##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
 [ ] 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
(State or other jurisdiction of 
incorporation or organization)
    
    52-2258674
(I.R.S. Employer
Identification No.)
 5850 San Felipe, Suite 450
Houston, Texas 77057
(Address of principal executive offices)
    
    77057
(Zip Code)
 (713) 706-6200
 
    Large accelerated filer [ ]
    
    Accelerated filer [ ]
    
    Non-accelerated filer [X]




---



##### 



TABLE OF CONTENTS
 Page No.PART I
    
    FINANCIAL INFORMATIONItem 1
    
    Financial Statements
    
    3Consolidated Condensed Balance Sheets at June 30, 2007(unaudited) and December 31, 2006
    
    3Consolidated Condensed Statements of Operations for thethree and six months ended June 30, 2007 and 2006(unaudited)
    
    4Consolidated Condensed Statement of Stockholders Equityfor the six months ended June 30, 2007 (unaudited)
    
    5Consolidated Condensed Statements of Cash Flows for thesix months ended June 30, 2007 and 2006 (unaudited)
    
    6Notes to Consolidated Condensed Financial Statements
    
    7Item 2
    
    Managements Discussion and Analysis of FinancialCondition and Results of Operations
    
    17Item 3
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    23Item 4
    
    Controls and Procedures
    
    23PART II
    
    OTHER INFORMATIONItem 1
    
    Legal Proceedings
    
    24Item 1A
    
    Risk Factors
    
    24Item 2
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    24Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    24Item 6
    
    Exhibits and Reports on Form 8-K
    
    24
 2




---



##### 



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 AMERICAN SPECTRUM REALTY, INC.
 
 CONSOLIDATED CONDENSED BALANCE SHEETS
  June 30, 2007
    
    
    December 31, 2006(Unaudited)ASSETSReal estate held for investment
    
    $
    239,483
    
    
    $
    211,109Accumulated depreciation
    
    
    (44,035
    )
    
    
    (38,296
    )Real estate held for investment, net
    
    
    195,448
    
    
    
    172,813Cash and cash equivalents
    
    
    777
    
    
    
    1,166Tenant and other receivables, net of allowance for doubtful accounts of
$257 and $243, respectively
    
    
    306
    
    
    
    470Deferred rents receivable
    
    
    1,820
    
    
    
    1,536Investment in management company
    
    
    4,000
    
    
    
    4,000Prepaid and other assets, net
    
    
    10,094
    
    
    
    10,197Total Assets
    
    $
    212,445
    
    
    $
    190,182LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Notes payable, including premiums of $1,242 and $1,460, respectively
    
    $
    181,429
    
    
    $
    155,036Deferred tax liability
    
    
    3,892
    
    
    
    5,752Accounts payable
    
    
    2,521
    
    
    
    2,461Accrued and other liabilities
    
    
    6,205
    
    
    
    5,549Total Liabilities
    
    
    194,047
    
    
    
    168,798Minority interest
    
    
    5,541
    
    
    
    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, 1,614,054 and 1,606,179 shares, respectively; outstanding,
1,381,804 and 1,379,429 shares, respectively
    
    
    16
    
    
    
    16Additional paid-in capital
    
    
    46,661
    
    
    
    46,553Accumulated deficit
    
    
    (30,795
    )
    
    
    (28,355
    )Treasury stock, at cost, 232,250 and 226,750 shares, respectively
    
    
    (3,025
    )
    
    
    (2,875
    )Total Stockholders Equity
    
    
    12,857
    
    
    
    15,339Total Liabilities and Stockholders Equity
    
    $
    212,445
    
    
    $
    190,182
  3




---



##### 



AMERICAN SPECTRUM REALTY, INC.
 
