial Group, Inc., borrowed $1.4 million from IberiaBank and issued a note payable to IberiaBank (the “IberiaBank Note”). The IberiaBank Note was secured by land and buildings owned by The Hoffman Commercial Group, Inc. and was guaranteed by BBX Capital. In March 2022, The Hoffman Commercial Group, Inc. closed on the sale of the land and building held as collateral, and the IberiaBank Note was repaid-in-full. Included in other income in the Company’s condensed consolidated statement of operations and comprehensive loss for the six months ended June 30, 2022 was a $0.9 million net gain from The Hoffman Commercial Group, Inc’s sale of the land and building for net proceeds of $2.7 million.

7. Common Stock

BBX Capital has two classes of common stock. Holders of BBX Capital’s Class A Common Stock are entitled to one vote per share, which in the aggregate represents 22% of the combined voting power of BBX Capital’s Class A and Class B Common Stock. BBX Capital’s Class B Common Stock represents the remaining 78% of the combined vote. As of June 30, 2022, the percentage of total common equity represented by the Class A and Class B Common Stock was 76% and 24%, respectively. BBX Capital’s Class B Common Stock is convertible into its Class A Common Stock on a share for share basis at any time at the option of the holder.

BBX Capital 2001 Incentive Plan (“2021 Plan”)

On January 18, 2022, the compensation committee of BBX Capital’s board of directors granted awards of 571,523 restricted shares of BBX Capital’s Class A Common Stock to its executive and non-executive officers and 205,029 restricted shares of BBX Class B Common Stock to an executive officer of the Company under the 2021 Plan. The aggregate grant date fair value of the January 2022 awards was $8.0 million (a weighted average per share fair value of $10.34), and the shares vest ratably in annual installments of approximately 258,850 shares over three periods beginning on October 1, 2022. As of June 30, 2022, the unearned compensation expense associated with the awards was $6.3 million.

Compensation cost for restricted stock awards is based on the fair value of the award on the measurement date, which is generally the grant date. The fair value of restricted stock awards is generally based on the market price of the Company’s common stock on the grant date. For awards that are subject only to service conditions, the Company recognizes compensation costs on a straight-line basis over the requisite service period of the awards, and the impact of forfeitures are recognized when they occur.

Share Repurchase Program

In January 2022, the Board of Directors approved a new share repurchase program which authorizes the repurchase of up to $15.0 million of shares of the Company’s Class A Common Stock and Class B Common Stock. The repurchase program authorizes the Company, in management’s discretion, to repurchase shares from time to time subject to market conditions and other factors.

The timing, price, and number of shares which may be repurchased under the program in the future will be based on market conditions, applicable securities laws, and other factors considered by management. Share repurchases under the program may be made from time to time through solicited or unsolicited transactions in the open market or in privately negotiated transactions. The share repurchase program does not obligate the Company to repurchase any specific amount of shares and may be suspended, modified, or terminated at any time without prior notice. During the six months ended June 30, 2022, the Company repurchased 15,782 shares of its Class A Common Stock for approximately $0.1 million, at an average cost of $7.69 per share, including fees.

During the six months ended June 30, 2021, the Company repurchased 597,088 shares of its Class A Common Stock for approximately $3.8 million under the Company’s then existing 2020 stock repurchase program, at an average cost of $6.29 per share, including fees.

8. Revenue Recognition

The table below sets forth the Company’s revenue disaggregated by category (in thousands):



	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Trade sales - wholesale	$	38,878		37,692	$	76,465		80,160
Trade sales - retail		33,707		8,840		61,869		12,286
Sales of real estate inventory		8,737		12,390		15,207		25,925
Revenue from customers		81,322		58,922		153,541		118,371
Interest income		1,221		1,667		2,370		3,317
Net gains on sales of real estate assets		—		204		1,329		309
Other revenue		1,150		925		1,929		1,596
Total revenues	$	83,693		61,718	$	159,169		123,593

As of June 30, 2022 and December 31, 2021, the contingent purchase price receivable of $18.7 million and $19.9 million included in the Company’s condensed consolidated statements of financial condition, respectively, represents estimated variable consideration related to the contingent purchase price due from homebuilders in connection with the sale of real estate inventory to the homebuilders. As of June 30, 2022 and December 31, 2021, the Company’s other liabilities in its condensed consolidated statements of financial condition included $1.0 million and $0.6 million, respectively, of variable consideration related to the estimated contingent purchase price due to a homebuilder in connection with the sale of real estate inventory to the homebuilder.

During the three and six months ended June 30, 2022, Renin’s total revenues included $26.8 million and $53.5 million, respectively, of trade sales to three major customers and their affiliates and $13.5 million and $26.6 million, respectively, of revenues generated outside the United States. Revenues from each of the three major customers were $4.7 million, $12.6 million, and $9.5 million for the three months ended June 30, 2022, which represented 5.6%, 15.0%, and 11.4% of the Company’s total revenues for the three months ended June 30, 2022. Revenues from each of the three major customers were $10.1 million, $24.1 million, and $19.3 million for the six months ended June 30, 2022, which represented 6.4%, 15.2%, and 12.1% of the Company’s total revenues for the six months ended June 30, 2022.

