UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 1-7865
HMG/COURTLAND PROPERTIES, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 59-1914299
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2701 S. Bayshore Drive, Coconut Grove, Florida 33133
(Address of principal executive offices) (Zip Code)
305-854-6803
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed
by Sections 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No ___
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whether the registrant filed all documents and reports required
to be filed by Sections 12, 13, or 15 (d) of the Exchange Act after the
distribution of securities under a plan confirmed by court. Yes ___ No ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
1,166,835 Common shares were outstanding as of July 31, 1997.
<PAGE>
HMG/COURTLAND PROPERTIES, INC.
Index
PAGE
NUMBER
PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
June 30, 1997 (Unaudited) and December 31, 1996 1
Condensed Consolidated Statements of Operations
Three and Six Months Ended June 30, 1997 and 1996 (Unaudited) 2
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 1997 and 1996 (Unaudited) 3
Notes to Condensed Consolidated Financial Statements (Unaudited) 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
PART II. Other Information
Item 1. Legal Proceedings 6
Item 2. Reports on Form 8-K 8
<PAGE>
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
Part I Financial Information
Item I Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
June 30, December 31,
1997 1996
ASSETS
<S> <C> <C>
Investment Properties, net of accumulated depreciation:
Commercial and Industrial $2,801,223 $3,044,789
Hotel and Club Facility 7,650,098 8,086,619
Yacht Slips 1,557,675 1,708,307
Land Held for Development 5,664,348 6,712,173
------------ ------------
Total investment properties, net 17,673,344 19,551,888
Investments In and Receivables From Unconsolidated Entities 4,169,565 3,088,925
Notes and Advances Due From Related Parties 1,502,448 1,396,068
Mortgage Loans, Notes and Other Receivables 1,510,309 193,523
Cash and Cash Equivalents 478,290 1,389,546
Cash Restricted 730,021 1,000,000
Other Assets 873,741 849,765
============ ============
TOTAL ASSETS $26,937,718 $27,469,715
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Expenses 1,244,831 1,621,924
Mortgages and Notes payable 9,463,870 10,084,395
Other Liabilities 2,770,377 2,072,319
------------ ------------
TOTAL LIABILITIES 13,479,078 13,778,638
Minority interests 121,778
------------ ------------
STOCKHOLDERS' EQUITY
Preferred Stock, no par value; 2,000,000 shares
authorized; none issued
Common Stock, $1 par value; 1,500,000 shares authorized;
1,245,635 shares issued and outstanding 1,245,635 1,245,635
Additional Paid-in Capital 26,283,222 26,283,222
Undistributed Gains From Sales of Real Estate, net of losses 33,591,061 33,288,537
Undistributed Losses From Operations (46,664,816) (46,251,633)
------------ ------------
14,455,102 14,565,761
Less: Treasury Stock, at cost (78,800 shares) (996,462) (996,462)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 13,458,640 13,569,299
============ ============
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $26,937,718 $27,469,715
============ ============
</TABLE>
See notes to condensed consolidated financial statements
1
<PAGE>
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(UNAUDITED) Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
REVENUES
Rentals and related revenue $432,047 $316,399 $904,975 $637,937
Hotel, club and marina revenues 137,583 1,519,921 292,873 3,620,745
Gain from sale of marketable securities 8,870 192,243 8,870 279,456
Gain from unconsolidated entities 636,440 46,900 603,763 89,019
Interest from invested cash, dividends and other 136,223 78,462 307,801 106,128
--------- --------- --------- ---------
Total revenues 1,351,163 2,153,925 2,118,282 4,733,285
--------- --------- --------- ---------
EXPENSES
Operating expenses:
Rental Properties and other 216,330 220,813 436,012 604,240
Hotel, club and marina expenses:
Payroll and related expenses 53,403 771,192 114,690 1,570,185
Cost of food and beverage 315,913 674,497
Administrative and general expenses 88,091 699,226 322,252 1,612,913
Advisor's fee 218,751 218,751 437,502 437,502
General and administrative 182,352 153,399 288,843 244,273
Directors' fees and expenses 26,197 19,830 36,947 29,330
Depreciation and amortization 271,648 291,780 547,440 571,226
--------- --------- --------- ---------
Total operating expenses 1,056,772 2,690,904 2,183,686 5,744,166
Interest expense 226,582 228,309 454,964 450,135
