##### 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 March 31, 2007
 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)
 
 
 þ o
  o o þ
 o þ




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##### 



TABLE OF CONTENTS
 Page No.PART I
    
    FINANCIAL INFORMATIONItem 1
    
    Financial Statements
    
    
    3Consolidated Condensed Balance Sheets at March 31, 2007 (unaudited) and December 31, 2006
    
    
    3Consolidated Condensed Statements of Operations for the three months ended March 31, 2007 and 2006 (unaudited)
    
    
    4Consolidated Condensed Statement of Stockholders Equity for the three months ended March 31, 2007 (unaudited)
    
    
    5Consolidated Condensed Statements of Cash Flows for the three months ended March 31, 2007 and 2006 (unaudited)
    
    
    6Notes to Consolidated Condensed Financial Statements
    
    
    7Item 2
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    20Item 4
    
    Controls and Procedures
    
    
    21PART II
    
    OTHER INFORMATIONItem 1
    
    Legal Proceedings
    
    
    22Item 1A
    
    Risk Factors
    
    
    22Item 2
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 6
    
    Exhibits and Reports on Form 8-K
    
    
    22Certifications Pursuant to Section 302Certifications Pursuant to Section 906




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 AMERICAN SPECTRUM REALTY, INC.
 
 CONSOLIDATED CONDENSED BALANCE SHEETS
 March 31, 2007
    
    
    December 31, 2006(Unaudited)ASSETSReal estate held for investment
    
    $
    213,285
    
    
    $
    211,109Accumulated depreciation
    
    
    (41,103
    )
    
    
    (38,296
    )Real estate held for investment, net
    
    
    172,182
    
    
    
    172,813Cash and cash equivalents
    
    
    817
    
    
    
    1,166Tenant and other receivables, net of allowance for doubtful accounts of
$213 and $243, respectively
    
    
    335
    
    
    
    470Deferred rents receivable
    
    
    1,836
    
    
    
    1,536Investment in management company
    
    
    4,000
    
    
    
    4,000Prepaid and other assets, net
    
    
    8,363
    
    
    
    10,197Total Assets
    
    $
    187,533
    
    
    $
    190,182LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Notes payable, including premiums of $1,352 and $1,460, respectively
    
    $
    155,228
    
    
    $
    155,036Deferred tax liability
    
    
    5,060
    
    
    
    5,752Accounts payable
    
    
    2,469
    
    
    
    2,461Accrued and other liabilities
    
    
    4,882
    
    
    
    5,549Total Liabilities
    
    
    167,639
    
    
    
    168,798Minority interest
    
    
    5,749
    
    
    
    6,045Stockholders 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, 1,609,304 and 1,606,179 shares, respectively; outstanding,
1,377,054 and 1,379,429 shares, respectively
    
    
    16
    
    
    
    16Additional paid-in capital
    
    
    46,646
    
    
    
    46,553Accumulated deficit
    
    
    (29,492
    )
    
    
    (28,355
    )Treasury stock, at cost, 232,250 and 226,750 shares, respectively
    
    
    (3,025
    )
    
    
    (2,875
    )Total Stockholders Equity
    
    
    14,145
    
    
    
    15,339Total Liabilities and Stockholders Equity
    
    $
    187,533
    
    
    $
    190,182
  3




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##### Table of Contents



AMERICAN SPECTRUM REALTY, INC.
 
 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
 Three Months Ended March 31,2007
    
    
    2006REVENUES:Rental revenue
    
    $
    7,264
    
    
    $
    5,577Interest and other income
    
    
    37
    
    
    
    74Total revenues
    
    
    7,301
    
    
    
    5,651EXPENSES:Property operating expense
    
    
    3,003
    
    
    
    2,496General and administrative
    
    
    727
    
    
    
    920Depreciation and amortization
    
    
    2,976
    
    
    
    2,461Interest expense
    
    
    2,598
    
    
    
    2,185Total expenses
    
    
    9,304
    
    
    
    8,062Loss from continuing operations before deferred income tax benefit and minority interest
    
    
    (2,003
    )
    
    
    (2,411
    )Deferred income tax benefit
    
    
    692
    
    
    
    Loss from continuing operations before minority interest
    
    
    (1,311
    )
    
    
    (2,411
    )Minority interest (share from continuing operations)
    