During the three and six months ended June 30, 2021, Renin’s total revenues included $28.6 million and $60.0 million, respectively, of trade sales to three major customers and their affiliates and $12.6 million and $26.9 million, respectively, of revenues generated outside the United States. Revenues from each of the three major customers were $8.0 million, $11.6 million, and $9.0 million for the three months ended June 30, 2021, which represented 14.0%, 18.8%, and 14.6% of the Company’s total revenues for the three months ended June 30, 2021. Revenues from each of the three major customers were $17.3 million, $22.7 million, and $20.0 million for the six months ended June 30, 2021, which represented 14.0%, 18.3%, and 16.2% of the Company’s total revenues for the six months ended June 30, 2021.

9. Income Taxes

BBX Capital and its subsidiaries file a consolidated U.S. federal income tax return and income tax returns in various state and foreign jurisdictions.

Effective income tax rates for interim periods are based upon the Company’s then current estimated annual rate, which varies based upon the Company’s estimate of taxable income or loss and the mix of taxable income or loss in the various states and foreign jurisdictions in which the Company operates. The Company’s effective tax rate was applied to income or loss before income taxes reduced by net income or losses attributable to noncontrolling interests in consolidated entities taxed as partnerships and net losses in foreign jurisdictions in which no tax benefit can be recognized. In addition, the Company recognizes taxes related to unusual or infrequent items or which result from a change in judgment regarding a position taken in a prior period as discrete items in the interim period in which the event occurs.

The Company’s effective income tax rate for the three and six months ended June 30, 2022 was approximately 28% and 25%, respectively, and was different than the expected federal income tax rate of 21% due to the impact of nondeductible executive compensation, valuation allowances related to losses incurred in a foreign jurisdiction, and state income taxes.

The Company’s effective income tax rate for the three and six months ended June 30, 2021 was approximately 23% and 25%, respectively, and was different than the expected federal income tax rate of 21% due to the impact of nondeductible executive compensation and state income taxes. The effective income tax rate for the three and six months ended June 30, 2021 excludes a discrete income tax expense of $4.0 million related to the gain on the consolidation of IT’SUGAR.

Certain of Bluegreen Vacations Holding Corporation’s (“Bluegreen Vacations”) state filings covering tax periods prior to the spin-off of the Company from Bluegreen Vacations are under examination which may result in the audit of the Company’s subsidiaries. While there is no assurance as to the results of these audits, no material adjustments are currently anticipated in connection with these examinations.

10. Earnings Per Share

Basic earnings per share is computed by dividing net income available to BBX Capital’s shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed in the same manner as basic earnings per share but also reflects potential dilution that could occur if restricted stock awards issued by BBX Capital were vested. Restricted stock awards, if dilutive, are considered in the weighted average number of dilutive common shares outstanding based on the treasury stock method.

The table below sets forth the computation of basic and diluted earnings per common share (in thousands, except per share data):



		For the Three Months Ended		For the Six Months Ended
		June 30,		June 30,
		2022	2021	2022	2021
Basic earnings per share
Numerator:
Net income	$	10,389	20,237	8,463	22,692
Net loss (income) attributable to noncontrolling interests		66	(117)	176	(227)
Net income available to shareholders	$	10,455	20,120	8,639	22,465
Denominator:
Basic weighted average number of common shares outstanding		15,471	18,811	15,473	19,046
Basic earnings per share	$	0.68	1.07	0.56	1.18
Diluted earnings per share
Numerator:
Net income available to shareholders	$	10,455	20,120	8,639	22,465
Denominator:
Basic weighted average number of common shares outstanding		15,471	18,811	15,473	19,046
Effect of dilutive restricted stock awards		—	—	18	—
Diluted weighted average number of common shares outstanding		15,471	18,811	15,491	19,046
Diluted earnings per share	$	0.68	1.07	0.56	1.18

During the three and six months ended June 30, 2022, 776,552 and 0, respectively, of outstanding unvested restricted stock awards were anti-dilutive and not included in the computation of diluted earnings per share. No restricted stock awards were outstanding during the three and six months ended June 30, 2021.

11. Noncontrolling Interests

Redeemable Noncontrolling Interest

As of June 30, 2022 and December 31, 2021, the Company’s consolidated statements of financial condition included a redeemable noncontrolling interest of $1.5 million and $1.1 million, respectively, which relates to a redeemable noncontrolling interest associated with IT’SUGAR. The Company owns over 90% of IT’SUGAR’s Class B Units, while the remaining Class B units are a noncontrolling interest held by an executive officer of IT’SUGAR and may be redeemed for cash at the holder’s option upon a contingent event outside of the Company’s control.