 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
   Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006REVENUES:Rental revenue
    
    $
    7,904
    
    
    $
    6,140
    
    
    $
    15,168
    
    
    $
    11,717Interest and other income
    
    
    21
    
    
    
    74
    
    
    
    58
    
    
    
    148Total revenues
    
    
    7,925
    
    
    
    6,214
    
    
    
    15,226
    
    
    
    11,865EXPENSES:Property operating expense
    
    
    3,324
    
    
    
    2,854
    
    
    
    6,327
    
    
    
    5,350Corporate general and administrative
    
    
    1,023
    
    
    
    1,004
    
    
    
    1,750
    
    
    
    1,924Depreciation and amortization
    
    
    3,126
    
    
    
    2,766
    
    
    
    6,102
    
    
    
    5,227Interest expense
    
    
    3,118
    
    
    
    2,369
    
    
    
    5,716
    
    
    
    4,554Total expenses
    
    
    10,591
    
    
    
    8,993
    
    
    
    19,895
    
    
    
    17,055OTHER INCOME:Gain on extinguishment of debt
    
    
    
    
    
    
    1,849
    
    
    
    
    
    
    
    1,849Total other income
    
    
    
    
    
    
    1,849
    
    
    
    
    
    
    
    1,849Net loss from continuing operations before deferred income tax benefit and minority interest
    
    
    (2,666
    )
    
    
    (930
    )
    
    
    (4,669
    )
    
    
    (3,341
    )Deferred income tax benefit
    
    
    1,168
    
    
    
    1,218
    
    
    
    1,860
    
    
    
    1,218Net (loss) income from continuing operations before minority interest
    
    
    (1,498
    )
    
    
    288
    
    
    
    (2,809
    )
    
    
    (2,123
    )Minority interest (share from continuing operations)
    
    
    195
    
    
    
    (38
    )
    
    
    369
    
    
    
    283Net (loss) income from continuing operations
    
    
    (1,303
    )
    
    
    250
    
    
    
    (2,440
    )
    
    
    (1,840
    )Discontinued operations:Loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (65
    )Gain on sale of discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,349Deferred income tax expense
    
    
    
    
    
    
    (8,196
    )
    
    
    
    
    
    
    (8,196
    )Minority interest
    
    
    
    
    
    
    1,093
    
    
    
    
    
    
    
    (1,875
    )(Loss) income from discontinued operations
    
    
    
    
    
    
    (7,103
    )
    
    
    
    
    
    
    12,213Net (loss) income
    
    $
    (1,303
    )
    
    $
    (6,853
    )
    
    $
    (2,440
    )
    
    $
    10,373Basic and diluted per share data:Net (loss) income from continuing operations
    
    $
    (0.94
    )
    
    $
    0.18
    
    
    $
    (1.77
    )
    
    $
    (1.32
    )(Loss) income from discontinued operations
    
    
    
    
    
    
    (5.11
    )
    
    
    
    
    
    
    8.78Net (loss) income
    
    $
    (0.94
    )
    
    $
    (4.93
    )
    
    $
    (1.77
    )
    
    $
    7.46Basic weighted average shares used
    
    
    1,380,221
    
    
    
    1,390,488
    
    
    
    1,378,512
    
    
    
    1,391,289
  4




---



##### 



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
    )Issuance of common stock to officers
and directors
    
    
    4,750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of stock options
    
    
    3,125
    
    
    
    
    
    
    
    85
    
    
    
    
    
    
    
    
    
    
    
    85Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    21Acquisition of minority interest in the
operating partnership
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    2Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,440
    )
    
    
    
    
    
    
    (2,440
    )Balance, June 30, 2007
    
    
    1,614,054
    
    
    $
    16
    
    
    $
    46,661
    
    
    $
    (30,795
    )
    
    $
    (3,025
    )
    
    $
    12,857
  5




---



##### 



AMERICAN SPECTRUM REALTY, INC
 
 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
   Six Months Ended June 30,2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net (loss) income
    
    $
    (2,440
    )
    
    $
    10,373Adjustments to reconcile net (loss) income to net cash provided by
operating activities:Depreciation and amortization
    
    
    6,102
    
    
    
    5,302Deferred rental (income) expense
    
    
    (284
    )
    
