2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

Our financial records are maintained on the accrual basis of accounting whereby revenues are recognized when earned and expenses are recorded when incurred. The consolidated financial statements include our accounts as well as the accounts of any wholly- or majority-owned subsidiaries in which we have a controlling financial interest. Investments in joint ventures and partnerships, where we have the ability to exercise significant influence but do not exercise financial and operating control, are accounted for using the equity method. All significant inter-company accounts and transactions have been eliminated through consolidation.

The accompanying consolidated financial statements included in this Report as of and for the three and nine months ended September 30, 2011 and 2010, are unaudited. In our opinion, the accompanying consolidated financial statements contain all normal and recurring items and adjustments necessary for their fair presentation.

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

REVENUE RECOGNITION

We lease space to tenants under agreements with varying terms. Our leases are accounted for as operating leases, and, although certain leases of the properties provide for tenant occupancy during periods for which no rent is due and/or for increases or decreases in the minimum lease payments over the terms of the leases, revenue is recognized on a straight-line basis over the terms of the individual leases. Revenue recognition under a lease begins when the lessee takes possession of or controls the physical use of the leased asset. Generally, possession or control occurs on the lease commencement date. In all cases, we have determined that we are the owner of any tenant improvements that we fund pursuant to the lease terms. In cases where significant tenant improvements are made prior to lease commencement, the leased asset is considered to be the finished space, and revenue recognition therefore begins when the improvements are substantially complete. Accrued rents are included in tenant receivables. Revenue from tenant reimbursements of taxes, maintenance expenses and insurance is recognized in the period the related expense is recorded. Additionally, certain of the lease agreements contain provisions that grant additional rents based on tenants' sales volumes (contingent or percentage rent). Percentage rents are recognized when the tenants achieve the specified targets as defined in their lease agreements. During the nine months ended September 30, 2011 and 2010, we recognized percentage rents of $95,000 and $177,000, respectively.

We recognize lease termination fees in the period that the lease is terminated and collection of the fees is reasonably assured. Upon early lease termination, we provide for losses related to unrecovered intangibles and other assets. We recognized lease termination fees of $109,000 and $0 during the nine months ended September 30, 2011 and 2010, respectively.

We have investments in advised funds and other affiliates that are accounted for under the equity method because we exercise significant influence over such entities. We record our percentage interest in the earnings and losses of these entities in income (loss) from advised funds and other affiliates on our statement of operations. We serve as the general partner of our advised funds and receive asset management fees for such service, which are calculated as a percentage of equity under management.

We account for profit recognition on sales of real estate in accordance with GAAP where profits from sales are not recognized until certain criteria are met. Gains relating to transactions that do not meet the GAAP criteria are deferred and recognized when the criteria are met or by using the installment or deposit methods of profit recognition, as appropriate in the circumstances.

We provide various real estate services, including development, construction management, property management, leasing and brokerage. The fees for these services are recognized as services are provided and are generally calculated as a percentage of revenues earned or to be earned or of property cost, as appropriate. Construction management contracts are recognized only to the extent of the fee revenue.

REAL ESTATE INVESTMENTS

Development Properties – Land, buildings and improvements are recorded at cost. Expenditures related to the development of real estate are carried at cost, which includes capitalized carrying charges, acquisition costs and development costs. Carrying charges, primarily interest, real estate taxes and loan acquisition costs, and direct and indirect development costs related to buildings under construction, are capitalized as part of construction in progress. The capitalization of such costs ceases at the earlier of one year from the date of completion of major construction or when the property, or any completed portion, becomes available for occupancy. We capitalize costs associated with pending acquisitions of raw land as incurred. We did not capitalize any interest or taxes during the nine months ended September 30, 2011 or 2010.