As a result of the filing of the Bankruptcy Cases by IT’SUGAR and its subsidiaries, the Company deconsolidated IT’SUGAR as of September 22, 2020 and derecognized the related redeemable noncontrolling interest in IT’SUGAR. However, as a result of IT’SUGAR emerging from the Bankruptcy Cases in June 2021 and the revesting of BBX Sweet Holdings’ equity interests in IT’SUGAR, the Company consolidated the results of IT’SUGAR into its consolidated financial statements as of June 17, 2021 and again recognized the redeemable noncontrolling interest in IT'SUGAR as of that date. During the three and six months ended June 30, 2022, the Company’s condensed consolidated results of operations and comprehensive income included the results of operations of IT’SUGAR, and during the three and six months ended June 30, 2021, the Company’s condensed consolidated results of operations and comprehensive income included the results of operations of IT’SUGAR from June 17, 2021 through June 30, 2021. The Company has attributed net income or loss to the redeemable noncontrolling interest in IT’SUGAR during the periods which include the results of operations of IT’SUGAR.

During the three and six months ended June 30, 2022, the net income attributable to the redeemable noncontrolling interest in IT’SUGAR was $82,000 and $11,000, respectively. For the period from June 17, 2021 to June 30, 2021, the net loss attributable to the redeemable noncontrolling interest in IT’SUGAR was $72,000.

Other Noncontrolling Interests

As of June 30, 2022 and December 31, 2021, the Company’s consolidated statements of financial condition included noncontrolling interests of $0.7 million and $1.1 million, respectively, which are primarily comprised of (i) a 19% noncontrolling equity interest in a restaurant the Company acquired through a loan foreclosure and (ii) noncontrolling interests in IT’SUGAR FL II, LLC. IT’SUGAR FL II, LLC is a consolidated VIE that operates IT’SUGAR’s retail location in Hawaii. As of June 30, 2022 and December 31, 2021, the Company’s condensed consolidated statements of financial condition included total assets of IT’SUGAR FL II, LLC of $9.8 million and $11.2 million, respectively, and total liabilities of IT’SUGAR FL II, LLC of $8.5 million and $9.1 million, respectively.

During the three and six months ended June 30, 2022, the net loss attributable to the noncontrolling interests was $148,000 and $187,000 respectively. During the three and six months ended June 30, 2021, the net income attributable to the noncontrolling interests was $45,000 and $155,000, respectively.

12. Commitments and Contingencies

Litigation

In the ordinary course of business, the Company is party to lawsuits as plaintiff or defendant involving its operations and activities. Additionally, from time to time in the ordinary course of business, the Company is involved in disputes with existing and former employees, vendors, taxing jurisdictions, and various other parties and also receives individual consumer complaints as well as complaints received through regulatory and consumer agencies. The Company takes these matters seriously and attempts to resolve any such issues as they arise.

Reserves are accrued for matters in which management believes it is probable that a loss will be incurred and the amount of such loss can be reasonably estimated. Management does not believe that the aggregate liability relating to known contingencies in excess of the aggregate amounts accrued will have a material impact on the Company’s results of operations or financial condition. However, litigation is inherently uncertain, and the actual costs of resolving legal claims, including awards of damages, may be substantially higher than the amounts accrued for these claims and may have a material adverse impact on the Company’s results of operations or financial condition.

Adverse judgments and the costs of defending or resolving legal claims may be substantial and may have a material adverse impact on the Company’s financial statements. Management is not at this time able to estimate a range of reasonably possible losses with respect to matters in which it is reasonably possible that a loss will occur. In certain matters, management is unable to estimate the loss or reasonable range of loss until additional developments provide information sufficient to support an assessment of the loss or reasonable range of loss. Frequently in these matters, the claims are broad, and the plaintiffs have not quantified or factually supported their claims.

There were no material pending legal proceedings against BBX Capital or its subsidiaries as of June 30, 2022.

Other Commitments and Guarantees

BBX Capital has guaranteed certain obligations of its subsidiaries and unconsolidated real estate joint ventures, including the following:

BBX Capital was previously a guarantor of 50% of the outstanding balance of a third-party mortgage loan to the Bayview joint venture which had an outstanding balance of $5.0 million as of December 31, 2021. In June 2022, the Company sold its equity interest in the joint venture to its partner in the joint venture. In connection with the sale, the Company obtained a release from the lender under the mortgage loan for any and all liability to the lender under the loan documents, including any obligation related to the Company’s guaranty of the outstanding loan balance.

BBX Capital is guarantor on a lease agreement executed by IT’SUGAR which expires in January 2023 with respect to base rents of $0.4 million and common area costs under the lease.

BBX Capital is a guarantor on certain notes payable by its wholly-owned subsidiaries. See Note 6 for additional information regarding these obligations.

13. Fair Value Measurement

Fair value is defined as the price that would be received on the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

There are three main valuation techniques to measure the fair value of assets and liabilities: the market approach, the income approach, and the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The income approach uses financial models to convert future amounts to a single present amount and includes present value and option-pricing models. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset and is often referred to as current replacement cost.