    
    174
    
    
    
    321Loss from continuing operations
    
    
    (1,137
    )
    
    
    (2,090
    )Discontinued operations:Loss from operations
    
    
    
    
    
    
    (65
    )Gain on sale of discontinued operations
    
    
    
    
    
    
    22,349Minority interest
    
    
    
    
    
    
    (2,968
    )Income from discontinued operations
    
    
    
    
    
    
    19,316Net (loss) income
    
    $
    (1,137
    )
    
    $
    17,226Basic and diluted per share data:Net loss from continuing operations
    
    $
    (0.83
    )
    
    $
    (1.50
    )Income from discontinued operations
    
    
    
    
    
    
    13.87Net (loss) income
    
    $
    (0.83
    )
    
    $
    12.37Basic and diluted weighted average shares used
    
    
    1,376,804
    
    
    
    1,392,089
  4




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##### Table of Contents



AMERICAN SPECTRUM REALTY INC.
 
 CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS EQUITY
 AdditionalCommon
    
    Common
    
    Paid-In
    
    Accumulated
    
    TreasuryShares
    
    Stock
    
    Capital
    
    Deficit
    
    Stock
    
    Total EquityBalance, January 1, 2007
    
    
    1,606,179
    
    
    $
    16
    
    
    $
    46,553
    
    
    $
    (28,355
    )
    
    $
    (2,875
    )
    
    $
    15,339Common stock repurchase
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (150
    )
    
    
    (150
    )Exercise of stock options
    
    
    3,125
    
    
    
    
    
    
    
    85
    
    
    
    
    
    
    
    
    
    
    
    85Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    8Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,137
    )
    
    
    
    
    
    
    (1,137
    )Balance, March 31, 2007
    
    
    1,609,304
    
    
    $
    16
    
    
    $
    46,646
    
    
    $
    (29,492
    )
    
    $
    (3,025
    )
    
    $
    14,145
  5




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##### Table of Contents



AMERICAN SPECTRUM REALTY, INC
 
 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 Three Months Ended March 31,2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net (loss) income
    
    $
    (1,137
    )
    
    $
    17,226Adjustments to reconcile net (loss) income to net cash provided by (used
in) operating activities:Depreciation and amortization
    
    
    2,976
    
    
    
    2,536Deferred rental (income) expense
    
    
    (300
    )
    
    
    11Minority interest
    
    
    (174
    )
    
    
    2,647Net gain on sales of real estate assets
    
    
    
    
    
    
    (22,349
    )Stock-based compensation expense
    
    
    8
    
    
    
    8Income tax benefit
    
    
    (692
    )
    
    
    Amortization of note payable premiums, included in interest expense
    
    
    (108
    )
    
    
    (109
    )Changes in operating assets and liabilities:Decrease in tenant and other receivables
    
    
    143
    
    
    
    96Increase (decrease)in accounts payable
    
    
    8
    
    
    
    (930
    )Decrease in prepaid and other assets
    
    
    1,665
    
    
    
    397(Decrease) increase in accrued and other liabilities
    
    
    (684
    )
    
    
    123Net cash provided by (used in) operating activities
    
    
    1,705
    
    
    
    (344
    )CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds received from sales of real estate assets
    
    
    
    
    
    
    33,583Real estate acquisition
    
    
    (748
    )
    
    
    Capital improvements to real estate assets
    
    
    (1,419
    )
    
    
    (916
    )Net cash (used in) provided by investing activities:
    
    
    (2,167
    )
    
    
    32,667CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from borrowings
    
    
    750
    
    
    
    Repayment of borrowings  property sales
    
    
    
    
    
    
    (26,165
    )Repayment of borrowings  scheduled payments
    
    
    (450
    )
    
    
    (398
    )Note payments, litigation settlement
    
    
    
    
    
    
    (4,877
    )Repurchase of common stock
    
    
    (150
    )
    
    
    Acquisition of minority interest in the operating partnership
    
    
    (122
    )
    
    
    Proceeds from exercise of stock options
    
    
    85
    
    
    
    32Net cash provided by (used in) financing activities:
    
    
    113
    
    
    
    (31,408
    )Decrease (increase) in cash
    
    
    (349
    )
    
    
    915Cash and cash equivalents, beginning of period
    
    
    1,166
    
    
    