Acquired Properties and Acquired Lease Intangibles – We account for operating real estate acquisitions as an acquisition of a business as we believe most operating real estate meets the definition of a "business" under GAAP. Accordingly, we allocate the purchase price of the acquired properties to land, building and improvements, identifiable intangible assets and to the acquired liabilities based on their respective fair values. Identifiable intangibles include amounts allocated to acquired above and below market leases, out of market debt, the value of in-place leases and customer relationship value, if any. We determine fair value based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known trends and specific market and economic conditions that may affect the property. Factors considered by management in our analysis of determining the as-if-vacant property value include (i) an estimate of carrying costs during the expected lease-up periods, considering market conditions, and (ii) costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and estimates of lost rentals at market rates during the expected lease-up periods, tenant demand and other economic conditions. Management also estimates costs to execute similar leases including leasing commissions, tenant improvements, legal and other related expenses. Intangibles related to in-place lease value and above and below-market leases are recorded as acquired lease intangibles and are amortized as an adjustment to rental revenue or amortization expense, as appropriate, over the remaining terms of the underlying leases. Below market leases include fixed-rate renewal periods. Premiums or discounts on debt are amortized to interest expense over the remaining term of such debt. Costs related to acquiring operating properties are expensed as incurred.

Depreciation – Depreciation is computed using the straight-line method over an estimated useful life of up to 39 years for buildings, up to 20 years for site improvements and over the term of the lease for tenant improvements. Leasehold estate properties, which are properties where we own the building and improvements but not the related ground, are amortized over the life of the lease.

Discontinued Operations – Our properties generally have operations and cash flows that can be clearly distinguished from the rest of the Company. The operations and gains on sales reported in discontinued operations include those properties that have been sold and for which operations and cash flows have been clearly distinguished. The operations of these properties have been eliminated from ongoing operations, and we will not have continuing involvement after disposition. Prior period operating activity related to such properties has been reclassified as discontinued operations in the accompanying statements of operations.

Impairment – We review our properties for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets, including accrued rental income, may not be recoverable through operations. We determine whether an impairment in value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges), including the residual value of the property, with the carrying value of the individual property. If impairment is indicated, a loss will be recorded for the amount by which the carrying value of the asset exceeds its fair value. During the nine months ended September 30, 2011, we did not recognize any impairment charges related to any of our properties. During the nine months ended September 30, 2010, we recognized an impairment charge of $2.3 million on four properties that represent non-core real estate assets and $1.2 million on two non-core real estate assets reported in discontinued operations. Both the estimated undiscounted cash flow analysis and fair value determination are based upon various factors which require complex and subjective judgments to be made by management. Such assumptions include projecting lease-up periods, holding periods, cap rates, rental rates, operating expenses, lease terms, tenant credit-worthiness, tenant improvement allowances, terminal sales value and certain macroeconomic factors among other assumptions to be made for each property.

RECEIVABLES AND ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS

Tenant receivables – Included in tenant receivables are base rents, tenant reimbursements and receivables attributable to recording rents on a straight-line basis. An allowance for the uncollectible portion of accrued rents and accounts receivable is determined based upon customer credit-worthiness (including expected recovery of our claim with respect to any tenants in bankruptcy), historical bad debt levels and current economic trends. Bad debt expenses and any recoveries related to tenant receivables are included in property expense. Following is a summary of activity within our allowance for uncollectible accounts ($ in thousands):


	Nine months ended September 30,
	2011			2010
Beginning balance	$	2,068		$	1,026
Additional reserves		429			1,091
Collections/reversals		(694	)		(245	)
Write-offs		(15	)		(140	)
Ending balance	$	1,788		$	1,732

Accounts receivable – Included in accounts receivable are various receivables that arise in the normal course of operating our business, including a $1.1 million receivable from the City of Pearland, Texas. We acquired this receivable in June 2008 in conjunction with the acquisition of Shadow Creek Ranch Shopping Center by our advised funds in February 2008. The receivable is to be funded by 1/3 of the 1.5% sales tax that the City of Pearland collects from the shopping center. We did not record any bad debt expense related to accounts receivable during the nine months ended September 30, 2011. During the nine months ended September 30, 2010, we reversed $51,000 of bad debt expense related to miscellaneous receivables that were collected during the period. Bad debt expense, if any, and any related recoveries on accounts receivable are included in general and administrative expense.