Minority partners' interests in operating
losses of consolidated entities (48,347) (20,125) (107,185) (85,463)
--------- --------- --------- ---------
Total expenses 1,235,007 2,899,088 2,531,465 6,108,838
--------- --------- --------- ---------
Income (loss) before sales of real estate 116,156 (745,163) (413,183) (1,375,553)
Gain (loss) on sales of real estate, net 683 (643) 302,524 (50,209)
--------- --------- --------- ---------
Net Income (loss) $116,839 ($745,806) ($110,659) ($1,425,762)
========= ========= ========= =========
Net Income (Loss) Per Common Share
(Based on 1,166,835 weighted average shares outstanding)
$0.10 ($0.64) ($0.09) ($1.22)
========= ========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements
2
<PAGE>
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(UNAUDITED) Six months ended
June 30,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($110,659) ($1,425,762)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 547,440 571,226
Gain from unconsolidated entities (603,763) (89,019)
(Gain) loss on sales of real estate, net (302,524) 50,209
Net gain from sales of marketable securities (8,870) (279,456)
Minority partners' interest in operating losses (107,185) (85,463)
Changes in assets and liabilities:
Increase in other assets (244,129) (96,610)
Increase in due from affiliates (106,380) (100,116)
Decrease in accounts payable and accrued expenses (377,093) (186,759)
Increase in other liabilities 968,037 262,277
----------- -----------
Total adjustments (234,467) 46,289
----------- -----------
Net cash used in operating activities (345,126) (1,379,473)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Aquisitions and improvements of properties (37,350) (201,565)
Net proceeds from disposals of properties 1,857,372 477,333
Increase in mortgage loans, notes and other receivables (1,124,182) 160,715
Net contributions to unconsolidated entities (476,877) (191,710)
Net proceeds from sales and redemptions of securities 22,226 370,972
Increase in investments in securities (13,419) (91,760)
----------- -----------
Net cash provided by investing activities 227,770 523,985
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of mortgages and notes payables (1,077,310) (312,310)
Additions to mortgages and notes payables 456,785 1,050,514
Net distributions to minority partners (173,375) (158,852)
----------- -----------
Net cash (used in) provided by financing activities (793,900) 579,352
----------- -----------
Net decrease in cash and cash equivalents (911,256) (276,136)
Cash and cash equivalents at beginning of the period 1,389,546 1,094,999
----------- -----------
Cash and cash equivalents at end of the period $478,290 $818,863
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $455,000 $450,000
=========== ===========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
The Company leased its Grove Isle Facility in November 1996 and received an
initial payment (as defined) of $1,000,000. The use of these funds is restricted
per agreement and accordingly this amount has been recorded as restricted cash
and included in other liabilities. As of June 30, 1997 the remaining balance of
this amount is approximately $730,000.
See notes to condensed consolidated financial statements
3
<PAGE>
HMG/COURTLAND PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements include all adjustments (consisting only of
normal recurring accruals) which are necessary for a fair presentation of the
results for the periods presented. Certain information and footnote disclosures
normally included in the financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted. It is
suggested that these condensed consolidated financial statements be read in
conjunction with the Company's Annual Report for the year ended December 31,
1996. The results of operations for the three and six months ended June 30, 1997
are not necessarily indicative of the results to be expected for the full year.
2. GAIN ON SALES OF REAL ESTATE, NET
In January 1997, The Grove Towne Center-Texas, Ltd. sold approximately
three (3) acres of vacant land located in Houston, Texas for approximately
$823,000. The Company recognized a net gain of approximately $50,000.
In January 1997, HMG-Fieber Associates sold its property located in
Springfield, Massachusetts for $937,000. The sales proceeds included a purchase
money mortgage note of $865,000. This mortgage matures in January 1998 and bears
interest at prime plus 2%. As required, under the installment method of
accounting for sales of real estate the venture recognized a gain of
approximately $60,000. The Company recognized a net gain of approximately
$35,000.