    
    19Minority interest
    
    
    (369
    )
    
    
    1,592Net gain on sales of real estate assets
    
    
    
    
    
    
    (22,349
    )Gain on extinguishment of debt
    
    
    
    
    
    
    (1,849
    )Stock-based compensation expense
    
    
    21
    
    
    
    35Income tax (benefit) expense
    
    
    (1,860
    )
    
    
    6,978Amortization of note payable premiums, included in interest expense
    
    
    (218
    )
    
    
    (220
    )Changes in operating assets and liabilities:Decrease in tenant and other receivables
    
    
    164
    
    
    
    269Increase in accounts payable
    
    
    60
    
    
    
    216Increase in prepaid and other assets
    
    
    (259
    )
    
    
    (423
    )Increase in accrued and other liabilities
    
    
    656
    
    
    
    317Net cash provided by operating activities
    
    
    1,573
    
    
    
    260CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds received from sales of real estate assets
    
    
    
    
    
    
    34,383Real estate acquisitions
    
    
    (26,108
    )
    
    
    Capital improvements to real estate assets
    
    
    (2,267
    )
    
    
    (1,932
    )Net cash (used in) provided by investing activities:
    
    
    (28,375
    )
    
    
    32,451CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from borrowings
    
    
    12,125
    
    
    
    2,250Proceeds from borrowings  property acquisitions
    
    
    23,422
    
    
    
    Repayment of borrowings  property sales
    
    
    
    
    
    
    (26,165
    )Repayment of borrowings  refinances
    
    
    (8,067
    )
    
    
    (1,500
    )Repayment of borrowings  scheduled payments
    
    
    (869
    )
    
    
    (893
    )Note payments, litigation settlement
    
    
    
    
    
    
    (4,877
    )Repurchase of common stock
    
    
    (150
    )
    
    
    (177
    )Acquisition of minority interest in the operating partnership
    
    
    (133
    )
    
    
    Proceeds from exercise of stock options
    
    
    85
    
    
    
    63Net cash provided by (used in) financing activities:
    
    
    26,413
    
    
    
    (31,299
    )(Decrease) increase in cash
    
    
    (389
    )
    
    
    1,415Cash and cash equivalents, beginning of period
    
    
    1,166
    
    
    
    300Cash and cash equivalents, end of period
    
    $
    777
    
    
    $
    1,712SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid for interest
    
    $
    5,651
    
    
    $
    4,725Cash paid for income taxes
    
    
    121
    
    
    
    71SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:Conversion of operating partnership units into common stock
    
    $
    
    
    
    $
    19Debt assumed in connection with acquisitions of real estate assets
    
    
    
    
    
    
    16,914Borrowings in connection with acquisitions of real estate assets
    
    
    
    
    
    
    16,452
  6




---



##### 



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




---



##### 



SEGEMENT 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,
 INCOME TAXES
  8




---



##### 



NOTE 3. REAL ESTATE
 ACQUISITIONS
 2007.
  9




---



##### 



2006.
   DISPOSITIONS
 2007.
  2006.
  NOTE 4. DISCONTINUED OPERATIONS
    Three Months Ended
    
    
    Six Months EndedCondensed Consolidated Statements of Operations
    
    June 30, 2006
    
    
    June 30, 2006Rental revenue
    
    $
    
    
    
    $
    381Total expenses
    
    
    
    
    
    
    446Loss from discontinued operations before gain on sale,
income tax expense and minority interest
    
    
    
    
    
    
    (65
    )Gain on sale of discontinued operations
    
    
    
    
    
    
    22,349Income tax expense
    
    
    (8,196
    )
    
    
    (8,196
    )Minority interest from discontinued operations
    
    
    1,096
    
    
    
    (1,875
    )(Loss) income from discontinued operations
    
    $
    (7,103
    )
    
    $
    12,213
 10




---



##### 



NOTE 5. NOTES PAYABLE, NET OF PREMIUMS
  June 30, 2007
    
    
    December 31, 2006Property (unless otherwise noted)
    