Accounting standards define an input fair value hierarchy that has three broad levels and gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

The input fair value hierarchy is summarized below:

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

Level 2:		Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability

Level 3:		Unobservable inputs for the asset and liability

There were no material assets or liabilities measured at fair value on a recurring or nonrecurring basis in the Company’s condensed consolidated financial statements as of June 30, 2022 and December 31, 2021.

‎

Financial Disclosures about Fair Value of Financial Instruments

The tables below set forth information regarding the Company’s consolidated financial instruments (in thousands):



					Fair Value Measurements Using
					Quoted prices
	Carrying				in Active		Significant
	Amount		Fair Value		Markets		Other		Significant
	As of		As of		for Identical		Observable		Unobservable
	June 30,		June 30,		Assets		Inputs		Inputs
	2022		2022		(Level 1)		(Level 2)		(Level 3)
Financial assets:
Cash and cash equivalents	$	118,136		118,136		118,136		—		—
Restricted cash		750		750		750		—		—
Note receivable from Bluegreen Vacations		50,000		45,805		—		—		45,805
Financial liabilities:
Notes payable and other borrowings		43,564		42,803		—		—		42,803



						Fair Value Measurements Using
						Quoted prices
	Carrying				in Active			Significant
	Amount		Fair Value			Markets		Other		Significant
	As of		As of			for Identical		Observable		Unobservable
	December 31,		December 31,			Assets		Inputs		Inputs
	2021		2021			(Level 1)		(Level 2)		(Level 3)
Financial assets:
Cash and cash equivalents	$	118,045		118,045			118,045		—		—
Restricted cash		1,000		1,000			1,000		—		—
Note receivable from Bluegreen Vacations		50,000		50,340			—		—		50,340
Financial liabilities:
Notes payable and other borrowings		54,883		56,360			—		—		56,360

Management has made estimates of fair value that it believes to be reasonable. However, because there is no active market for many of these financial instruments, the fair values of the majority of the Company’s financial instruments have been derived using the income approach technique with Level 3 unobservable inputs. Estimates used in net present value financial models rely on assumptions and judgments regarding issues in which the outcome is unknown, and actual results or values may differ significantly from these estimates. The Company’s fair value estimates do not consider the tax effect that would be associated with the disposition of the assets or liabilities at their estimated fair values. As such, the estimated value upon sale or disposition of the asset may not be received, and the estimated value upon disposition of the liability in advance of its scheduled maturity may not be paid.

The amounts reported in the condensed consolidated statements of financial condition for cash and cash equivalents and restricted cash approximate fair value.

The estimated fair value of the Company’s note receivable from Bluegreen Vacations was measured using the income approach with Level 3 inputs by discounting the forecasted cash inflows associated with the note using an estimated market rate.

The fair values of the Company’s Community Development Bonds, which are included in notes payable and other borrowings above, were measured using the market approach with Level 3 inputs based on estimated market prices of similar financial instruments.

The fair values of the Company’s notes payable and other borrowings (other than the Community Development Bonds above) were measured using the income approach with Level 3 inputs by discounting the forecasted cash flows based on estimated market rates.

The Company’s financial instruments also include trade accounts receivable, accounts payable, and accrued liabilities. The carrying amount of these financial instruments approximate their fair values due to their short-term maturities.

The Company is exposed to credit related losses in the event of non-performance by counterparties to the financial instruments with a maximum exposure equal to the carrying amount of the assets. The Company’s exposure to credit risk consists primarily of accounts receivable balances.

14. Certain Relationships and Related Party Transactions

The Company may be deemed to be controlled by Alan B. Levan, the Company’s Chairman, John E. Abdo, the Company’s Vice Chairman, Jarett S. Levan, the Company’s Chief Executive Officer and President, and Seth M. Wise, the Company’s Executive Vice President. Together, they may be deemed to beneficially own shares of BBX Capital’s Class A Common Stock and Class B Common Stock representing approximately 82% of BBX Capital’s total voting power. Mr. Alan B. Levan also serves as the Chairman, Chief Executive Officer, and President of Bluegreen Vacations, and Mr. Abdo also serves as Vice Chairman of Bluegreen Vacations. Additionally, Mr. Jarett Levan and Mr. Wise serve as directors of Bluegreen Vacations.

During the three and six months ended June 30, 2022, the Company recognized $0.5 million and $1.0 million of income for providing office space, risk management, and management advisory services to Bluegreen Vacations and $0.3 million and $0.7 million for such services during the three and six months ended June 30, 2021. During the three and six months ended June 30, 2021, the Company paid Bluegreen Vacations $0 and $158,000, respectively, for office space provided by Bluegreen Vacations to the Company. Bluegreen Vacations ceased providing office space to the Company in March 2021 and began renting office space from the Company in November 2021. The amounts paid or reimbursed are the actual cost of providing the services or space.