    300Cash and cash equivalents, end of period
    
    $
    817
    
    
    $
    1,215SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid for interest
    
    $
    2,653
    
    
    $
    2,309Cash paid for income taxes
    
    
    4
    
    
    
    10SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:Conversion of operating partnership units into common stock
    
    $
    
    
    
    $
    Debt assumed in connection with acquisitions of real estate assets
    
    
    
    
    
    
    11,302Borrowings in connection with acquisitions of real estate assets
    
    
    
    
    
    
    16,452
  6




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##### Table of Contents



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
  7




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##### Table of Contents



SEGMENT REPORTING
  NEW ACCOUNTING PRONOUNCEMENTS
  STOCK-BASED COMPENSATION
 Share-Based Payment Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees
 MINORITY INTEREST
  NET INCOME (LOSS) PER SHARE
 Earnings Per Share,
 8




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##### Table of Contents



INCOME TAXES
       9




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##### Table of Contents



NOTE 3. REAL ESTATE
 ACQUISITIONS
 2007.
  2006.
   DISPOSITIONS
 2007.
  2006.
  NOTE 4. DISCONTINUED OPERATIONS
  10




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##### Table of Contents



Condensed Consolidated Statements of Operations
    
    March 31, 2006Rental revenue
    
    $
    381Total expenses
    
    
    446Loss from discontinued operations before gain on sale
    
    
    (65
    )Gain on sale of discontinued operations
    
    
    22,349Minority interest from discontinued operations
    
    
    (2,968
    )Income from discontinued operations
    
    $
    19,316
 NOTE 5. NOTES PAYABLE, NET OF PREMIUMS
  March 31, 2007
    
    
    December 31, 2006Principal
    
    
    Interest
    
    
    Principal
    
    
    InterestProperty (unless otherwise noted)
    
    Maturity Date
    
    
    Balance
    
    
    Rate
    
    
    Balance
    
    
    RateFixed RatePacific Spectrum
    
    
    6/10/2009
    
    
    $
    5,479
    
    
    
    8.02
    %
    
    $
    5,500
    
    
    
    8.02
    %1501 Mockingbird
    
    
    6/30/2009
    
    
    
    307
    
    
    
    6.00
    %
    
    
    308
    
    
    
    6.00
    %6430 Richmond Atrium
    
    
    6/30/2009
    
    
    
    733
    
    
    
    5.50
    %
    
    
    736
    
    
    
    5.50
    %6420 Richmond Atrium
    
    
    7/1/2009
    
    
    
    6,342
    
    
    
    5.50
    %
    
    
    6,342
    
    
    
    5.50
    %Morenci Professional Park
    
    
    12/1/2009
    
    
    
    1,683
    
    
    
    6.60
    %
    
    
    1,704
    
    
    
    6.60
    %7700 Building
    
    
    7/10/2010
    
    
    
    33,045
    
    
    
    8.50
    %
    
    
    33,147
    
    
    
    8.50
    %Columbia
    
    
    7/1/2011
    
    
    
    2,237
    
    
    
    7.15
    %
    
    
    2,242
    
    
    
    7.15
    %Bristol Bay
    
    
    8/1/2011
    
    
    
    7,168
    
    
    
    7.58
    %
    
    
    7,192
    
    
    
    7.58
    %Technology
    
    
    8/1/2011
    
    
    
    7,418
    
    
    
    7.44
    %
    
    
    7,443
    
    
    
    7.44
    %Creekside
    
    
    12/1/2011
    
    
    
    6,053
    
    
    
    7.17
    %
    
    
    6,074
    
    
    
    7.17
    %16350 Park Ten Place
    
    
    5/11/2012
    
    
    
    4,627
    
    
    
    7.45
    %
    
    
    4,642
    
    
    
    7.45
    %16360 Park Ten Place
    
    
    5/11/2012
    
    
    
    3,625
    
    
    
    7.45
    %
    
    
    3,637
    
    
    
    7.45
    %2855 Mangum
    
    
    5/11/2012
    
    
    
    2,671
    
    
    
    7.45
    %
    
    
    2,680
    
    
    
    7.45
    %2855 Mangum
    
    
    5/11/2012
    
    
    
    1,572
    
    
    
    6.00
    %
    
    
    1,586
    
    
    