    Maturity Date
    
    
    Principal Balance
    
    
    Interest Rate
    
    
    Principal Balance
    
    
    Interest RateFixed Rate8 Centre/Windrose
    
    
    4/24/2009
    
    
    $
    2,000
    
    
    
    18.00
    %
    
    $
    
    
    
    
    Pacific Spectrum
    
    
    6/10/2009
    
    
    
    5,461
    
    
    
    8.02
    %
    
    
    5,500
    
    
    
    8.02
    %1501 Mockingbird
    
    
    6/30/2009
    
    
    
    306
    
    
    
    6.00
    %
    
    
    308
    
    
    
    6.00
    %6430 Richmond
    
    
    6/30/2009
    
    
    
    731
    
    
    
    5.50
    %
    
    
    736
    
    
    
    5.50
    %Morenci Professional Park
    
    
    12/1/2009
    
    
    
    1,661
    
    
    
    6.60
    %
    
    
    1,704
    
    
    
    6.60
    %7700 Irvine Center
    
    
    7/10/2010
    
    
    
    32,957
    
    
    
    8.50
    %
    
    
    33,147
    
    
    
    8.50
    %Columbia
    
    
    7/1/2011
    
    
    
    2,232
    
    
    
    7.15
    %
    
    
    2,242
    
    
    
    7.15
    %Bristol Bay
    
    
    8/1/2011
    
    
    
    7,147
    
    
    
    7.58
    %
    
    
    7,192
    
    
    
    7.58
    %Technology
    
    
    8/1/2011
    
    
    
    7,395
    
    
    
    7.44
    %
    
    
    7,443
    
    
    
    7.44
    %Creekside 1
    
    
    2/1/2011
    
    
    
    6,034
    
    
    
    7.17
    %
    
    
    6,074
    
    
    
    7.17
    %16350 Park Ten Place
    
    
    5/11/2012
    
    
    
    4,614
    
    
    
    7.45
    %
    
    
    4,642
    
    
    
    7.45
    %16360 Park Ten Place
    
    
    5/11/2012
    
    
    
    3,618
    
    
    
    7.45
    %
    
    
    3,637
    
    
    
    7.45
    %2855 Mangum
    
    
    5/11/2012
    
    
    
    2,664
    
    
    
    7.45
    %
    
    
    2,680
    
    
    
    7.45
    %2855 Mangum
    
    
    5/11/2012
    
    
    
    1,558
    
    
    
    6.00
    %
    
    
    1,586
    
    
    
    6.00
    %6430 Richmond
    
    
    5/11/2012
    
    
    
    2,236
    
    
    
    7.45
    %
    
    
    2,249
    
    
    
    7.45
    %Southwest Pointe
    
    
    6/1/2012
    
    
    
    2,805
    
    
    
    7.33
    %
    
    
    2,822
    
    
    
    7.33
    %16350 Park Ten Place 5
    
    
    /11/2012
    
    
    
    509
    
    
    
    7.45
    %
    
    
    512
    
    
    
    7.45
    %16360 Park Ten Place
    
    
    8/11/2012
    
    
    
    400
    
    
    
    7.45
    %
    
    
    402
    
    
    
    7.45
    %11500 Northwest Freeway
    
    
    6/1/2014
    
    
    
    4,237
    
    
    
    5.93
    %
    
    
    4,267
    
    
    
    5.93
    %11500 Northwest Freeway
    
    
    6/1/2014
    
    
    
    306
    
    
    
    5.93
    %
    
    
    308
    
    
    
    5.93
    %5850 San Felipe
    
    
    8/1/2014
    
    
    
    5,303
    
    
    
    5.65
    %
    
    
    5,342
    
    
    
    5.65
    %Northwest Corporate Center
    
    
    8/1/2014
    
    
    
    5,563
    
    
    
    6.26
    %
    
    
    5,599
    
    
    