During the three and six months ended June 30, 2022, the Company paid the Abdo Companies, Inc. approximately $44,000 and $88,000, respectively, for certain management services and rent. During the three and six months ended June 30, 2021, the Company paid the Abdo Companies, Inc. approximately $38,000 and $76,000, respectively, for such services. John E. Abdo, the Company’s Vice Chairman, is the principal shareholder and Chief Executive Officer of the Abdo Companies, Inc.

The Company provides management services to the Altman Companies for which the Company recognized $48,000 and $199,000, respectively, net of services provided to the Company by the Altman Companies, during the three and six months ended June 30, 2022 and $71,000 and $131,000, net, respectively, during the three and six months ended 2021 in return for such services. The Altman Companies began renting space from the Company in June 2022 and the Company accrued $31,000 of rent from Altman Companies for the three and six months ended June 30, 2022.

During the three and six months ended June 30, 2021, interest income in the Company’s condensed consolidated statement of operations and comprehensive income or loss includes $61,000 and $102,000, respectively, of interest on loans receivable from IT’SUGAR. The interest income on the loans receivable from IT’SUGAR was not eliminated in consolidation during the three and six months ended June 30, 2021 as the Company did not consolidate IT’SUGAR during the period from January 1, 2021 through June 16, 2021. See Note 16 for further discussion.

In connection with the spin-off, of the Company from Bluegreen Vacations, Bluegreen Vacations issued a $75.0 million note payable to the Company that accrues interest at a rate of 6% per annum and requires payments of interest on a quarterly basis. Under the terms of the note, Bluegreen Vacations has the option in its discretion to defer interest payments under the note, with interest on the entire outstanding balance thereafter to accrue at a cumulative, compounded rate of 8% per annum until such time as Bluegreen Vacations is current on all accrued payments under the note, including deferred interest. All outstanding amounts under the note will become due and payable on September 30, 2025 or earlier upon certain other events. Bluegreen Vacations is permitted to prepay the note in whole or in part at any time, and in December 2021, Bluegreen Vacations prepaid $25.0 million of the principal balance of the note, reducing the outstanding balance to $50.0 million. Included in interest income in the Company’s condensed consolidated statement of operations and comprehensive income or loss for the three and six months ended June 30, 2022 was $0.8 million and $1.5 million, respectively, of interest income received on the note and $1.1 million and $2.3 million, respectively for the three and six months ended June 30, 2021.

15. Segment Reporting

Operating segments are defined as components of an enterprise about which separate financial information is available that is regularly reviewed by the chief operating decision maker (“CODM”) in assessing performance and deciding how to allocate resources. Reportable segments consist of one or more operating segments with similar economic characteristics, products and services, production processes, type of customer, distribution system, or regulatory environment.

The information provided for segment reporting is obtained from internal reports utilized by the Company’s CODM, and the presentation and allocation of assets and results of operations may not reflect the actual economic costs of the segments as standalone businesses. If a different basis of allocation were utilized, the relative contributions of the segments might differ, but the relative trends in the segments’ operating results would, in management’s view, likely not be materially impacted.

The Company’s three reportable segments are its principal holdings: BBX Capital Real Estate, BBX Sweet Holdings, and Renin. See Note 1 for a description of the Company’s principal holdings.

The amounts set forth in the column entitled “Other” include the Company’s investments in various operating businesses, including a controlling financial interest in a restaurant acquired in connection with a loan receivable default, and the amounts set forth in the column entitled “Reconciling Items and Eliminations” include unallocated corporate general and administrative expenses and interest income on the $50.0 million note receivable from Bluegreen Vacations.

The Company evaluates segment performance based on segment income or loss before income taxes.

‎

The table below sets forth the Company’s segment information as of and for the three months ended June 30, 2022 (in thousands):



Revenues:		BBX Capital Real Estate	BBX Sweet Holdings		Renin		Other		Reconciling Items and Eliminations		Segment Total
Trade sales	$	—		35,602		35,093		1,895		(5)		72,585
Sales of real estate inventory		8,737		—		—		—		—		8,737
Interest income		629		—		—		—		592		1,221
Other revenue		506		—		—		848		(204)		1,150
Total revenues		9,872		35,602		35,093		2,743		383		83,693
Costs and expenses:
Cost of trade sales		—		20,622		34,305		676		(5)		55,598
Cost of real estate inventory sold		3,878		—		—		—		—		3,878
Interest expense		—		222		776		—		(489)		509
Recoveries from loan losses, net		(3,289)		—		—		—		—		(3,289)
Selling, general and administrative expenses		3,362		14,982		4,273		1,658		5,786		30,061
Total costs and expenses		3,951		35,826		39,354		2,334		5,292		86,757
Operating income (losses)		5,921		(224)		(4,261)		409		(4,909)		(3,064)
Equity in net earnings of unconsolidated real estate joint ventures		19,154		—		—		—		—		19,154
Other income		5		6		—		—		92		103
Foreign exchange gain		—		—		357		—		—		357
Income (loss) before income taxes	$	25,080		(218)		(3,904)		409		(4,817)		16,550
Total assets	$	203,868		151,272		106,634		6,601		74,822		543,197
Expenditures for property and equipment	$	—		2,588		254		22		1,202		4,066
Depreciation and amortization	$	—		1,612		832		35		73		2,552
Debt accretion and amortization	$	136		5		21		—		—		162
Cash and cash equivalents	$	98,665		4,708		162		1,918		12,683		118,136
Real estate equity method investments	$	51,740		—		—		—		—		51,740
Goodwill	$	—		14,274		4,140		—		—		18,414
Notes payable and other borrowings	$	3,898		15,050		51,148		18		(26,550)		43,564

