##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 COMMISSION FILE NUMBER 001-16785
 American Spectrum Realty, Inc.
  State of Maryland
    
    52-2258674(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)5850 San Felipe, Suite 450
Houston, Texas 77057
    
    77057(Address of principal executive offices)
    
    (Zip Code)
  (Registrants telephone number, including area code)
 (Former name, former address and former fiscal year, if changed since last
report
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ




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##### 



TABLE OF CONTENTS
 Page No.PART I FINANCIAL INFORMATIONItem 1 Financial Statements
    
    
    3Consolidated Condensed Balance Sheets at June 30, 2008 (unaudited) and December 31, 2007
    
    
    3Consolidated Condensed Statements of Operations for the three and six months ended June 30, 2008 and 2007
(unaudited)
    
    
    4Consolidated Condensed Statement of Stockholders Equity for the six months ended June 30, 2008 (unaudited)
    
    
    5Consolidated Condensed Statements of Cash Flows for the six months ended June 30, 2008 and 2007 (unaudited)
    
    
    6Notes to Consolidated Condensed Financial Statements
    
    
    7Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 4T Controls and Procedures
    
    
    21PART II OTHER INFORMATIONItem 1 Legal Proceedings
    
    
    22Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 4 Submission of Matters to a Vote of Security Holders
    
    
    22Item 6 Exhibits and Reports on Form 8-K
    
    
    23Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 AMERICAN SPECTRUM REALTY, INC.
 
 CONSOLIDATED CONDENSED BALANCE SHEETS
 June 30, 2008
    
    
    December 31, 2007(Unaudited)ASSETSReal estate held for investment
    
    $
    256,406
    
    
    $
    238,053Accumulated depreciation
    
    
    (55,124
    )
    
    
    (48,757
    )Real estate held for investment, net
    
    
    201,282
    
    
    
    189,296Real estate held for sale
    
    
    
    
    
    
    1,996Cash and cash equivalents
    
    
    2,058
    
    
    
    847Restricted cash
    
    
    
    
    
    
    3,565Tenant and other receivables, net of allowance for doubtful
accounts of$543 and $186, respectively
    
    
    770
    
    
    
    561Deferred rents receivable
    
    
    1,849
    
    
    
    1,589Investment in management company
    
    
    4,000
    
    
    
    4,000Prepaid and other assets, net
    
    
    13,153
    
    
    
    10,932Total Assets
    
    $
    223,112
    
    
    $
    212,786LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Notes payable, including premium of $41 and $64, respectively
    
    $
    203,076
    
    
    $
    186,824Liabilities related to real estate held for sale
    
    
    
    
    
    
    2,318Deferred tax liability
    
    
    105
    
    
    
    1,777Accounts payable
    
    
    2,459
    
    
    
    2,822Accrued and other liabilities
    
    
    9,802
    
    
    
    8,457Total Liabilities
    
    
    215,442
    
    
    
    202,198Minority interest
    
    
    4,139
    
    
    
    4,522Stockholders Equity:Preferred stock, $.01 par value; authorized, 25,000,000 shares, none issued and outstanding
    
    
    
    
    
    
    Common stock, $.01 par value; authorized, 100,000,000 shares;
issued, 1,620,304 and 1,613,554 shares, respectively;
outstanding, 1,384,598 and 1,378,214 shares, respectively
    
    
    16
    
    
    
    16Additional paid-in capital
    
    
    46,754
    
    
    
    46,693Accumulated deficit
    
    
    (40,144
    )
    
    
    (37,557
    )Treasury stock, at cost, 235,706 and 235,340 shares, respectively
    
    
    (3,095
    )
    
    
    (3,086
    )Total Stockholders Equity
    
    
    3,531
    
    
    
    6,066Total Liabilities and Stockholders Equity
    
    $
    223,112
    
    
    $
    212,786
  3




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##### Table of Contents



AMERICAN SPECTRUM REALTY, INC.
 