Notes receivable – Included in notes receivable is $4.6 million due from the sale of a tract of land adjacent to our Uptown Plaza – Dallas property located outside of downtown Dallas, Texas. In January 2010, we granted an extension to the buyer and extended the loan to December 31, 2010. The note matured, unpaid, on that date. The borrower is making principal and interest payments as if the loan had been extended. We are currently in discussions with the borrower as to possible remedies and recorded a $1.3 million impairment on the note in 2010. The impairment reduced the note receivable to the fair value of the underlying collateral, which was determined by calculating an average, per-acre price of vacant tracts of land sold near downtown Dallas, Texas within the past three years. Interest accruals are recorded directly to the reserve balance. Interest income is recorded to the extent that cash is received from the borrower. During the nine months ended September 30, 2011, we collected $288,000 from the borrower on this note, and we have recorded all of such payments in interest income in the accompanying consolidated statements of operations.

Also included in notes receivable is $102,000 in notes receivable from various tenants. An allowance for the uncollectible portion of notes receivable from tenants is determined based upon customer credit-worthiness (including expected recovery of our claim with respect to any tenants in bankruptcy), historical bad debt levels, and current economic trends. As of September 30, 2011, and December 31, 2010, we had an allowance for uncollectible notes receivable from tenants of $29,000 and $99,000, respectively. During the nine months ended September 30, 2011 and 2010, we recorded net bad debt recoveries related to tenant notes receivable of $71,000 and $0, respectively.

Notes receivable – related party – Included in related party notes receivable are loans made to certain of our affiliated advised funds related to the acquisition or development of properties and the deferral of asset management fees. These loans bear interest at LIBOR plus a spread and are due upon demand. The notes are secured by the funds' ownership interests in various unencumbered properties. During the year ended December 31, 2010, we, as the general partner of AmREIT Income and Growth Fund ("AIGF"), approved a plan to begin marketing the fund's assets for sale, and recorded a $500,000 impairment on the note from AIGF as we believe that the fund will be unable to repay the full balance after settlement of its other obligations. As a result of the impairment, we have ceased recording interest income on the note. Instead, interest accruals are recorded directly to the reserve balance, and interest income is recorded to the extent that cash is received from the borrower.

During the nine months ended September 30, 2011, AIGF disposed of one of its investment properties and used a portion of the proceeds to make a $900,000 payment on its note to us, $84,000 of which represented accrued interest and is included in interest income – related party on our consolidated statements of operations.

The following is a summary of the notes receivable due from related parties (in thousands):


			September 30, 2011						December 31, 2010
Related Party	Face Amount			Reserve			Carrying Amount		Face Amount		Reserve		Carrying Amount
AmREIT Income and Growth Fund, Ltd	$	2,440	$	(532	)	$	1,908	$	3,157	$	(500	)	$	2,657
AmREIT Monthly Income and Growth Fund III, Ltd		1,461	(1)	-			1,461		913		-			913
AmREIT Monthly Income and Growth Fund IV, L.P.		1,815		-			1,815		1,290		-			1,290
Total	$	5,716	$	(532	)	$	5,184	$	5,360	$	(500	)	$	4,860

(1) In October 2011, we loaned an additional $1.5 million to AmREIT Monthly Income and Growth Fund III, Ltd.

DERIVATIVE FINANCIAL INSTRUMENTS

GAAP requires that all derivative instruments, whether designated in hedging relationships or not, be recorded on the balance sheet at their fair value. Gains or losses resulting from changes in the values of those derivatives are accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. Changes in fair value of derivatives that qualify as cash flow hedges are recognized in other comprehensive income ("OCI") while the ineffective portion of the derivative's change in fair value is recognized in the income statement. As the hedge transactions settle, gains and losses associated with the transaction are reclassified out of OCI and into earnings. We assess, both at inception of the hedge and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the cash flows of the hedged items.

Our use of derivative financial instruments to date has been limited to the use of interest rate swaps to mitigate our interest rate risk on variable-rate debt and are immaterial to our consolidated financial statements. We have designated our interest rate swaps as cash flow hedges for financial reporting purposes and have therefore recorded any changes in their fair value to other comprehensive income. All methods of assessing fair value result in a general approximation of value, and such value may never actually be realized.