    6.26
    %14741 Yorktown
    
    
    9/1/2014
    
    
    
    8,600
    
    
    
    5.32
    %
    
    
    8,600
    
    
    
    5.32
    %8100 Washington
    
    
    2/22/2015
    
    
    
    2,282
    
    
    
    5.59
    %
    
    
    2,298
    
    
    
    5.59
    %8300 Bissonnet
    
    
    5/1/2015
    
    
    
    4,693
    
    
    
    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
    
    
    
    2,735
    
    
    
    5.38
    %
    
    
    2,754
    
    
    
    5.38
    %800 Sam Houston Parkway
    
    
    12/29/2015
    
    
    
    2,443
    
    
    
    6.25
    %
    
    
    2,466
    
    
    
    6.25
    %888 Sam Houston Parkway
    
    
    12/29/2015
    
    
    
    2,443
    
    
    
    6.25
    %
    
    
    2,466
    
    
    
    6.25
    %2401 Fountainview
    
    
    3/1/2016
    
    
    
    12,561
    
    
    
    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
    %6420 Richmond
    
    
    7/1/2009
    
    
    
    6,400
    
    
    
    5.50
    %
    
    
    6,342
    
    
    
    5.50
    %Subtotal
    
    $
    152,594
    
    
    
    
    
    
    $
    151,382Variable RateCorporate  Unsecured (1)
    
    
    8/17/2007
    
    
    
    1,500
    
    
    
    9.25
    %
    
    
    
    
    
    
    Corporate  Unsecured (1)
    
    
    9/12/2007
    
    
    
    500
    
    
    
    9.25
    %
    
    
    
    
    
    
    Corporate  Unsecured
    
    
    5/31/2008
    
    
    
    200
    
    
    
    9.25
    %
    
    
    200
    
    
    
    9.25
    %Corporate  Secured
    
    
    10/1/2008
    
    
    
    1,976
    
    
    
    8.07
    %
    
    
    1,994
    
    
    
    8.07
    %Beltway Industrial
    
    
    5/9/2010
    
    
    
    17,000
    
    
    
    7.72
    %
    
    
    
    
    
    
    8 Centre
    
    
    4/19/2012
    
    
    
    3,330
    
    
    
    7.72
    %
    
    
    
    
    
    
    Windrose
    
    
    4/19/2012
    
    
    
    3,087
    
    
    
    7.72
    %
    
    
    
    
    
    
    Subtotal
    
    $
    27,593
    
    
    
    
    
    
    $
    2,194Loan Premiums
    
    
    
    
    
    
    1,242
    
    
    
    
    
    
    
    1,460Total
    
    $
    181,429
    
    
    
    
    
    
    $
    155,036
 
 (1)
    
    Maturity can be extended an additional 90 days at the option of the Company.  11




---



##### 



NOTE 6. GAIN ON EXTINGUISHMENT OF DEBT
  NOTE 7. MINORITY INTEREST
    12




---



##### 



NOTE 8. REPURCHASE OF COMMON STOCK
    NOTE 9. STOCK-BASED COMPENSATION
   Stock Options
     13




---



##### 



Shares
    
    
    WeightedUnder
    
    
    Average
    
    
    Average IntrinsicOption
    
    
    Exercise Price
    
    
    ValueOutstanding on January 1, 2007
    
    
    35,938
    
    
    $
    26.19Granted
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Exercised
    
    
    (3,125
    )
    
    $
    27.08
    
    
    $
    Outstanding on June 30, 2007
    
    
    32,813
    
    
    $
    22.80
    
    
    $
    169,678Exercisable as of June 30, 2007
    
    
    27,813
    
    
    $
    24.07
    
    
    $
    144,491
  Weighted Average
    
    WeightedRange of
    
    
    
    
    
