UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly period ended September 30, 1998
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.
1,100,235 Common shares were outstanding as of October 31, 1998.
<PAGE>
HMG/COURTLAND PROPERTIES, INC.
Index
PAGE
NUMBER
PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30,
1998 (Unaudited) and December 31, 1997.......................1
Condensed Consolidated Statements of Operations for the
Three and Nine Months Ended September 30, 1998 and 1997
(Unaudited)..................................................2
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1998 and 1997
(Unaudited)..................................................3
Notes to Condensed Consolidated Financial Statements
(Unaudited)..................................................4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................6
PART II. Other Information
Item 6. Reports on Form 8-K...............................9
<PAGE>
<TABLE>
<CAPTION>
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES Part I Financial Information
Item I Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
<S> <C> <C>
(UNAUDITED)
September 30, December 31,
1998 1997
ASSETS
Investment Properties, net of accumulated depreciation:
Commercial and Industrial $ 3,266,025 $ 3,046,597
Hotel and Club Facility 6,661,269 7,254,692
Yacht Slips 1,587,675 1,557,675
Land Held for Development 3,013,272 5,073,976
------------ ------------
Total investment properties, net 14,528,241 16,932,940
Investments In and Receivables From Unconsolidated Entities 4,422,427 4,138,935
Notes and Advances Due From Related Parties 705,228 655,912
Loans, Notes and Other Receivables 879,244 894,935
Cash and Cash Equivalents 2,130,761 2,492,059
Investments in marketable securities 1,330,350 102,378
Other Assets 535,748 792,464
------------ ------------
TOTAL ASSETS $ 24,531,999 $ 26,009,623
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Expenses 1,047,274 888,346
Mortgages and Notes payable 9,612,783 10,216,407
Other Liabilities 239,522 390,864
------------ ------------
TOTAL LIABILITIES 10,899,579 11,495,617
Minority interests 209,068 396,694
------------ ------------
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
Accumulated other comprehensive loss (167,144)
Undistributed Gains From Sales of Real Estate, net of losses 36,670,311 35,151,554
Undistributed Losses From Operations (49,287,535) (47,566,637)
------------ ------------
14,744,489 15,113,774
Less: Treasury Stock, at cost (145,400 shares) (1,321,137) (996,462)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 13,423,352 14,117,312
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 24,531,999 $ 26,009,623
============ ============
</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 Nine months ended
September 30, September 30,
1998 1997 1998 1997
REVENUES
<S> <C> <C> <C> <C>
Rentals and related revenue $ 428,660 $ 438,414 $ 1,283,229 $ 1,343,389
Marina revenues 117,734 118,202 382,574 411,075
Gain from sale of marketable securities 71,314 55,057 274,053 63,927
Gain from unconsolidated investments 12,276 16,565 77,361 620,328
Interest from invested cash, dividends and other 57,508 264,310 166,639 572,111
----------- ----------- ----------- -----------
Total revenues 687,492 892,548 2,183,856 3,010,830
----------- ----------- ----------- -----------
EXPENSES
Operating expenses:
Rental Properties and other 161,081 199,953 501,044 608,465
Marina 122,917 139,332 381,016 412,081
Advisor's fee 165,000 218,751 495,000 656,253
General and administrative 79,806 83,988 320,803 403,625
Professional fees and expenses 305,825 46,603 756,947 207,502
Directors' fees and expenses 12,006 17,545 27,006 54,492
Depreciation and amortization 278,071 268,438 779,444 815,878
----------- ----------- ----------- -----------
Total operating expenses 1,124,706 974,610 3,261,260 3,158,296
Interest expense 218,230 240,590 657,682 695,554
Minority partners' interests in operating
losses of consolidated entities (5,151) (77,527) (14,188) (184,712)
----------- ----------- ----------- -----------
Total expenses 1,337,785 1,137,673 3,904,754 3,669,138
----------- ----------- ----------- -----------
(Loss) income before sales of real estate (650,293) (245,125) (1,720,898) (658,308)
Gain on sales of real estate, net 270,830 1,518,757 573,354
----------- ----------- ----------- -----------
Net (Loss) income ($ 650,293) $ 25,705 ($ 202,141) ($ 84,954)
=========== =========== =========== ===========
Net (Loss) Income Per Common Share, Basic and Diluted
(Based on weighted average shares outstanding of 1,100,235,
and 1,140,976 for the three and nine months September 30, 1998,
respectively, and 1,166,835 for 1997) ($ 0.59) $ 0.02 ($ 0.18) ($ 0.07)
=========== =========== =========== ===========
</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) Nine months ended
September 30,
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($ 202,141) ($ 84,954)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 779,444 815,878
Gain from unconsolidated investments (77,361) (620,328)
Gain on sales of real estate, net (1,518,757) (573,354)
Gain from sales of marketable securities, net (274,053) (63,927)
Minority partners' interest in operating losses (14,188) (184,712)
Changes in assets and liabilities:
Decrease (increase) in other assets 187,989 (339,949)
Increase in due from affiliates (49,316) (31,460)
Increase (decrease) in accounts payable and accrued expenses 158,928 (735,386)
(Decrease) increase in other liabilities (151,345) 666,086
----------- -----------
Total adjustments (958,659) (1,067,152)
----------- -----------
Net cash used in operating activities (1,160,800) (1,152,106)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Aquisitions and improvements of properties (366,722) (624,740)
Net proceeds from disposals of properties 3,388,498 2,590,142
Increase in mortgage loans, notes and other loans receivable (46,681) (1,415,133)
Decrease in mortgage loans, notes and other loans receivable 62,372 43,367
Net contributions to unconsolidated entities (206,130) (559,067)
Net proceeds from sales and redemptions of securities 1,132,065 78,129
Increase in investments in securities (2,253,128) (13,891)
----------- -----------
Net cash provided by investing activities 1,710,274 98,807
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of mortgages and notes payables (5,225,406) (1,151,646)
Additions to mortgages and notes payables 4,621,782 1,247,610
Purchase of treasury stock (324,675)
Net contributions from (distributions to) minority partners 17,527 (215,649)
----------- -----------
Net cash used in financing activities (910,772) (119,685)
----------- -----------
Net decrease in cash and cash equivalents (361,298) (1,172,984)
Cash and cash equivalents at beginning of the period 2,492,059 1,389,546
----------- -----------
Cash and cash equivalents at end of the period $ 2,130,761 $ 216,562
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 658,000 $ 696,000
=========== ===========
</TABLE>
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,
1997. The results of operations for the three and nine months ended September
30, 1998 are not necessarily indicative of the results to be expected for the
full year.