DEFERRED COSTS, NET

Deferred costs include deferred leasing costs and deferred loan costs, net of amortization. Deferred loan costs are incurred in obtaining financing and are amortized to interest expense over the term of the debt agreements using a method that approximates the effective interest method. Accumulated amortization related to deferred loan costs totaled $1.7 million and $1.3 million as of September 30, 2011, and December 31, 2010, respectively. Deferred leasing costs consist of internal and external commissions associated with leasing our properties and are amortized to depreciation and amortization expense over the lease term. Accumulated amortization related to leasing costs totaled $1.4 million and $1.2 million as of September 30, 2011, and December 31, 2010, respectively.

DEFERRED COMPENSATION

Our 1999 Flexible Incentive Plan (the "Plan") is designed to attract and retain the services of our directors and employees that we consider essential to our long-term growth and success. As such, it is designed to provide them with the opportunity to own restricted common stock in us. All long-term compensation awards are designed to vest over a period of three to seven years and promote retention of our team.

Restricted Stock Issuances – The Plan allows for grants of restricted stock to our directors and employees as a form of long-term compensation. The stock grants vest over a period of three to seven years. We determine the fair value of the restricted stock as the number of shares awarded multiplied by the fair value per share of our common shares on the grant date. We amortize such fair value ratably over the vesting periods of the respective awards. The following table presents restricted stock activity during the nine months ended September 30, 2011:


	Non-vested Shares		Weighted average grant date fair value
Beginning of period	431,175		$	8.78
Granted	85,000			8.97
Vested	(96,559	)		8.33
Forfeited	(5,217	)		8.37
End of period	414,399		$	8.93

The weighted-average grant date fair value of restricted stock issued during the nine months ended September 30, 2011 was $8.97 per share which is based on our best estimate as our shares are not publicly traded. The total grant date fair value of shares of restricted stock which vested during the nine months ended September 30, 2011 was $804,000. Total compensation cost recognized related to restricted stock during the nine months ended September 30, 2011 and 2010, was $418,000 and $316,000, respectively. As of September 30, 2011, total unrecognized compensation cost related to restricted stock was $2.8 million, and the weighted average period over which we expect this cost to be recognized is 4.2 years.

INCOME TAXES

We account for federal and state income taxes under the asset and liability method.

Federal – We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code") and are, therefore, not subject to Federal income taxes to the extent of dividends paid, provided we meet all conditions specified by the Internal Revenue Code for retaining our REIT status, including the requirement that at least 90% of our real estate investment trust taxable income be distributed to stockholders.

Our real estate development and operating business, AmREIT Realty Investment Corporation and subsidiaries ("ARIC"), is a fully integrated and wholly-owned business consisting of brokers and real estate professionals that provide development, acquisition, brokerage, leasing, construction, asset and property management services to our portfolio and advised funds as well as to third parties. ARIC and its subsidiaries are treated as taxable REIT subsidiaries (collectively, the "Taxable REIT Subsidiaries") for federal income tax purposes.

State – In May 2006, the State of Texas adopted House Bill 3, which modified the state's franchise tax structure, replacing the previous tax based on capital or earned surplus with one based on margin (often referred to as the "Texas Margin Tax") effective with franchise tax reports filed on or after January 1, 2008. The Texas Margin Tax is computed by applying the applicable tax rate (1% for us) to the profit margin, which, generally, will be determined for us as total revenue less a 30% standard deduction. Although House Bill 3 states that the Texas Margin Tax is not an income tax, we believe GAAP requires presentation of the Texas Margin Tax as an income tax for financial reporting purposes. We recorded a margin tax provision of $157,000 and $287,000 for the Texas Margin Tax for the nine months ended September 30, 2011 and 2010, respectively.

Deferred Tax Assets – To the extent that we have deferred tax assets at period end, we will determine whether it is more likely than not that we will generate sufficient future taxable income in order to realize those assets. In making that determination, we will consider our current financial position, our results of operations for the current and preceding years, and our expectation of future operations. As of September 30, 2011, and December 31, 2010, we had a full valuation allowance offsetting our deferred tax asset, as we believe it does not meet the more-likely-than-not criteria under GAAP.

EARNINGS PER SHARE

Effective January 1, 2009, we report both basic and diluted earnings per share ("EPS") using the two-class method under GAAP. The two-class method is an earnings allocation method for computing EPS when an entity's capital structure includes either two or more classes of common stock or includes common stock and participating securities. Our unvested shares of restricted stock contain rights to receive non-forfeitable dividends and thus are participating securities. The two-class method determines EPS based on distributed earnings (i.e. dividends declared on common stock and any participating securities) and undistributed earnings. Undistributed losses are not allocated to participating securities under the two-class method unless the participating security has a contractual obligation to share in losses on a basis that is objectively determinable. Pursuant to the two-class method, our unvested shares of restricted stock have not been allocated any undistributed losses.