‎

The table below sets forth the Company’s segment information as of and for the three months ended June 30, 2021 (in thousands):



	BBX Capital Real Estate		BBX Sweet Holdings		Renin		Other		Reconciling Items and Eliminations		Segment Total
Revenues:
Trade sales	$	—		10,198		34,378		1,956		—	46,532
Sales of real estate inventory		12,390		—		—		—		—	12,390
Interest income		500		36		—		—		1,131	1,667
Net gains on sales of real estate assets		204		—		—		—		—	204
Other revenue		438		—		—		575		(88)	925
Total revenues		13,532		10,234		34,378		2,531		1,043	61,718
Costs and expenses:
Cost of trade sales		—		6,556		30,362		649		—	37,567
Cost of real estate inventory sold		5,568		—		—		—		—	5,568
Interest expense		—		40		429		—		(175)	294
Recoveries from loan losses, net		(1,137)		—		—		—		—	(1,137)
Selling, general and administrative expenses		1,647		3,590		3,804		1,478		3,520	14,039
Total costs and expenses		6,078		10,186		34,595		2,127		3,345	56,331
Operating income (losses)		7,454		48		(217)		404		(2,302)	5,387
Equity in net earnings of unconsolidated real estate joint ventures		4,443		—		—		—		—	4,443
Other (expense) income		(28)		19		—		—		138	129
Gain on the consolidation of IT'SUGAR, LLC		—		15,890		—		—		—	15,890
Foreign exchange gain		—		—		976		—		—	976
Income (loss) before income taxes	$	11,869		15,957		759		404		(2,164)	26,825
Total assets	$	169,987		132,566		106,889		7,026		120,191	536,659
Expenditures for property and equipment	$	—		16		1,364		90		366	1,836
Depreciation and amortization	$	—		315		632		40		18	1,005
Debt accretion and amortization	$	160		2		30		—		—	192
Cash and cash equivalents	$	43,768		10,309		682		2,049		45,043	101,851
Real estate equity method investments	$	55,288		—		—		—		—	55,288
Goodwill	$	—		13,860		6,936		—		—	20,796
Notes payable and other borrowings	$	16,883		14,432		45,961		35		(13,036)	64,275

‎

The table below sets forth the Company’s segment information as of and for the six months ended June 30, 2022 (in thousands):



		BBX Capital Real Estate	BBX Sweet Holdings		Renin		Other		Reconciling Items and Eliminations		Segment Total
Revenues:
Trade sales	$	—		64,959		68,581		4,800		(6)		138,334
Sales of real estate inventory		15,207		—		—		—		—		15,207
Interest income		1,174		—		—		—		1,196		2,370
Net gains on sales of real estate assets		1,329		—		—		—		—		1,329
Other revenue		1,022		—		—		1,293		(386)		1,929
Total revenues		18,732		64,959		68,581		6,093		804		159,169
Costs and expenses:
Cost of trade sales		—		38,995		66,079		1,535		(5)		106,604
Cost of real estate inventory sold		6,113		—		—		—		—		6,113
Interest expense		—		469		1,342		1		(767)		1,045
Recoveries from loan losses, net		(3,937)		—		—		—		—		(3,937)
Impairment losses		—		64		—		—		—		64
Selling, general and administrative expenses		5,760		27,657		8,933		3,657		11,418		57,425
Total costs and expenses		7,936		67,185		76,354		5,193		10,646		167,314
Operating income (losses)		10,796		(2,226)		(7,773)		900		(9,842)		(8,145)
Equity in net earnings of unconsolidated real estate joint ventures		20,686		—		—		—		—		20,686
Other (expense) income		(8)		878		—		2		215		1,087
Foreign exchange gain		—		—		168		—		—		168
Income (loss) before income taxes	$	31,474		(1,348)		(7,605)		902		(9,627)		13,796
Expenditures for property and equipment	$	—		3,945		524		48		1,433		5,950
Depreciation and amortization	$	—		3,105		1,651		68		130		4,954
Debt accretion and amortization	$	145		49		53		—		—		247

‎

The table below sets forth the Company’s segment information as of and for the six months ended June 30, 2021 (in thousands):