    Remaining
    
    AverageExercise
    
    Number
    
    Contractual
    
    ExercisePrice
    
    Outstanding
    
    Life
    
    Price$8.10  $12.20
    
    
    14,688
    
    
    6.1 years
    
    $
    10.58$18.25  $27.16
    
    
    12,500
    
    
    4.7 years
    
    $
    20.41$60.00  $60.00
    
    
    5,625
    
    
    4.3 years
    
    $
    60.00
  WeightedRange of
    
    
    
    
    
    AverageExercise
    
    Number
    
    ExercisePrice
    
    Exercisable
    
    Price$8.10  $12.20
    
    
    13,438
    
    
    $
    10.81$18.25  $27.16
    
    
    8,750
    
    
    $
    21.33$60.00  $60.00
    
    
    5,625
    
    
    $
    60.00
  Weighted AverageGrant DateNonvested Stock Options
    
    Number
    
    
    Fair ValueNonvested at January 1, 2007
    
    
    9,374
    
    
    $
    8.48Granted
    
    
    
    
    
    
    Vested
    
    
    4,374
    
    
    $
    7.89Forfeited
    
    
    
    
    
    
    Nonvested at June 30, 2007
    
    
    5,000
    
    
    $
    9.00
  Restricted Stock
  14




---



##### 



Weighted AverageGrant DateRestricted Stock Awards
    Number of Shares
    
    Fair ValueNonvested at January 1, 2007
    
    
    Granted
    
    
    4,750
    
    
    $
    22.75Vested
    
    
    Forfeited
    
    
    Nonvested at June 30, 2007
    
    
    4,750
    
    
    $
    22.75
  NOTE 10. RELATED PARTY TRANSACTIONS
   NOTE 10. COMMITMENTS AND CONTINGENCIES
    15




---



##### 



NOTE 11. SUBSEQUENT EVENTS
   16




---



##### 



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.
 17




---



##### 



Generally, each tenant is responsible for his prorated share of increases in operating
expenses. 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 June 30, 2007 and 2006.
  Variance2007
    
    
    2006
    
    
    $
    
    
    %Rental revenue
    
    $
    7,904,000
    
    
    $
    6,140,000
    
    
    $
    1,764,000
    
    
    
    28.7
    %Operating expenses:Property operating expenses
    
    
    3,324,000
    
    
    
    2,854,000
    
    
    
    470,000
    
    
    
    16.5
    %General and administrative
    
    
    1,023,000
    
    
    
    1,004,000
    
    
    
    19,000
    
    
    
    1.9
    %Depreciation and amortization
    
    
    3,126,000
    
    
    
    2,766,000
    
    
    
    360,000
    
    
    
    13.0
    %Interest expense
    
    
    3,118,000
    
    
    
    2,369,000
    
    
    
    749,000
    
    
    
    31.6
    %
 Rental revenue
 Property operating expenses
 18




---



##### 



General and administrative
 Depreciation and amortization
 Interest expense
 Gain on extinguishment of debt.
 Deferred income taxes.
 Minority interest from continuing operations.
 Discontinued operations
 19




---



##### 



Three Months EndedCondensed Consolidated Statements of Operations
    
    June 30, 2006Rental revenue
    
    $
    Total expenses
    
    
    Loss from discontinued operations before income tax expense
and minority interest
    
    
    Income tax expense
    
    
    (8,196
    )Minority interest from discontinued operations
    
    
    1,093Loss from discontinued operations
    
    $
    (7,103
    )
 Discussion of the six months ended June 30, 2007 and 2006.
  Variance2007
    
    
    2006
    
    
    $
    
    
    %Rental revenue
    
    $
    15,168,000
    
    
    $
    11,717,000
    
    
    $
    3,451,000
    
    
    
    29.5
    %Operating expenses:Property operating expenses
    
    
    6,327,000
    
    
    
    5,350,000
    
    
    
    977,000
    
    
    
    18.3
    %General and administrative
    
    
    1,750,000
    
    
    
    1,924,000
    
    
    
    (174,000
    )
    
    
    (9.0
    %)Depreciation and amortization
    
    
    6,102,000
    
    
    