    6.00
    %6430 Richmond Atrium
    
    
    5/11/2012
    
    
    
    2,242
    
    
    
    7.45
    %
    
    
    2,249
    
    
    
    7.45
    %Southwest Pointe
    
    
    6/1/2012
    
    
    
    2,813
    
    
    
    7.33
    %
    
    
    2,822
    
    
    
    7.33
    %16350 Park Ten Place
    
    
    5/11/2012
    
    
    
    511
    
    
    
    7.45
    %
    
    
    512
    
    
    
    7.45
    %16360 Park Ten Place
    
    
    8/11/2012
    
    
    
    400
    
    
    
    7.45
    %
    
    
    402
    
    
    
    7.45
    %11500 Northwest Freeway
    
    
    6/1/2014
    
    
    
    4,251
    
    
    
    5.93
    %
    
    
    4,267
    
    
    
    5.93
    %11500 Northwest Freeway
    
    
    6/1/2014
    
    
    
    307
    
    
    
    5.93
    %
    
    
    308
    
    
    
    5.93
    %5850 San Felipe
    
    
    8/1/2014
    
    
    
    5,322
    
    
    
    5.65
    %
    
    
    5,342
    
    
    
    5.65
    %Northwest Corporate Center
    
    
    8/1/2014
    
    
    
    5,580
    
    
    
    6.26
    %
    
    
    5,599
    
    
    
    6.26
    %14741 Yorktown
    
    
    9/1/2014
    
    
    
    8,600
    
    
    
    5.32
    %
    
    
    8,600
    
    
    
    5.32
    %8100 Washington
    
    
    2/22/2015
    
    
    
    2,290
    
    
    
    5.59
    %
    
    
    2,298
    
    
    
    5.59
    %8300 Bissonnet
    
    
    5/1/2015
    
    
    
    4,708
    
    
    
    5.51
    %
    
    
    4,724
    
    
    
    5.51
    %1501 Mockingbird
    
    
    7/1/2015
    
    
    
    3,350
    
    
    
    5.28
    %
    
    
    3,350
    
    
    
    5.28
    %5450 Northwest Central
    
    
    9/1/2015
    
    
    
    2,744
    
    
    
    5.38
    %
    
    
    2,754
    
    
    
    5.38
    %800 Sam Houston Parkway
    
    
    12/29/2015
    
    
    
    2,457
    
    
    
    6.25
    %
    
    
    2,466
    
    
    
    6.25
    %888 Sam Houston Parkway
    
    
    12/29/2015
    
    
    
    2,457
    
    
    
    6.25
    %
    
    
    2,466
    
    
    
    6.25
    %2401 Fountainview
    
    
    3/1/2016
    
    
    
    12,599
    
    
    
    5.82
    %
    
    
    12,640
    
    
    
    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
    %Subtotal
    
    $
    150,941
    
    
    
    
    
    
    $
    151,382Variable RateCorporate  Unsecured (1)
    
    
    6/23/2007
    
    
    
    750
    
    
    
    8.50
    %
    
    
    
    
    
    
    Corporate  Unsecured
    
    
    5/31/2008
    
    
    
    200
    
    
    
    9.25
    %
    
    
    200
    
    
    
    9.25
    %Corporate  Secured
    
    
    10/1/2008
    
    
    
    1,985
    
    
    
    8.07
    %
    
    
    1,994
    
    
    
    8.07
    %Subtotal
    
    $
    2,935
    
    
    
    
    
    
    $
    2,194Loan Premiums
    
    
    
    
    
    
    1,352
    
    
    
    
    
    
    
    1,460Total
    
    $
    155,228
    
    
    
    
    
    
    $
    155,036
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##### Table of Contents



(1)
    
    Loan was paid off in April 2007.    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
    
    AverageUnder
    
    Average
    
    IntrinsicOption
    
    Exercise Price
    
    ValueOutstanding on January 1, 2007
    
    
    35,938
    
    
    $
    26.19Granted
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Exercised
    
    
    (3,125
    )
    