 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
   Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007REVENUES:Rental revenue
    
    $
    8,778
    
    
    $
    7,822
    
    
    $
    17,042
    
    
    $
    15,001Interest and other income
    
    
    40
    
    
    
    21
    
    
    
    130
    
    
    
    58Total revenues
    
    
    8,818
    
    
    
    7,843
    
    
    
    17,172
    
    
    
    15,059EXPENSES:Property operating expense
    
    
    4,216
    
    
    
    3,296
    
    
    
    7,744
    
    
    
    6,285Corporate general and administrative
    
    
    1,025
    
    
    
    955
    
    
    
    1,881
    
    
    
    1,682Depreciation and amortization
    
    
    3,550
    
    
    
    3,092
    
    
    
    6,788
    
    
    
    6,036Interest expense
    
    
    3,362
    
    
    
    3,078
    
    
    
    6,467
    
    
    
    5,636Total expenses
    
    
    12,153
    
    
    
    10,421
    
    
    
    22,880
    
    
    
    19,639Net loss from continuing operations before deferred income tax benefit and minority interest
    
    
    (3,335
    )
    
    
    (2,578
    )
    
    
    (5,708
    )
    
    
    (4,580
    )Deferred income tax benefit
    
    
    1,165
    
    
    
    1,092
    
    
    
    2,013
    
    
    
    1,784Net loss from continuing operations before minority interest
    
    
    (2,170
    )
    
    
    (1,486
    )
    
    
    (3,695
    )
    
    
    (2,796
    )Minority interest (share from continuing operations)
    
    
    280
    
    
    
    193
    
    
    
    477
    
    
    
    367Net loss from continuing operations
    
    
    (1,890
    )
    
    
    (1,293
    )
    
    
    (3,218
    )
    
    
    (2,429
    )Discontinued operations:(Loss) gain from discontinued operations
    
    
    
    
    
    
    (20
    )
    
    
    5
    
    
    
    (21
    )Gain on sale of discontinued operations
    
    
    
    
    
    
    
    
    
    
    1,141
    
    
    
    Deferred income tax benefit (expense)
    
    
    
    
    
    
    8
    
    
    
    (421
    )
    
    
    8Minority interest
    
    
    
    
    
    
    2
    
    
    
    (94
    )
    
    
    2(Loss) income from discontinued operations
    
    
    
    
    
    
    (10
    )
    
    
    631
    
    
    
    (11
    )Net loss
    
    $
    (1,890
    )
    
    $
    (1,303
    )
    
    $
    (2,587
    )
    
    $
    (2,440
    )Basic and diluted per share data:Net loss from continuing operations
    
    $
    (1.37
    )
    
    $
    (0.94
    )
    
    $
    (2.34
    )
    
    $
    (1.77
    )Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    0.46
    
    
    
    Net loss
    
    $
    (1.37
    )
    
    $
    (0.94
    )
    
    $
    (1.88
    )
    
    $
    (1.77
    )Basic weighted average shares used
    
    
    1,376,098
    
    
    
    1,380,221
    
    
    
    1,375,864
    
    
    
    1,378,512
  4




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AMERICAN SPECTRUM REALTY INC.
 
 CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS EQUITY
 Common
    
    Common
    
    AdditionalStock
    
    Stock
    
    Paid-In
    
    Accumulated
    
    TreasuryShares
    
    Amount
    
    Capital
    
    Deficit
    
    Stock
    
    Total EquityBalance, January 1, 2008
    
    
    1,613,554
    
    
    $
    16
    
    
    $
    46,693
    
    
    $
    (37,557
    )
    
    $
    (3,086
    )
    
    $
    6,066Common stock repurchase
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    (9
    )Issuance of common stock
to officers and
directors
    
    
    4,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of stock options
    
    
    2,500
    
    
    
    
    
    
    
    31
    
    
    
    
    
    
    
    
    
    
    
    31Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    30Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,587
    )
    
    
    
    
    
    
    (2,587
    )Balance, June 30, 2008
    
    
    1,620,304
    
    
    $
    16
    
    
    $
    46,754
    
    
    $
    (40,144
    )
    
    $
    (3,095
    )
    
    $
    3,531
  5




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AMERICAN SPECTRUM REALTY, INC
 
 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
   Six Months Ended June 30,2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (2,587
    )
    
    $
    (2,440
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization
    
    
    6,810
    
    
    
    6,102Deferred rental income
    
    
    (260
    )
    
    
    (284
    )Minority interest
    
    
    (383
    )
    
    
    (369
    )Net gain on sale of real estate asset
    
    
    (1,141
    )
    
    
    Stock-based compensation expense
    
    
    30
    
    
    
