Note 4 - Sale of Controlling Interest in Real Estate Subsidiary	12 Months Ended
Dec. 31, 2019
Notes to Financial Statements
Controlling Stock Sale of Real Estate Subsidiary [Text Block]	NOTE 4. SALE OF CONTROLLING INTEREST IN REAL ESTATE SUBSIDIARY Transaction On June 27, 2019, the Company sold 65% of its membership interest in Mt Melrose, LLC to an unaffiliated third -party purchaser, Woodmont Lexington, LLC, a Delaware limited liability company (“Woodmont”). As consideration for the transaction, Woodmont paid the Company $100,000 and agreed to assume full responsibility for the management and operation of Mt Melrose and its real estate portfolio. The Company retained a 35% membership interest in Mt Melrose, with Woodmont owning the other 65% membership interest. Subsequent to the transaction, however, Woodmont, as the manager of Mt Melrose, has purported that the Company’s membership interest in Mt Melrose has been diluted to 20.8%. The Company disputes this assertion and maintains that it has retained its 35% membership interest. Prior to this transaction, the Company had grown uncomfortable with the extreme amounts of high-priced debt that the Mt Melrose subsidiary had taken on. There were significant principal payments due over the next 12 months at the subsidiary level that the portfolio’s cash flows could not offset and the Company was unwilling to subsidize. As reported in previous quarterly and annual reports, on November 1, 2018, management implemented a right-sizing strategy for the Mt Melrose portfolio. This strategy included the hiring of a dedicated third -party property manager, a restructuring of overhead expenses, the divestiture of non-cash-flowing properties, and a focus on refinancing high-interest debt. The property manager was responsible for all day-to-day operations including, but not limited to: tenant relations and communications, property repairs and renovations, vacancy marketing, and turnover procedures. This allowed management to remain passive operationally and focus on property sales and refinancing opportunities. Subsequent to the sale on June 27, 2019, the property manager continues to fulfill the day-to-day operational responsibilities, and, to management’s knowledge, Woodmont continues to act on management’s previous right-sizing efforts by liquidating non-cash-flowing properties and pursuing refinancing options. In connection with this transaction, the Company and Woodmont entered into a certain Amended and Restated Limited Liability Company Agreement of Mt Melrose, LLC (the “A&R LLC Agreement”). The A&R LLC Agreement sets forth the general terms and conditions governing the arrangements between the two members. The A&R LLC Agreement provides that the business and affairs of Mt Melrose will be managed exclusively by one or more managers; and Woodmont is designated as the sole manager. In addition, the Company has expressly agreed to a three -year “standstill” arrangement, during which time the Company will not in any way participate, directly or indirectly, in the management or control of Mt Melrose; and with respect to any matters requiring a vote of the members, the Company will vote with (i.e., the same as) Woodmont. This arrangement allows the Company to maintain its passive management structure, while still owning a significant portion of the partnership. Under the terms of the A&R LLC Agreement, distributions of cash, from whatever source, may be made to the members at such times, and in such amounts, as the manager, Woodmont, determines; provided, however, that any such distributions will be made in accordance with the following priorities: (i) distribution of amounts up to a cumulative total of $2,000,000 will be made pro rata in accordance with the members’ respective percentage interests (as expressly specified in the A&R LLC Agreement); (ii) then, distribution of cumulative amounts in excess of $2,000,000 and up to $3,000,000 will be made 67% to the Company and 33% to Woodmont; and (iii) thereafter, distribution of cumulative amounts in excess of $3,000,000 will be made pro rata in accordance with the members’ respective percentage interests (as expressly specified in the A&R LLC Agreement). Deconsolidation Due to Transfer of Control Prior to the sale of 65% of its Mt Melrose interest, the Company owned 100% of the membership interests in Mt Melrose, LLC and controlled the entity by virtue of its voting interests. As a result, the Company consolidated Mt Melrose under the “voting interests” (“VOE”) consolidation model. By virtue of the A&R LLC Agreement, and the aforementioned standstill agreement, Woodmont is the sole “manager” responsible for all management and operating decisions of Mt Melrose. Management determined that as of June 27, 2019, the Company no longer has a “controlling financial interest” in Mt Melrose and will no longer consolidate Mt Melrose. Furthermore, the Company has concluded that Mt Melrose does not qualify as a “variable interest entity” as Mt Melrose has sufficient equity at risk to permit operations and the Company is not the primary beneficiary of Mt Melrose’s activities. All activity prior to the deconsolidation event has been included on the accompanying consolidated statements of operations for the year ended December 31, 2019, in continuing operations, and under the real estate segment. As of June 27, 2019, all previously consolidated assets and liabilities of Mt Melrose, LLC have been removed from the accompanying consolidated balance sheets. The Company’s membership interest in Mt Melrose will now be accounted for as an investment in the equity of Mt Melrose in the Company’s reported financial statements. Accounting for Remaining Mt Melrose Investment The Company adopted ASU 2016 - 01 effective January 1, 2018. ASU 2016 - 01 generally requires entities to measure equity investments at fair value and recognize any changes in fair value in net income. However, entities are able to elect a measurement alternative for equity investments that do not have a “readily determinable fair value.” The Company has determined that its equity investment in Mt Melrose does not have a readily determinable fair value at the time of deconsolidation. The Company’s inability to “exercise significant influence” due to the previously mentioned standstill agreement, also supports the use of the measurement alternative. Under this alternative, the Company will measure the Mt Melrose investment at its implied fair value and assess it for impairment at each reporting date, or more often if indication of a potential impairment exists. When fair value becomes determinable, from observable price changes in orderly transactions, the Company’s investment will be marked to fair value on a periodic basis. Future dividends will be recognized as income and returns of capital recognized as a reduction in the Company’s investment when and if received. Using the $100,000 transaction price for a 65% interest in Mt Melrose, LLC, the implied value of the retained 35% interest at the time of the transaction is $53,846. This amount is included under the long-term investment amount on the accompanying consolidated balance sheet as of December 31, 2019. Effective on June 27, 2019, the Company recognized a loss on the partial sale of Mt Melrose in the amount of $4,157,809, which has been reported separately on the accompanying consolidated statements of operations in continuing operations and under the real estate segment for the year ended December 31, 2019. The amount of the loss is based upon the value of the Company’s remaining interest in the subsidiary, less the Company’s previous carrying value of the subsidiary.