    $
    27.08
    
    
    $
    Outstanding on March 31, 2007
    
    
    32,813
    
    
    $
    22.80
    
    
    $
    324,472Exercisable as of March 31, 2007
    
    
    23,438
    
    
    $
    26.07
    
    
    $
    208,006
  Weighted Average
    
    WeightedRemaining
    
    AverageNumber
    
    Contractual
    
    ExerciseRange of Exercise Price
    
    Outstanding
    
    Life
    
    Price$8.10 - $12.20
    
    
    14,688
    
    
    6.8 years
    
    $
    10.58$18.25 - $27.16
    
    
    12,500
    
    
    6.4 years
    
    $
    20.41$60.00 - $60.00
    
    
    5,625
    
    
    4.6 years
    
    $
    60.00
 13




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##### Table of Contents



WeightedAverageNumber
    
    ExerciseRange of Exercise Price
    
    Exercisable
    
    Price$8.10 - $12.20
    
    
    10,938
    
    
    $
    11.08$18.25 - $27.16
    
    
    6,875
    
    
    $
    22.17$60.00 - $60.00
    
    
    5,625
    
    
    $
    60.00
  Weighted AverageGrant DateNonvested Stock Options
    
    Stock Options
    
    Fair ValueNonvested at January 1, 2007
    
    
    9,374
    
    
    $
    8.48Granted
    
    
    
    
    
    
    Vested
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Nonvested at March 31, 2007
    
    
    9,374
    
    
    $
    8.48
  Restricted Stock
  NOTE 9. RELATED PARTY TRANSACTIONS
    14




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##### Table of Contents



NOTE 10. COMMITMENTS AND CONTINGENCIES
    NOTE 11. SUBSEQUENT EVENTS
   15




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 OVERVIEW
     CRITICAL ACCOUNTING POLICIES
   
    
    Certain leases provide for tenant occupancy during periods for which no rent is due or
where minimum rent payments increase during the term of the lease. The Company records
rental income for the full term of each lease on a straight-line basis. Accordingly, a
receivable, if deemed collectible, is recorded from tenants equal to the excess of the
amount that would have been collected on a straight-line basis over the amount collected
and currently due (Deferred Rent Receivable). When a property is acquired, the term of
existing leases is considered to commence as of the acquisition date for purposes of this
calculation.
    
    Many of the Companys leases provide for Common Area Maintenance (CAM)/Escalations
(ESC) as the additional tenant revenue amounts due to the Company in addition to base
rent. CAM/ESC represents increases in certain property operating expenses (as defined in
each respective lease agreement) over the actual operating expense of the property in the
base year. The base year is stated in the lease agreement; typically, the year in which
the lease commenced. Generally, each tenant is responsible for his prorated share of
increases in operating expenses.
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Tenants are billed an estimated CAM/ESC charge based on the budgeted operating expenses for
the year. Within 90 days after the end of each fiscal year, a reconciliation and true up
billing of CAM/ESC charges is performed based on actual operating expenses.
    
    Rental properties are stated at cost, net of accumulated depreciation, unless
circumstances indicate that cost, net of accumulated depreciation, cannot be recovered, in
which case the carrying value of the property is reduced to estimated fair value.
Estimated fair value (i) is based upon the Companys plans for the continued operation of
each property and (ii) is computed using estimated sales price, as determined by
prevailing market values for comparable properties and/or the use of capitalization rates
multiplied by annualized net operating income based upon the age, construction and use of
the building. The fulfillment of the Companys plans related to each of its properties is
dependent upon, among other things, the presence of economic conditions which will enable
the Company to continue to hold and operate the properties prior to their eventual sale.
Due to uncertainties inherent in the valuation process and in the economy, the actual
results of operating and disposing of the Companys properties could be materially
different than current expectations.
    
    Gains on property sales are accounted for in accordance with the provisions of SFAS No.
66, Accounting for Sales of Real Estate. Gains are recognized in full when real estate is
sold, provided (i) the gain is determinable, that is, the collectibility of the sales
price is reasonably assured or the amount that will not be collectible can be estimated,
and (ii) the earnings process is virtually complete, that is, the Company is not obligated
to perform significant activities after the sale to earn the gain. Losses on property
sales are recognized immediately.
 RESULTS OF OPERATIONS
 Discussion of the three months ended March 31, 2007 and 2006.
  Variance2007
    
    2006
    
    $
    
    %Rental revenue
    
    $
    7,264,000
    
    
    $
    5,577,000
    
    
    
    1,687,000
    
    
    
    30.2
    %Operating expenses:Property operating expenses
    
    
    3,003,000
    
    
    