	BBX Capital Real Estate		BBX Sweet Holdings		Renin		Other		Reconciling Items and Eliminations		Segment Total
Revenues:
Trade sales	$	—		15,180		73,069		4,197		—		92,446
Sales of real estate inventory		25,925		—		—		—		—		25,925
Interest income		975		36		—		—		2,306		3,317
Net gains on sales of real estate assets		309		—		—		—		—		309
Other revenue		836		—		—		1,005		(245)		1,596
Total revenues		28,045		15,216		73,069		5,202		2,061		123,593
Costs and expenses:
Cost of trade sales		—		10,384		63,018		1,058		—		74,460
Cost of real estate inventory sold		13,426		—		—		—		—		13,426
Interest expense		—		66		839		1		(322)		584
Recoveries from loan losses, net		(1,645)		—		—		—		—		(1,645)
Selling, general and administrative expenses		3,621		5,161		8,108		2,984		7,363		27,237
Total costs and expenses		15,402		15,611		71,965		4,043		7,041		114,062
Operating income (losses)		12,643		(395)		1,104		1,159		(4,980)		9,531
Equity in net earnings of unconsolidated real estate joint ventures		4,172		—		—		—		—		4,172
Gain on the consolidation of IT'SUGAR, LLC		—		15,890		—		—		—		15,890
Other (expense) income		(28)		45		—		(1)		176		192
Foreign exchange gain		—		—		496		—		—		496
Income (loss) before income taxes	$	16,787		15,540		1,600		1,158		(4,804)		30,281
Total assets	$	169,987		132,566		106,889		7,026		120,191		536,659
Expenditures for property and equipment	$	—		19		1,601		102		380		2,102
Depreciation and amortization	$	—		396		1,263		70		67		1,796
Debt accretion and amortization	$	379		2		61		—		—		442

‎

16. IT’SUGAR Bankruptcy

Bankruptcy and Deconsolidation of IT’SUGAR

In March 2020, as a result of various factors, including government-mandated closures and Center for Disease Control and World Health Organization advisories in connection with the COVID-19 pandemic, IT’SUGAR closed all of its retail locations and furloughed all store employees and the majority of its corporate employees.

IT’SUGAR ceased paying rent to the landlords of its closed locations in April 2020 and engaged in negotiations with its landlords for rent abatements, deferrals, and other modifications for both the period of time that the locations were closed and the subsequent period during which the locations were open and operating under conditions affected by the pandemic. During that period, IT’SUGAR also ceased paying various outstanding obligations to its vendors.

Between May 2020 and September 2020, IT’SUGAR reopened nearly all of its approximately 100 locations that were open prior to the pandemic. Although IT’SUGAR reopened its retail locations and received an advance of $2.0 million from a subsidiary of BBX Capital under an existing credit facility, IT’SUGAR was unable to maintain sufficient liquidity to sustain its operations. As a result, on September 22, 2020, IT’SUGAR and its subsidiaries filed voluntary petitions to reorganize under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court.

As a result of the filings, the uncertainties surrounding the nature, timing, and specifics of the Bankruptcy Cases, and the Company’s resulting loss of control and significant influence over IT’SUGAR, the Company determined that IT’SUGAR was a VIE in which the Company was not the primary beneficiary and deconsolidated IT’SUGAR in connection with the filings. Following the deconsolidation of IT’SUGAR, the Company accounted for its investment in IT’SUGAR at cost less impairment, if any.

Emergence from Bankruptcy and Reconsolidation of IT’SUGAR

Emergence from Bankruptcy

In April 2021, IT’SUGAR filed its proposed plan of reorganization with the Bankruptcy Court. Following approval of the proposed plan by IT’SUGAR’s unsecured creditors, the Bankruptcy Court entered an order (the “Confirmation Order”) on June 16, 2021 confirming the plan of reorganization filed by IT’SUGAR, as modified by the Confirmation Order (the “Plan”), and the Plan became effective on June 17, 2021 (the “Effective Date”). Pursuant to the terms of the Plan, the Company’s equity interests in IT’SUGAR were revested on the Effective Date, and all organizational documents of IT’SUGAR were assumed, ratified, and reinstated. As a result of the confirmation and effectiveness of the Plan and the revesting of its equity interests in IT’SUGAR, the Company was deemed to have reacquired a controlling financial interest in IT’SUGAR and consolidated the results of IT’SUGAR into its consolidated financial statements as of the Effective Date, the date that the Company reacquired control of IT’SUGAR.

Allocation of IT’SUGAR’s Fair Value upon Consolidation

The Company accounted for the consolidation of IT’SUGAR upon the revesting of its equity interests under the acquisition method of accounting, which requires that the assets acquired and liabilities assumed associated with an acquiree be recognized at their fair values at the consolidation date. As a result, the Company remeasured the carrying value of its equity interests in IT’SUGAR at fair value as of the Effective Date, with the remeasurement adjustment recognized in the Company’s statement of operations, and recognized goodwill based on the difference between (i) the fair values of IT’SUGAR’s identifiable assets and liabilities at the consolidation date and (ii) the fair values of the Company’s interests in IT’SUGAR and the noncontrolling interests in IT’SUGAR.