In February 1997, The Grove Towne Center-Texas, Ltd. sold
approximately one (1) acre of vacant land located in Houston, Texas for
approximately $244,000. The Company recognized a net gain of approximately
$49,000.
In March 1997, HMG-Fieber Associates sold its property located in
Vestal, New York for $350,000 and recognized a gain of approximately $224,000.
The Company recognized a net gain of approximately $131,000.
In March 1997 the Company sold approximately seven (7) acres of vacant
land located in Houston, Texas for $352,000. The Company recognized a net gain
on the sale of approximately $37,000.
( 4 )
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Total revenues for the three and six months ended June 30, 1997, as
compared with the same periods in 1996, decreased approximately $803,000 (37%)
and $2.6 million (55%), respectively. Total expenses for the same comparable
periods also decreased by approximately $1.7 million (57%) and $3.6 million
(59%), respectively.
REVENUES
Rentals and related revenue for the three and six months ended June
30, 1997 as compared with the same periods in 1996, increased by approximately
$116,000 (37%) and $267,000 (42%), respectively. This increase was primarily
attributable to increased rental income from the Grove Isle property which was
leased to an unaffiliated tenant commencing in November 1996.
Hotel, club and marina revenues consisted of hotel rooms revenue, food
and beverage revenue, club membership dues and revenues from marina operations.
As previously reported, the Grove Isle property has been operated by an
unaffiliated tenant since November 1996. The marina at Grove Isle continues to
be operated by a consolidated affiliate of the Company.
For the three and six months ended June 30, 1997, hotel, club and
marina revenues decreased by approximately $1.4 million (91%) and $3.3 million
(92%), respectively, as compared to that of the same periods in 1996. This was
attributable to the aforementioned lease in November 1996.
For the three and six months ended June 30, 1997 gain from
unconsolidated entities increased by approximately $590,000 and $515,000,
respectively, as compared to that of the same periods in 1996. This increase is
attributable to increased gains of T.G.I.F. Texas, Inc., a 49% owned investment
of Courtland Investments, Inc.
For the three and six months ended June 30, 1997 interest from
invested cash, dividends and other increased by $58,000 (74%) and $202,000
(190%), respectively, as compared to that of the same periods in 1996. This
increase is primarily attributable to the gain on sale of a boat slip of
approximately $117,000 in February 1997 by Grove Isle Yacht Club Associates.
EXPENSES
Operating expenses of rental properties and other for the three and
six months ended June 30, 1997, as compared with the same periods in 1996,
decreased by approximately $4,000 (2%) and $168,000 (28%), respectively. This
decrease was primarily attributable to decreased real estate taxes of HMG-Fieber
Associates as the result of sales of properties, and due to decreased insurance
costs at the Grove Isle property.
Hotel, Club and Marina payroll and related expenses for the three and
six months ended June 30, 1997 decreased by approximately $718,000 (93%) and
$1.5 million (93%), respectively, as compared with
( 5 )
<PAGE>
that of the same periods in 1996. Also, cost of food and beverage decreased to
zero after November 1996. These decreases were attributable to the
aforementioned lease of the Grove Isle property.
Hotel, club and marina administrative and general expenses for the
three and six months ended June 30, 1997, decreased by $611,000 (86%) and $ 1.3
million (80%), respectively, as compared with that of the same period in 1996.
This was also attributable to the aforementioned lease of the Grove Isle
property.
For the three and six months ended June 30, 1997, general and
administrative expenses increased by $29,000 (16%) and $45,0000 (18%),
respectively, as compared to the same comparable periods in 1996.
These increased are primarily the result of increased professional fees.
For the three and six months ended June 30, 1997 minority partners'
interest in losses of consolidated entities increased by $28,000 (140%) and
$22,000 (25%), respectively, as compared to that of the same comparable periods
in 1996. These increases are primarily due to decreased gains from HMG- Fieber.
All other expenses for the three and six months ended June 30, 1997 as
compared to the same period in 1996 remained consistent.