    5,227,000
    
    
    
    875,000
    
    
    
    16.7
    %Interest expense
    
    
    5,716,000
    
    
    
    4,554,000
    
    
    
    1,162,000
    
    
    
    25.5
    %
 Rental revenue
 Property operating expenses
 General and administrative
 Depreciation and amortization
 20




---



##### 



Interest expense
 Gain on extinguishment of debt.
 Deferred income taxes.
 Minority interest from continuing operations.
 Discontinued operations
  Six Months EndedCondensed Consolidated Statements of Operations
    
    June 30, 2006Rental revenue
    
    $
    381Total expenses
    
    
    446Loss from discontinued operations before gain on sale,
Income tax expense and minority interest
    
    
    (65
    )Gain on sale of discontinued operations
    
    
    22,349Income tax expense
    
    
    (8,196
    )Minority interest from discontinued operations
    
    
    (1,875
    )Income from discontinued operations
    
    $
    12,213
 LIQUIDITY AND CAPITAL RESOURCES
   Six Months EndedJune 30,2007
    
    
    2006Non-Cash Items:Depreciation and amortization expense
    
    $
    6,102
    
    
    $
    5,302Income tax benefit (expense)
    
    
    (1,860
    )
    
    
    6,978Deferred rental income (expense)
    
    
    (284
    )
    
    
    19Minority interest
    
    
    (369
    )
    
    
    1,592Stock-based compensation expense
    
    
    21
    
    
    
    35Amortization of loan premiums
    
    
    (218
    )
    
    
    (220
    )
 21




---



##### 



CONTRACTUAL OBLIGATIONS AND COMMITMENTS
  Payment Due By PeriodTotal
    
    
    Less than 1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    More than 5 yearsLong-term debt (1)
    
    $
    180,187
    
    
    $
    3,468
    
    
    $
    15,731
    
    
    $
    73,339
    
    
    $
    87,649Interest costs on long
term debt (1)
    
    
    62,672
    
    
    
    6,385
    
    
    
    24,692
    
    
    
    16,631
    
    
    
    14,964Capital expenditures (2)
    
    
    1,017
    
    
    
    1,017
    
    
    
    
    
    
    
    
    
    
    
    Consulting
    
    
    18
    
    
    
    9
    
    
    
    9
    
    
    
    
    
    
    
    Total
    
    $
    243,894
    
    
    $
    10,879
    
    
    $
    40,432
    
    
    $
    89,970
    
    
    $
    102,613
 
 (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. 22




---



##### 



INFLATION
  FORWARD-LOOKING STATEMENTS
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
 INTEREST RATES
     
 ITEM 4. CONTROLS AND PROCEDURES
   23




---



##### 



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   Name of
    
    Number of
    
    Number ofNominee
    
    Votes For
    
    Votes WithheldTimothy R. Brown
    
    
    1,152,182
    
    
    
    8,923William J. Carden
    
    
    1,152,545
    
    
    
    8,560John N. Galardi
    
    
    1,152,537
    
    
    
    8,568William W. Geary, Jr.
    
    
    1,152,666
    
    
    
    8,439John F. Itzel
    
    
    1,152,515
    
    
    
    8,590Presley E. Werlein, III
    
    
    1,152,472
    
    
    
    8,633
  Number of
    
    Number of
    
    Number ofVotes For
    
    Votes Against
    
    Votes Abstaining1,154,646
    
    
    2,670
    
    
    
    3,789
 
 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
    
 24




---



##### 



SIGNATURES
  AMERICAN SPECTRUM REALTY, INC.
Date: August 8, 2007By:
    /s/ William J. CardenWilliam J. CardenChairman of the Board, President and,
Chief Executive Officer
(Principal Executive Officer) Date: August 8, 2007By:
    /s/ G. Anthony EppolitoG. Anthony EppolitoVice President, Chief Financial Officer,
(Principal Financial Officer and Accounting Officer),
Treasurer and Secretary 25




---



##### 



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
 26