The following table summarizes the fair values of the assets acquired and liabilities assumed of IT’SUGAR at the consolidation date (in thousands):



Cash	$	6,909
Trade accounts receivable		584
Trade inventory		5,337
Property and equipment		19,291
Identifiable intangible assets⁽¹⁾		9,670
Operating lease assets ⁽²⁾		54,421
Other assets		3,323
Total assets acquired		99,535
Accounts payable		(2,517)
Accrued expenses		(8,445)
Other liabilities		(124)
Operating lease liabilities		(63,143)
Notes payable and other borrowings ⁽⁴⁾		(10,054)
Total liabilities assumed		(84,283)
Fair value of identifiable net assets		15,252
Fair value of net assets acquired		28,590
Fair value of redeemable noncontrolling interest		936
Fair value of IT'SUGAR		29,526
Goodwill	$	14,274

Gain on the consolidation of IT'SUGAR ⁽³⁾	$	15,890

(1)Identifiable intangible assets primarily include the estimated fair value of IT’SUGAR’s trademark, which is being amortized over an estimated expected useful life of 15 years.

(2)Includes a net intangible liability of $8.7 million related to off market rents associated with certain of IT’SUGAR’s retail locations that is expected to be recognized over a weighted average lease term of approximately 8 years.

(3)The gain is comprised of the remeasurement of the Company’s equity interest in IT’SUGAR at fair value.

(4)Notes payable and other borrowings reflects amounts due to the Company’s wholly-owned subsidiary that have been eliminated in consolidation as of and subsequent to the consolidation date.

The fair values reported in the above table were estimated by the Company using available market information and applicable valuation methods. As considerable judgment is involved in estimates of fair value, the fair values presented above are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methods could have a material effect on the estimated fair value amounts.

The following summarizes the Company’s methodologies for estimating the fair values of certain assets and liabilities associated with the consolidation of IT’SUGAR and the fair value of BBX Capital’s existing investment in IT’SUGAR:

Property and Equipment – Property and equipment acquired consists primarily of leasehold improvements at IT’SUGAR’s retail locations. The fair value of IT’SUGAR’s property and equipment was estimated based on the replacement cost approach.

Identifiable Intangible Assets – The primary identifiable intangible asset acquired consists of IT’SUGAR’s trademark. The fair value of the acquired trademark was estimated using the relief-from-royalty method, a form of the income approach. Under this approach, the fair value was estimated by calculating the present value using a risk-adjusted discount rate of the expected future royalty payments that would have to be paid if the IT’SUGAR trademark was not owned.

Operating Lease Assets and Lease Liabilities – Operating lease assets and lease liabilities were measured based on the present value of the fixed lease payments included in IT’SUGAR’s lease agreements pursuant to the provisions of Accounting Standards Codification 842, Leases. In addition, IT’SUGAR’s operating lease assets have been adjusted to reflect an estimate of favorable or unfavorable terms of IT’SUGAR’s lease agreements when compared with market terms. These adjustments were estimated by calculating the present value using a risk-adjusted discount rate of the difference between the contractual amounts to be paid pursuant to the lease agreements and the estimate of market lease rates at the consolidation date.

Goodwill – Goodwill recognized in connection with the consolidation of IT’SUGAR reflects the difference between the (i) the fair values of IT’SUGAR’s identifiable assets and liabilities at the consolidation date and (ii) the fair values of the Company’s existing interests and any noncontrolling interests in IT’SUGAR at the consolidation date.

Remeasurement of Existing Investment in IT’SUGAR – As part of the acquisition method of accounting, the Company is required to remeasure the carrying value of its existing interests in IT’SUGAR at fair value as of the consolidation date, with the remeasurement adjustment recognized in the Company’s condensed consolidated statement of operations and comprehensive income. The Company applied an income approach utilizing a discounted cash flow methodology to estimate the fair value of its investment in IT’SUGAR as of the consolidation date. The Company’s discounted cash flow methodology established an estimate of the fair value of IT’SUGAR by estimating the present value of the projected future cash flows to be generated from IT’SUGAR. The discount rate applied to the projected future cash flows to arrive at the present value is intended to reflect all risks of ownership and the associated risks of realizing the stream of projected future cash flows associated with IT’SUGAR. The most significant assumptions used in the discounted cash flow methodology to estimate the preliminary fair value of IT’SUGAR were the terminal value, the discount rate, and the forecast of future cash flows.

Redeemable Noncontrolling Interest – Represents a 9.65% redeemable noncontrolling interest in IT'SUGAR’s Class B Units.

The results of operations of IT’SUGAR are included in the Company’s condensed consolidated statement of operations and comprehensive loss for the three and six months ended June 30, 2022 but are not included in the Company’s condensed consolidated statement of operations and comprehensive income for the period from January 1, 2021 to June 16, 2021. The following table shows IT’SUGAR’s trade sales and income before income taxes included in the Company’s condensed consolidated statements of operations and comprehensive income for the dates indicated (in thousands):