LIQUIDITY AND CAPITAL RESOURCES
The Company's material commitments primarily consist of maturities of
debt obligations. The funds necessary to meet these obligations are expected
from the proceeds of sales of properties, refinancing, distributions from
investments and available cash. In addition, the Company intends to continue to
seek opportunities for investment in income producing properties.
MATERIAL COMPONENTS OF CASH FLOWS
For the three and six months ended June 30, 1997, net cash provided by
investing activities was approximately $228,000. This consisted primarily of net
proceeds from disposal of properties of $1.9 million, partially offset by
increased mortgage loans receivable of $1.1 million, net contributions to
unconsolidated entities of $477,000 and improvements of properties of $37,000.
For the six months ended June 30, 1997, net cash used in financing
activities was approximately $883,000. This consisted primarily of repayment of
mortgages payable of $1 million and distributions to minority partners of
$262,000. These uses of cash were partially offset by additions to mortgages and
notes payable of $457,000.
PART II. OTHER INFORMATION
Item I. Legal Proceedings
As previously disclosed in the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1996, on April 4, 1997, the Company made
certain claims and took certain other actions against Lee Gray, a former officer
and Director of the Company, Norman A. Fieber, a former Director of the Company,
and certain related parties. The Company's claims and actions arose from the
failure of Messrs. Gray and Fieber to disclose Mr. Gray's interest in the
Company's HMG-Fieber Wallingford Associates and HMG-Fieber Associates joint
ventures (the "Joint Ventures") and the inquiry into Messrs. Gray's and Fieber's
faulure to disclose Mr. Gray's interest in HMG-Fieber Associates by a Special
Committee appointed by the Board of Directors (the "Inquiry"). The Company is
currently party, as both plaintiff and defendant, to litigation in three
jurisdictions stemming from the Inquiry and the actions taken by the Company and
Courtland Group, Inc., a Delaware corporation ("CGI"), subquent to the Inquiry.
( 6 )
<PAGE>
HMG Courtland Properties, Inc. v. Lee Gray et al.
On July 2, 1997, the Company filed suit in the Court of Chancery of
the State of Delaware in and for New Castle County against Lee Gray
(individually and as a partner in Martine Avenue Associates), Norman A. Fieber
(individually and as a partner in NAF Associates), Betsy Gray Saffell (Lee
Gray's sister) (individually and as a partner in Martine Avenue Associates),
Martine Avenue Associates, (a New York general partnership in which Mr. Gray and
Mrs. Saffell are the general partners) ("Martine"), NAF Associates (a
Connecticut general partnership in which Mr. Fieber and Martine are general
partners, and the Company's joint venture partner in HMG-Fieber Associates
("NAF"), and The Jim Fieber Trust (a trust for beneficiaries including Mr.
Fieber and Martine, and the Company's joint venture partner in HMG-Fieber
Wallingford Associates, which has James A Fieber, son of Norman A. Fieber, as
trustee) (the "Trust").
The Company's lawsuit is based on the facts underlying the Board of
Directors' conclusion, based upon the report of the Special Committee following
the Inquiry and in consultation with counsel, that Mr. Gray breached his
fiduciary duties to the Company and CGI by failing to disclose his interest in
the Joint Ventures, and that Mr. Fieber breached his fiduciary duty to the
Company and assisted Mr. Gray by failing to disclose Mr. Gray's interest in the
Joint Ventures. The Company's suit makes the following claims: (i) breach of
fiduciary duty against Mr. Gray; (ii) breach of fiduciary duty against Mr.
Fieber; (iii) aiding and abetting against Mr. Fieber, Mrs. Saffell, Martine, NAF
and the Trust; (iv) usurpation of a corporate opportunity against all
defendants; (v) common law fraud against Messrs. Gray and Fieber; and (vi)
conspiracy against all defendants. Relief being sought by the Company includes:
(i) damages; (ii) imposition of constructive trust for the benefit of the
Company over, and an accounting of, the defendants' interests in the Joint
Ventures; (iii) a recision of the transactions which created the Joint Ventures;
and (iv) a disgorgement of all interests and profits derived by all the
defendants from the Joint Ventures. The Company believes strongly that its
claims are meritorious and intends to vigerously pursue all legal remedies
against all defendents.