In 2010, we determined that undistributed losses had been allocated to both our common and unvested shares of restricted stock in prior periods. As such, prior period amounts have been adjusted to reflect our EPS using the two-class method. EPS for the three and nine months ended September 30, 2010, was initially reported at $0.35 and $0.42, respectively, in previously filed financial statements. This adjustment was not material to any current or prior period financial statements.

The following table provides a reconciliation of net (loss) income from continuing operations and the number of common shares used in the computations of basic and diluted EPS under the two-class method (in thousands, except per share amounts):


		For the three months ended September 30,						For the nine months ended September 30,
		2011		2010				2011			2010

Continuing Operations
Income from continuing operations attributable to
common stockholders	$	703		$	2,702		$	2,458		$	3,313
Less: Dividends attributable to unvested restricted
stockholders		(41	)		(43	)		(124	)		(147	)
Less: Income attributable to non-controlling interests		-			(149	)		-			(173	)
Basic and Diluted — Income from continuing
operations		662			2,510			2,334			2,993
Discontinued Operations
Basic and Diluted — Income from discontinued
operations		415			5,732			562			6,459
Net income attributable to common stockholders after
allocation to participating securities	$	1,077		$	8,242		$	2,896		$	9,452

Number of Shares:
Basic and Diluted — Weighted average shares
outstanding		22,785			22,691			22,761			22,677

Basic and Diluted Earnings Per Share
Income from continuing operations attributable to
common stockholders	$	0.03		$	0.11		$	0.11		$	0.14
Income from discontinued operations attributable to
common stockholders	$	0.02		$	0.25		$	0.02		$	0.28
Net income attributable to common stockholders	$	0.05		$	0.36		$	0.13		$	0.42

Weighted average shares outstanding do not include unvested, restricted shares totaling 414,000 and 426,000 at September 30, 2011 and 2010, respectively.

FAIR VALUE MEASUREMENTS

GAAP emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. GAAP requires the use of observable market data, when available, in making fair value measurements. Observable inputs are inputs that the market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of ours. When market data inputs are unobservable, we utilize inputs that we believe reflect our best estimate of the assumptions market participants would use in pricing the asset or liability. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement. As a basis for considering market participant assumptions in fair value measurements, GAAP establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity's own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). The three levels of inputs used to measure fair value are as follows:

• Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access.

• Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

• Level 3 - Unobservable inputs for the asset or liability, which are typically based on the Company's own assumptions, as there is little, if any, related market activity.

Notes Payable and Other Financial Instruments – Our consolidated financial instruments consist of cash and cash equivalents, tenant receivables, accounts receivable, accounts receivable – related party, notes receivable, notes receivable –related party, notes payable, and accounts payable and other liabilities. The carrying values of all but the notes payable are representative of the fair values due to the short term nature of the instruments and/or recent impairments. Our notes payable consist of both variable-rate and fixed-rate notes. The fair value of the variable-rate notes and revolving line of credit approximate their carrying values. In determining the fair value of our fixed-rate notes, we determine the appropriate Treasury Bill Rate based on the remaining time to maturity for each of the debt instruments. We then add the appropriate yield spread to the Treasury Bill Rate. The yield spread is a risk premium estimated by investors to account for credit risk involved in debt financing. The spread is typically estimated based on the property type and loan-to-value ratio of the debt instrument. The result is an estimate of the market interest rate a typical investor would expect to receive given the underlying subject asset (property type) and remaining time to maturity. Fixed-rate loans assumed in connection with real estate acquisitions are recorded in the accompanying consolidated financial statements at fair value at the time of acquisition. We believe the fair value of our notes payable is classified in Level 2 of the fair value hierarchy.