NOTE

SALE OF CONTROLLING INTEREST IN REAL ESTATE SUBSIDIARY

Transaction

June 27, 2019,

the Company sold

65%

of its membership interest in Mt Melrose, LLC to an unaffiliated

third

-party purchaser, Woodmont Lexington, LLC, a Delaware limited liability company (“Woodmont”). As consideration for the transaction, Woodmont paid the Company

$100,000

and agreed to assume full responsibility for the management and operation of Mt Melrose and its real estate portfolio. The Company retained a

35%

membership interest in Mt Melrose, with Woodmont owning the other

65%

membership interest. Subsequent to the transaction, however, Woodmont, as the manager of Mt Melrose, has purported that the Company’s membership interest in Mt Melrose has been diluted to

20.8%.

The Company disputes this assertion and maintains that it has retained its

35%

membership interest.

Prior to this transaction, the Company had grown uncomfortable with the extreme amounts of high-priced debt that the Mt Melrose subsidiary had taken on. There were significant principal payments due over the next

months at the subsidiary level that the portfolio’s cash flows could

not

offset and the Company was unwilling to subsidize. As reported in previous quarterly and annual reports, on

November

2018,

management implemented a right-sizing strategy for the Mt Melrose portfolio. This strategy included the hiring of a dedicated

third

-party property manager, a restructuring of overhead expenses, the divestiture of non-cash-flowing properties, and a focus on refinancing high-interest debt. The property manager was responsible for all day-to-day operations including, but

not

limited to: tenant relations and communications, property repairs and renovations, vacancy marketing, and turnover procedures. This allowed management to remain passive operationally and focus on property sales and refinancing opportunities. Subsequent to the sale on

June 27, 2019,

the property manager continues to fulfill the day-to-day operational responsibilities, and, to management’s knowledge, Woodmont continues to act on management’s previous right-sizing efforts by liquidating non-cash-flowing properties and pursuing refinancing options.