    2,496,000
    
    
    
    507,000
    
    
    
    20.3
    %General and administrative
    
    
    727,000
    
    
    
    920,000
    
    
    
    (193,000
    )
    
    
    (21.0
    %)Depreciation and amortization
    
    
    2,976,000
    
    
    
    2,461,000
    
    
    
    515,000
    
    
    
    20.9
    %Interest expense
    
    
    2,598,000
    
    
    
    2,185,000
    
    
    
    413,000
    
    
    
    18.9
    %
 Rental revenue
 Property operating expenses
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##### Table of Contents



General and administrative
 Depreciation and amortization
 Interest expense
 Deferred income taxes.
 Minority interest from continuing operations.
 Discontinued operations
  Condensed Consolidated Statements of Operations
 Three Months EndedMarch 31, 2007Rental revenue
    
    $
    381Total expenses
    
    
    446Loss from discontinued operations before gain on sale
and share of minority interest
    
    
    (65
    )Gain on sale of discontinued operations
    
    
    22,349Minority interest from discontinued operations
    
    
    (2,968
    )Income from discontinued operations
    
    $
    19,316
 LIQUIDITY AND CAPITAL RESOURCES
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##### Table of Contents



Three Months EndedMarch 31,2007
    
    2006Non-Cash Charges:Depreciation and amortization
    
    $
    2,976
    
    
    $
    2,536Minority interest
    
    
    
    
    
    
    2,647Deferred rental expense
    
    
    
    
    
    
    11Stock-based compensation expense
    
    
    8
    
    
    
    8Non-Cash Items:Income tax benefit
    
    
    (692
    )
    
    
    Amortization of loan premiums
    
    
    (108
    )
    
    
    (109
    )Deferred rental income
    
    
    (300
    )
    
    
    Minority interest
    
    
    (174
    )
    
    
    
     19




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##### Table of Contents



CONTRACTUAL OBLIGATIONS AND COMMITMENTS
  Payment Due By PeriodLess than
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    1 year
    
    13 years
    
    35 years
    
    5 yearsLong-term debt (1)
    
    $
    153,876
    
    
    $
    2,293
    
    
    $
    19,885
    
    
    $
    56,210
    
    
    $
    75,488Interest costs on long
term debt (1)
    
    
    55,786
    
    
    
    7,936
    
    
    
    20,508
    
    
    
    14,415
    
    
    
    12,927Capital expenditures (2)
    
    
    990
    
    
    
    990
    
    
    
    
    
    
    
    
    
    
    
    Consulting
    
    
    22
    
    
    
    13
    
    
    
    9
    
    
    
    
    
    
    
    Total
    
    $
    210,674
    
    
    $
    11,232
    
    
    $
    40,402
    
    
    $
    70,625
    
    
    $
    88,415
 
 (1)
    
    See Note 5  Notes Payable  of the Consolidated Financial Statements.(2)
    
    Represents estimated cost of commitments for tenant improvements and lease commissions related
to the leasing of space to new or renewing tenants. INFLATION
  FORWARD-LOOKING STATEMENTS
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
 INTEREST RATES
    20




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ITEM 4. CONTROLS AND PROCEDURES
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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Company Purchases of Equity Securities
 Total Number of
    
    
    Maximum Number ofShares Purchased as
    
    
    Shares that May YetPart of Publicly
    
    
    Be Purchased Under(1) Total Number of
    
    
    Average Price Paid
    
    
    Announced Plans or
    
    
    the Plans orPeriod
    
    Shares Purchased
    
    
    per Share
    
    
    Programs
    
    
    ProgramsJanuary 1-31, 2007
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    February 1-28, 2007
    
    
    5,500
    
    
    
    26.98
    
    
    
    
    
    
    
    March 1-31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    5,500
    
    
    $
    26.98
    
    
    
    
    
    
    
    
 
 (1)
    
    Represents shares purchased in an open market transaction. Company Sales of Equity Securities
  
 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
    
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##### Table of Contents



SIGNATURES
  AMERICAN SPECTRUM REALTY, INC.Date: May 10, 2007
    By:
    /s/ William J. CardenWilliam J. CardenChairman of the Board, President and,
Chief Executive Officer
(Principal Executive Officer)Date: May 10, 2007
    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
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 200232
    
    Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
 24