    21Income tax benefit
    
    
    (1,592
    )
    
    
    (1,860
    )Amortization of note payable premiums, included in interest expense
    
    
    (23
    )
    
    
    (218
    )Changes in operating assets and liabilities:Release of restricted cash
    
    
    3,565
    
    
    
    (Increase) decrease in tenant and other receivables
    
    
    (72
    )
    
    
    164Increase in prepaid and other assets
    
    
    (1,737
    )
    
    
    (259
    )(Decrease) increase in accounts payable
    
    
    (375
    )
    
    
    60Increase in accrued and other liabilities
    
    
    999
    
    
    
    656Net cash provided by operating activities
    
    
    3,234
    
    
    
    1,573CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds received from sale of real estate asset
    
    
    3,014
    
    
    
    Real estate acquisitions
    
    
    (17,250
    )
    
    
    (26,108
    )Capital improvements to real estate assets
    
    
    (1,862
    )
    
    
    (2,267
    )Net cash used in investing activities:
    
    
    (16,098
    )
    
    
    (28,375
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from borrowings
    
    
    300
    
    
    
    12,125Proceeds from borrowings  property acquisitions
    
    
    16,950
    
    
    
    23,422Repayment of borrowings  property sales
    
    
    (2,218
    )
    
    
    Repayment of borrowings  refinances
    
    
    (150
    )
    
    
    (8,067
    )Repayment of borrowings  scheduled payments
    
    
    (829
    )
    
    
    (869
    )Repurchase of common stock
    
    
    (9
    )
    
    
    (150
    )Acquisition of minority interest in the operating partnership
    
    
    
    
    
    
    (133
    )Proceeds from exercise of stock options
    
    
    31
    
    
    
    85Net cash provided by financing activities:
    
    
    14,075
    
    
    
    26,413Increase (decrease) in cash and cash equivalents
    
    
    1,211
    
    
    
    (389
    )Cash and cash equivalents, beginning of period
    
    
    847
    
    
    
    1,166Cash and cash equivalents, end of period
    
    $
    2,058
    
    
    $
    777SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid for interest
    
    $
    6,207
    
    
    $
    5,651Cash paid for income taxes
    
    
    151
    
    
    
    121
  6




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AMERICAN SPECTRUM REALTY, INC.
 
 Notes to Consolidated Condensed Financial Statements
 NOTE 1. DESCRIPTION OF BUSINESS
   NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 BASIS OF PRESENTATION
    RECLASSIFICATIONS
  SEGMENT REPORTING
  7




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NEW ACCOUNTING PRONOUNCEMENTS
 Noncontrolling Interests in Consolidated Financial Statementsan amendment of Accounting Research
Bulletin No. 51
 Fair Value Measurement
 STOCK-BASED COMPENSATION
 Share-Based Payment Accounting for Stock-Based Compensation Accounting for Stock Issued to
Employees
 MINORITY INTEREST
  NET LOSS PER SHARE
 Earnings Per Share,
 8




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##### Table of Contents



INCOME TAXES
    NOTE 3. REAL ESTATE
 ACQUISITIONS
 2008
  2007
  DISPOSITIONS
 2008
  9




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##### Table of Contents



2007
  NOTE 4. DISCONTINUED OPERATIONS
 Real estate assets held for sale.
   Condensed Consolidated Balance Sheet
    
    December 31, 2007Real estate
    
    $
    1,808Other
    
    
    188Real estate assets held for sale
    
    $
    1,996Note payable
    
    $
    2,222Accounts payable
    
    
    12Accrued and other liabilities
    
    
    84Liabilities related to real estate held for sale
    
    $
    2,318
 Net income (loss) from discontinued operations.
  Three Months Ended June 30,Condensed Consolidated Statements of Operations
    
    2008
    
    2007Rental revenue
    
    $
    
    
    
    $
    90Total expenses
    
    
    
    
    
    
    110Loss from discontinued operations before gain
on sale, income tax expense and minority
interest
    
    
    
    
    
    
    (20
    )Income tax expense
    
    
    
    
    
    
    8Minority interest from discontinued operations
    
    
    
    
    
    
    2Loss from discontinued operations
    
    $
    
    
    
    $
    (10
    )
 Six Months Ended June 30,Condensed Consolidated Statements of Operations
    