Derivative Financial Instruments – We measure our derivative financial instruments at fair value on a recurring basis. In determining the fair value of our derivative instruments, we consider whether credit valuation adjustments are necessary to appropriately reflect both our own nonperformance risk and the respective counterparty's nonperformance risk in the fair value measurements. Although we have determined that the majority of the inputs used to value our derivatives fall within level 2 of the fair value hierarchy, the credit valuation assumptions associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. However, as of September 30, 2011, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Notes Receivable – In 2010, we recorded an impairment on a note receivable related to the disposition of a tract of land adjacent to our Uptown Plaza – Dallas property. As of December 31, 2010, the fair value of that note was $3.3 million and was determined by calculating an average, per-acre price of vacant tracts of land sold near downtown Dallas, Texas, within the last three years. The valuation was classified in Level 2 of the fair value hierarchy.

The following table presents our assets and liabilities and related valuation inputs within the fair value hierarchy utilized to measure fair value as of September 30, 2011, and December 31, 2010 (in thousands):


September 30, 2011		Level 1		Level 2		Level 3
Fixed-rate notes payable	$	-	$	166,968	$	-
Derivative liability		-		91		-


December 31, 2010		Level 1		Level 2		Level 3
Notes receivable	$	-	$	3,288	$	-
Fixed-rate notes payable		-		140,751		-
Derivative liability		-		346		-

DISCONTINUED OPERATIONS

During the nine months ended September 30, 2011, we sold two non-core, single-tenant assets. During the year ended December 31, 2010, we sold 21 non-core, single-tenant assets. These properties have been reflected as discontinued operations in the accompanying statement of operations. The following is a summary of our discontinued operations for the three and nine months ended September 30, 2011 and 2010 (in thousands, except for per share data):


		For the three months ended September 30,						For the nine months ended September 30,
		2011			2010			2011			2010
Revenues:
Rental income from operating leases	$	4		$	142		$	201		$	560
Earned income from direct financing leases		-			336			-			1,405
Total revenues		4			478			201			1,965
Expenses:
General and administrative		(3	)		(70	)		(3	)		(65	)
Property expense		1			1			2			8
Legal and professional		8			5			43			30
Depreciation and amortization		-			11			13			43
Impairment - properties		-			1,219			-			1,219
Total expenses		6			1,166			55			1,235
Operating income		(2	)		(688	)		146			730

Other income (expense):
Gain on sale of real estate acquired for investment		-			1,216			-			1,216
Interest and other income		-			3			4			3
Interest and other income - related party		-			4			-			8
Income tax expense		-			(93	)		(5	)		(121	)
Interest expense		-			(259	)		-			(926	)
Income from discontinued operations, net of tax		(2	)		183			145			910
Gain on sale of real estate acquired for resale, net of tax	$	417		$	5,549		$	417		$	5,549
Income from discontinued operations	$	415		$	5,732		$	562		$	6,459
Basic and diluted income from discontinued operations per share	$	0.02		$	0.25		$	0.02		$	0.28

STOCK ISSUANCE COSTS

Issuance costs incurred in the raising of capital through the sale of common stock are treated as a reduction of stockholders' equity.

CASH AND CASH EQUIVALENTS

We consider all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents consist of demand deposits at commercial banks and money market funds.

RECLASSIFICATIONS

Certain amounts in the prior year consolidated financial statements have been reclassified to conform to the presentation used in the current year consolidated financial statement.

NEW ACCOUNTING PRONOUNCEMENTS

Other comprehensive income – In June 2011, the Financial Accounting Standards Board ("FASB") amended GAAP with Accounting Standard Update 2011-05 "Comprehensive Income (Topic 220) Presentation of Comprehensive Income." This update does not change the recognition criteria of other comprehensive income ("OCI"); however, it eliminates the option that previously allowed reporting entities to present components of OCI as part of the statement of changes in stockholders' equity. Instead, an entity will be limited to the option to present the components of OCI either in a single continuous statement of net income and comprehensive income or in two separate but consecutive statements, and, under either option, an entity is required to present reclassification adjustments for items that are reclassified from OCI to net income and where those reclassifications are presented on the face of the financial statements. The update is effective for fiscal years, and interim periods beginning after December 15, 2011. Since our OCI is limited to the change in fair value of our interest rate swap and is immaterial (see Note 6), implementation of this update is not expected to have a material impact to our consolidated financial statements.