In connection with this transaction, the Company and Woodmont entered into a certain Amended and Restated Limited Liability Company Agreement of Mt Melrose, LLC (the “A&R LLC Agreement”). The A&R LLC Agreement sets forth the general terms and conditions governing the arrangements between the

two

members. The A&R LLC Agreement provides that the business and affairs of Mt Melrose will be managed exclusively by

one

or more managers; and Woodmont is designated as the sole manager. In addition, the Company has expressly agreed to a

three

-year “standstill” arrangement, during which time the Company will

not

in any way participate, directly or indirectly, in the management or control of Mt Melrose; and with respect to any matters requiring a vote of the members, the Company will vote with (i.e., the same as) Woodmont. This arrangement allows the Company to maintain its passive management structure, while still owning a significant portion of the partnership.

Under the terms of the A&R LLC Agreement, distributions of cash, from whatever source,

may

be made to the members at such times, and in such amounts, as the manager, Woodmont, determines; provided, however, that any such distributions will be made in accordance with the following priorities: (i) distribution of amounts up to a cumulative total of

$2,000,000

will be made

pro rata

in accordance with the members’ respective percentage interests (as expressly specified in the A&R LLC Agreement); (ii) then, distribution of cumulative amounts in excess of

$2,000,000

and up to

$3,000,000

will be made

67%

to the Company and

33%

to Woodmont; and (iii) thereafter, distribution of cumulative amounts in excess of

$3,000,000

will be made

pro rata

in accordance with the members’ respective percentage interests (as expressly specified in the A&R LLC Agreement).

Deconsolidation Due to Transfer of Control

Prior to the sale of

65%

of its Mt Melrose interest, the Company owned

100%

of the membership interests in Mt Melrose, LLC and controlled the entity by virtue of its voting interests. As a result, the Company consolidated Mt Melrose under the “voting interests” (“VOE”) consolidation model.

By virtue of the A&R LLC Agreement, and the aforementioned standstill agreement, Woodmont is the sole “manager” responsible for all management and operating decisions of Mt Melrose. Management determined that as of

June 27, 2019,

the Company

longer has a “controlling financial interest” in Mt Melrose and will

longer consolidate Mt Melrose. Furthermore, the Company has concluded that Mt Melrose does

not

qualify as a “variable interest entity” as Mt Melrose has sufficient equity at risk to permit operations and the Company is

not

the primary beneficiary of Mt Melrose’s activities. All activity prior to the deconsolidation event has been included on the accompanying consolidated statements of operations for the year ended

December 31, 2019,

in continuing operations, and under the real estate segment. As of

June 27, 2019,

all previously consolidated assets and liabilities of Mt Melrose, LLC have been removed from the accompanying consolidated balance sheets. The Company’s membership interest in Mt Melrose will now be accounted for as an investment in the equity of Mt Melrose in the Company’s reported financial statements.

Accounting for Remaining Mt Melrose Investment

The Company adopted ASU

2016

effective

January 1, 2018.

ASU

2016

generally requires entities to measure equity investments at fair value and recognize any changes in fair value in net income. However, entities are able to elect a measurement alternative for equity investments that do

not

have a “readily determinable fair value.” The Company has determined that its equity investment in Mt Melrose does

not

have a readily determinable fair value at the time of deconsolidation. The Company’s inability to “exercise significant influence” due to the previously mentioned standstill agreement, also supports the use of the measurement alternative. Under this alternative, the Company will measure the Mt Melrose investment at its implied fair value and assess it for impairment at each reporting date, or more often if indication of a potential impairment exists. When fair value becomes determinable, from observable price changes in orderly transactions, the Company’s investment will be marked to fair value on a periodic basis. Future dividends will be recognized as income and returns of capital recognized as a reduction in the Company’s investment when and if received.

Using the

$100,000

transaction price for a

65%

interest in Mt Melrose, LLC, the implied value of the retained

35%

interest at the time of the transaction is

$53,846.

This amount is included under the long-term investment amount on the accompanying consolidated balance sheet as of

December 31, 2019.

Effective on

June 27, 2019,

the Company recognized a loss on the partial sale of Mt Melrose in the amount of

$4,157,809,

which has been reported separately on the accompanying consolidated statements of operations in continuing operations and under the real estate segment for the year ended

December 31, 2019.

The amount of the loss is based upon the value of the Company’s remaining interest in the subsidiary, less the Company’s previous carrying value of the subsidiary.