    2008
    
    2007Rental revenue
    
    $
    73
    
    
    $
    177Total expenses
    
    
    68
    
    
    
    198Income (loss) from discontinued operations
before gain on sale, income tax expense and
minority interest
    
    
    5
    
    
    
    (21
    )Gain on sale of discontinued operations
    
    
    1,141
    
    
    
    Income tax expense
    
    
    (421
    )
    
    
    8Minority interest from discontinued operations
    
    
    (94
    )
    
    
    2Income (loss) from discontinued operations
    
    $
    631
    
    
    $
    (11
    )
 10




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##### Table of Contents



NOTE 5. NOTES PAYABLE, NET OF PREMIUM
  June 30, 2008
    
    
    December 31, 2007Maturity
    
    
    Principal
    
    
    Interest
    
    
    Principal
    
    
    InterestProperty (unless otherwise noted)
    
    Date
    
    
    Balance
    
    
    Rate
    
    
    Balance
    
    
    RateFixed RateFountain View Place
    
    
    4/29/2009
    
    
    
    1,700
    
    
    
    10.00
    %
    
    
    
    
    
    
    Fountain View Place
    
    
    4/29/2009
    
    
    
    2,500
    
    
    
    18.00
    %
    
    
    
    
    
    
    Pacific Spectrum
    
    
    6/10/2009
    
    
    
    5,382
    
    
    
    8.02
    %
    
    
    5,422
    
    
    
    8.02
    %1501 Mockingbird
    
    
    6/30/2009
    
    
    
    302
    
    
    
    6.00
    %
    
    
    304
    
    
    
    6.00
    %6430 Richmond Atrium
    
    
    6/30/2009
    
    
    
    721
    
    
    
    5.50
    %
    
    
    726
    
    
    
    5.50
    %Morenci
    
    
    12/01/2009
    
    
    
    1,571
    
    
    
    6.60
    %
    
    
    1,617
    
    
    
    6.60
    %Bristol Bay
    
    
    8/1/2011
    
    
    
    7,054
    
    
    
    7.58
    %
    
    
    7,101
    
    
    
    7.58
    %Technology
    
    
    8/1/2011
    
    
    
    7,296
    
    
    
    7.44
    %
    
    
    7,346
    
    
    
    7.44
    %Creekside
    
    
    12/1/2011
    
    
    
    5,951
    
    
    
    7.17
    %
    
    
    5,993
    
    
    
    7.17
    %16350 Park Ten Place
    
    
    5/11/2012
    
    
    
    4,556
    
    
    
    7.45
    %
    
    
    4,586
    
    
    
    7.45
    %16360 Park Ten Place
    
    
    5/11/2012
    
    
    
    3,570
    
    
    
    7.45
    %
    
    
    3,593
    
    
    
    7.45
    %2855 Mangum
    
    
    5/11/2012
    
    
    
    2,630
    
    
    
    7.45
    %
    
    
    2,647
    
    
    
    7.45
    %2855 Mangum
    
    
    5/11/2012
    
    
    
    1,502
    
    
    
    6.00
    %
    
    
    1,531
    
    
    
    6.00
    %6430 Richmond Atrium
    
    
    5/11/2012
    
    
    
    2,208
    
    
    
    7.45
    %
    
    
    2,222
    
    
    
    7.45
    %Southwest Pointe
    
    
    6/1/2012
    
    
    
    2,769
    
    
    
    7.33
    %
    
    
    2,787
    
    
    
    7.33
    %16350 Park Ten Place
    
    
    5/11/2012
    
    
    
    503
    
    
    
    7.45
    %
    
    
    506
    
    
    
    7.45
    %16360 Park Ten Place
    
    
    8/11/2012
    
    
    
    394
    
    
    
    7.45
    %
    
    
    397
    
    
    
    7.45
    %11500 Northwest Freeway
    
    
    6/1/2014
    
    
    
    4,177
    
    
    
    5.93
    %
    
    
    4,208
    
    
    
    5.93
    %11500 Northwest Freeway
    
    
    6/1/2014
    
    
    
    302
    
    
    
    5.93
    %
    
    
    304
    
    
    
    5.93
    %5850 San Felipe
    
    
    8/1/2014
    
    
    
    5,218
    
    
    
    5.65
    %
    
    
    5,258
    
    
    