Lee Gray v. Maurice Wiener et al.
On May 22, 1997, Lee Gray, a former director and officer and a
shareholder of the Company and a former officer and director and a shareholder
of CGI, which currently serves as the Company's advisor pursuant to an advisory
agreement which expires December 31, 1997, filed suit in the Circuit Court of
the 11th Judicial Circuit in and for Dade County, Florida against the following
defendants: (i) the Company; (ii) all of the directors and certain of the
officers of the Company and of CGI; (iii) CGI; and (iv) HMG Advisory Corp., a
Delaware corporation that will serve as the Company's advisor commencing January
1, 1998 pursuant to the advisory agreement approved by the shareholders at the
Company's Annual Meeting held on June 27, 1997.
In his lawsuit, Mr. Gray, individually and derivatively as a
shareholder of CGI, alleges, among other things, that his removal as an officer
of the Company, his failure to be nominated for reelection as Director of the
Company, his subsequent removal as an officer and director of CGI and the Board
of Directors' decision not to renew the Company's current advisory agreement
with CGI, were the product of a conspiracy involving certain officers and
Directors of the Company and of CGI who wanted to force Mr. Gray out of the
Company and CGI, and to terminate the Company's advisory agreement with CGI, for
their own financial gain. Mr. Gray has also alleged that he was libeled in the
discussion of the Inquiry and the results thereof in certain documents,
including documents filed with the Securities and Exchange Commission.
( 7 )
<PAGE>
Mr. Gray is seeking money damages in excess of $15,000, punitive damages, and
temporary and permanent injunctive relief on the following grounds: (i) breach
of fiduciary duty against the directors and certain of the officers of the
Company; (ii)libel against the Company and the directors and certain of the
officers of the Company; (iii) breach of fiduciary duty against the officers and
directors of CGI; and (iv) tortious interference with an advantageous business
relationship against defendants HMG Advisory Corp. and the officers and
directors of CGI. The Company and its officers and directors believe strongly
that they have meritorious defenses to and intend to vigorously defend against,
the claims made by Mr. Gray.
Norman A. Fieber v. HMG/Courtland Properties, Inc. et al.
On July 8, 1997, Norman A. Fieber, NAF Associates and James A. Fieber,
Trustee (collectively, the "Fieber Plaintiffs") filed a separate lawsuit against
the Company in the Superior Court of the State of Connecticut,
Fairfield/Bridgeport Judicial District. In their lawsuit, The Fieber Plaintiffs
are seeking a declaratory judgement absolving them of any liability to the
Company on essentially all of the issues and claims being considered in the
Company's lawsuit in Delaware discussed above. The Company intends to vigorously
oppose the Fieber Plaintiffs declaratory judgement actions.
Item 2. Exhibits and Reports on Form 8-K
(a) There were no reports on Form 8-K filed for the quarter ended
June 30, 1997.
( 8 )
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HMG/COURTLAND PROPERTIES, INC.
Dated: August 13, 1997 /s/ Lawrence Rothstein
Lawrence Rothstein
Senior Vice President
Dated: August 13, 1997 /s/ Carlos Camarotti
Carlos Camarotti
Vice President - Finance
( 9 )
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000311817
<NAME> HMG/Courtland Properties, Inc.
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Jun-30-1997
<CASH> 478,290
<SECURITIES> 0
<RECEIVABLES> 3,012,757
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 21,934,093
<DEPRECIATION> 4,260,749
<TOTAL-ASSETS> 26,937,718
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 1,245,635
0
0
<OTHER-SE> 12,213,005
<TOTAL-LIABILITY-AND-EQUITY> 26,937,718
<SALES> 2,118,282
<TOTAL-REVENUES> 2,118,282
<CGS> 0
<TOTAL-COSTS> 2,183,686
<OTHER-EXPENSES> (107,185)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 454,964
<INCOME-PRETAX> (110,659)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (110,659)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> 0
</TABLE>