    5.65
    %Northwest Corporate Center
    
    
    8/1/2014
    
    
    
    5,490
    
    
    
    6.26
    %
    
    
    5,527
    
    
    
    6.26
    %14741 Yorktown
    
    
    9/1/2014
    
    
    
    8,600
    
    
    
    5.32
    %
    
    
    8,600
    
    
    
    5.32
    %8100 Washington
    
    
    2/22/2015
    
    
    
    2,249
    
    
    
    5.59
    %
    
    
    2,266
    
    
    
    5.59
    %8300 Bissonnet
    
    
    5/1/2015
    
    
    
    4,630
    
    
    
    5.51
    %
    
    
    4,662
    
    
    
    5.51
    %1501 Mockingbird
    
    
    7/1/2015
    
    
    
    3,310
    
    
    
    5.28
    %
    
    
    3,332
    
    
    
    5.28
    %5450 Northwest Central
    
    
    9/1/2015
    
    
    
    2,695
    
    
    
    5.38
    %
    
    
    2,715
    
    
    
    5.38
    %800 Sam Houston Parkway
    
    
    12/29/2015
    
    
    
    2,396
    
    
    
    6.25
    %
    
    
    2,420
    
    
    
    6.25
    %888 Sam Houston Parkway
    
    
    12/29/2015
    
    
    
    2,396
    
    
    
    6.25
    %
    
    
    2,420
    
    
    
    6.25
    %2401 Fountain View
    
    
    3/1/2016
    
    
    
    12,400
    
    
    
    5.82
    %
    
    
    12,482
    
    
    
    5.82
    %12000 Westheimer
    
    
    1/1/2017
    
    
    
    4,250
    
    
    
    5.70
    %
    
    
    4,250
    
    
    
    5.70
    %Gray Falls
    
    
    1/1/2017
    
    
    
    3,100
    
    
    
    5.70
    %
    
    
    3,100
    
    
    
    5.70
    %6420 Richmond Atrium
    
    
    6/5/2017
    
    
    
    6,400
    
    
    
    5.87
    %
    
    
    6,400
    
    
    
    5.87
    %7700 Building
    
    
    8/1/2017
    
    
    
    45,000
    
    
    
    5.99
    %
    
    
    45,000
    
    
    
    5.99
    %Subtotal
    
    
    $
    163,222
    
    
    
    
    
    
    $
    159,722Variable RateCorporate  Unsecured (1)
    
    
    1/12/2009
    
    
    
    1,350
    
    
    
    7.00
    %
    
    
    1,500
    
    
    
    8.25
    %Corporate  Secured (2)
    
    
    2/7/2010
    
    
    
    1,922
    
    
    
    8.07
    %
    
    
    1,951
    
    
    
    8.07
    %Beltway Industrial
    
    
    5/9/2010
    
    
    
    17,000
    
    
    
    7.00
    %
    
    
    17,000
    
    
    
    7.64
    %Corporate  Unsecured (3)
    
    
    5/31/2010
    
    
    
    500
    
    
    
    7.00
    %
    
    
    200
    
    
    
    8.25
    %Northwest Spectrum Plaza
    
    
    4/19/2012
    
    
    
    3,270
    
    
    
    4.86
    %
    
    
    3,315
    
    
    
    7.64
    %Windrose
    
    
    4/19/2012
    
    
    
    3,031
    
    
    
    4.86
    %
    
    
    3,072
    
    
    
    7.64
    %Fountain View Place
    
    
    4/29/2018
    
    
    
    12,740
    
    
    
    6.50
    %
    
    
    
    
    
    
    Subtotal
    
    
    $
    39,813
    
    
    
    
    
    
    $
    27,038Loan Premium
    
    
    
    
    
    
    41
    
    
    
    
    
    
    
    64Total
    
    
    $
    203,076
    
    
    
    
    
    
    $
    186,824
 
 (1)
    
    In May 2008, the Company made a principal payment of $150,000 on the note, which reduced the
principal balance to $1,350,000 and the lender extended the maturity date of the note from June 12,
2008 to January 12, 2009.(2)
    
    In August 2008, the lender extended the maturity date of the note from October 1, 2008 to
February 7, 2010.(3)
    
    In March 2008, the lender extended the maturity date of the note from May 31, 2008 to May 31,
2010 and funded the Company an additional $300,000, which increased the principal balance to
$500,000. 11




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NOTE 6. MINORITY INTEREST
    NOTE 7. REPURCHASE OF COMMON STOCK
    NOTE 8. STOCK-BASED COMPENSATION
    12




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##### Table of Contents



Stock Options
   Shares
    
    Weighted Average
    
    AggregateUnder Option
    
    Exercise Price
    
    Intrinsic ValueOutstanding on January 1, 2008
    
    
    32,813
    
    
    $
    24.07Granted
    
    
    
    
    
    
    Forfeited
    
    
    (938
    )
    
    $
    14.86Exercised
    
    
    (2,500
    )
    
    $
    12.43
    
    
    $
    30,181Outstanding on June 30, 2008
    
    
    29,375
    
    
    $
    23.93
    
    
    $
    610,875Exercisable as of June 30, 2008
    
    
    27,813
    
    
    $
    24.25
    
    
    $
    575,156
  Weighted Average
    
    WeightedRange of
    
    
    
    Remaining
    
    AverageExercise
    
    Number
    
    Contractual
    
    ExercisePrice
    
    Outstanding
    
    Life
    
    Price$8.10  $12.20
    
    12,500
    
    5.8 years
    
    $10.66$18.25  $27.16
    
    11,250
    
    6.2 years
    
    $20.65$60.00  $60.00
    
    5,625
    
    3.3 years
    
    $60.00
  Weighted Average
    
    WeightedRange of
    
    
    
    Remaining
    
    AverageExercise
    
    Number
    
    Contractual
    
    ExercisePrice
    
    Exercisable
    
    Life
    
    Price$8.10  $12.20
    
    12,500
    
    5.8 years
    
    $10.66$18.25  $27.16
    
    9,688
    
    5.9 years
    
    $21.03$60.00  $60.00
    
    5,625
    
    3.3 years
    
    $60.00
  Weighted AverageGrant DateNonvested Stock Options
    
    Number
    
    
    Fair ValueNonvested at January 1, 2008
    
    
    5,000
    
    
    $
    9.00Granted
    
    
    
    
    
    
    Vested
    
    
    (2,500
    )
    
    $
    8.50Forfeited
    
    
    (938
    )
    
    $
    8.67Nonvested at June 30, 2008
    
    
    1,562
    
    
    $
    10.00
  13




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##### Table of Contents



Restricted Stock
    Weighted AverageNumber of
    
    
    Grant DateRestricted Stock Awards
    
    Shares
    
    
    Fair ValueNonvested at January 1, 2008
    
    
    4,250
    
    
    $
    22.75Granted
    
    
    4,250
    
    
    $
    25.00Vested
    
    
    (1,413
    )
    
    $
    22.75Forfeited
    
    
    
    
    
    
    Nonvested at June 30, 2008
    
    
    7,087
    
    
    $
    24.10
  NOTE 9. RELATED PARTY TRANSACTIONS
    14




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##### Table of Contents



NOTE 10. COMMITMENTS AND CONTINGENCIES
   
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 OVERVIEW
      15




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CRITICAL ACCOUNTING POLICIES
   Investment in Real Estate Assets
   Building and Improvements
    
    5 to 40 yearsTenant Improvements
    
    Term of the related leaseFurniture and Equipment
    
    3 to 5 years
 Allocation of Purchase Price of Acquired Assets
 Business Combinations
  Sales of Real Estate Assets
 Accounting for Sales of Real Estate
 16




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##### Table of Contents



RESULTS OF OPERATIONS
 Discussion of the three months ended June 30, 2008 and 2007.
  June 30,
    
    June 30,
    
    Variance2008
    
    2007
    
    $
    
    %Rental revenue
    
    $
    8,778,000
    
    
    $
    7,822,000
    
    
    $
    956,000
    
    
    
    12.2
    %Operating expenses:Property operating expenses
    
    
    4,216,000
    
    
    
    3,296,000
    
    
    
    920,000
    
    
    
    27.9
    %General and administrative
    
    
    1,025,000
    
    
    
    955,000
    
    
    
    70,000
    
    
    
    7.3
    %Depreciation and amortization
    
    
    3,550,000
    
    
    
    3,092,000
    
    
    
    458,000
    
    
    
    14.8
    %Interest expense
    
    
    3,362,000
    
    
    
    3,078,000
    
    
    
    284,000
    
    
    
    9.2
    %
 Rental revenue
 Property operating expenses
 General and administrative
 Depreciation and amortization
 Interest expense
 Income taxes.
 17




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##### Table of Contents



Minority interest.
 Discussion of the six months ended June 30, 2008 and 2007.
  June 30,
    
    June 30,
    
    Variance2008
    
    2007
    
    $
    
    %Rental revenue
    
    $
    17,042,000
    
    
    $
    15,001,000
    
    
    $
    2,041,000
    
    
    
    13.6
    %Operating expenses:Property operating expenses
    
    
    7,744,000
    
    
    
    6,285,000
    
    
    
    1,459,000
    
    
    
    23.2
    %General and administrative
    
    
    1,881,000
    
    
    
    1,682,000
    
    
    
    199,000
    
    
    
    11.8
    %Depreciation and amortization
    
    
    6,788,000
    
    
    
    6,036,000
    
    
    
    752,000
    
    
    
    12.5
    %Interest expense
    
    
    6,467,000
    
    
    
    5,636,000
    
    
    
    831,000
    
    
    
    14.7
    %
 Rental revenue
 Property operating expenses
 General and administrative
 Depreciation and amortization
 Interest expense
 18




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##### Table of Contents



Income taxes.
 Minority interest.
 Discontinued operations
 LIQUIDITY AND CAPITAL RESOURCES
   Six Months Ended June 30,2008
    
    2007Non-Cash Items:Depreciation and amortization expense
    
    $
    6,810
    
    
    $
    6,102Income tax benefit
    
    
    (1,592
    )
    
    
    (1,860
    )Deferred rental income
    
    
    (260
    )
    
    
    (284
    )Minority interest
    
    
    (383
    )
    
    
    (369
    )Stock-based compensation expense
    
    
    30
    
    
    
    21Amortization of loan premiums
    
    
    (23
    )
    
    
    (218
    )
   19




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##### Table of Contents



INFLATION
  FORWARD-LOOKING STATEMENTS
  20




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##### Table of Contents



ITEM 4T. CONTROLS AND PROCEDURES
   21




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  Company Purchases of Equity Securities
 Total Number ofShares Purchased as
    
    
    Maximum Number ofTotal Number
    
    
    
    
    
    
    Part of Publicly
    
    
    Shares that May Yet Beof Shares
    
    
    Average Price
    
    
    Announced Plans or
    
    
    Purchased Under thePeriod
    
    Purchased (1)
    
    
    Paid per Share
    
    
    Programs
    
    
    Plans or ProgramsApril 1-30, 2008
    
    
    366
    
    
    $
    24.98
    
    
    
    
    
    
    
    May 1-31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    June 1-30, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    366
    
    
    $
    24.98
    
    
    
    
    
    
    
    
 
 (1)
    
    Represents shares purchased in a private transaction. 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   Name of
    
    Number of
    
    Number ofNominee
    
    Votes For
    
    Votes WithheldTimothy R. Brown
    
    
    1,177,402
    
    
    
    6,294William J. Carden
    
    
    1,176,934
    
    
    
    6,762John N. Galardi
    
    
    1,176,960
    
    
    
    6,736William W. Geary, Jr.
    
    
    1,177,402
    
    
    
    6,294Presley E. Werlein, III
    
    
    1,177,340
    
    
    
    6,356
  Number of
    
    Number of
    
    Number ofVotes For
    
    Votes Against
    
    Votes Abstaining1,178,413
    
    3,021
    
    2,263
 22




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##### Table of Contents



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
    
 
 SIGNATURES
  AMERICAN SPECTRUM REALTY, INC.Date: August 13, 2008
    By:
    /s/ William J. CardenWilliam J. CardenChairman of the Board, President and,
Chief Executive Officer
(Principal Executive Officer)Date: August 13, 2008
    By:
    /s/ G. Anthony EppolitoG. Anthony EppolitoVice President, Chief Financial Officer,
(Principal Financial Officer and Accounting Officer),
Treasurer and Secretary 23




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EXHIBIT INDEX
 Exhibit No.
    
    Exhibit Title31.1
    
    Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of CEO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 200232.2
    
    Certification of CFO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
 24