2. GAIN ON SALES OF REAL ESTATE
In January 1998, The Grove Towne Center-Texas, Ltd. sold
approximately 13.5 acres of vacant land located in Houston, Texas for
approximately $2.6 million. The Company recognized a net gain of approximately
$725,000.
In February 1998, Courtland Investments, Inc. sold approximately
100 acres located in Westerly, Rhode Island for approximately $117,000. The
Company recognized a net gain of approximately $86,000.
In March 1998, the Company was awarded an additional $144,000 from
the State of Texas consideration for the condemnation of certain property in
Houston, Texas, as previously reported. The Company recognized a net gain of
approximately $86,000.
In June 1998, the Company sold approximately 8 acres of vacant land
located in Houston, Texas for approximately $1.1 million and recognized a net
gain of approximately $621,000.
3. PURCHASE OF TREASURY STOCK
In June 1998, the Company purchased 66,600 shares of treasury stock
at a cost of approximately $325,000, or $4.88 per share which was the market
value at the date of purchase.
( 4 )
<PAGE>
4. INVESTMENTS IN MARKETABLE SECURITIES
Investments in marketable securities are composed primarily of
corporate equity securities. These securities are classified as
available-for-sale and carried at fair value, based on quoted market prices. The
net unrealized gains or loses on these investments are reported as a separate
component of stockholders' equity. Gross unrealized gains on available-for-sale
securities as of September 30, 1998 were approximately $82,000. Gross unrealized
losses as of September 30, 1998 were approximately $249,000.
Gross gains on sales of marketable securities of approximately
$103,000 and $308,000 were realized during the three and nine months ended
September 30, 1998, respectively. Gross losses of approximately $32,000 and
$34,000 were realized during the three and nine months ended September 30, 1998,
respectively. Gross gains and losses are based on the average cost method of
determining cost.
5. COMPREHENSIVE INCOME (LOSS)
During the third quarter of 1998, the Company implemented Statement
of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income" and has elected to report comprehensive income (loss) in the condensed
consolidated statement of stockholders' equity. Comprehensive income (loss) is
the change in equity from transactions and other events from nonowner sources.
Comprehensive income (loss) includes net income (loss) and other comprehensive
income (loss). The components and related activity of accumulated other
comprehensive income (loss), resulting from net unrealized loss on available-
for-sale investments, are as follows:
Accumulated
Other
Comprehensive Income (Loss)
Balance as of December 31, 1997..................................$-0-
Changes in third quarter.....................................(167,144)
--------
Balance as of September 30, 1998............................($167,144)
========
6. COURTLAND INVESTMENTS, INC. ("CII") - CONSOLIDATION
As previously reported, the Company holds a 95% non-voting interest
and Masscap Investment Company, Inc. ( "Masscap") holds a 5% voting interest in
CII. In May 1998, the Company and Masscap entered into a written agreement in
order to confirm and clarify the terms of their previous continuing arrangement
with regard to the ongoing operations of CII, all of which provide the Company
with complete authority over all decision making relating to the business,
operations, and financing of CII consistent with its status as a real estate
investment trust.
( 5 )
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company reported a net loss of approximately $650,000 (or $.59 per
share) and $202,000 (or $.18 per share) for the three and nine months ended
September 30, 1998, respectively. This is as compared with net income of
approximately $26,000 (or $.02 per share) and a net loss of $85,000 (or $.07 per
share) for the three and nine months ended September 30, 1997, respectively.
Total revenues for the three and nine months ended September 30, 1998, as
compared with the same periods in 1997, decreased by approximately $205,000 (or
23%) and $827,000 (or 27%), respectively. Total expenses for the same comparable
periods increased by approximately $200,000 (or 18%) and $236,000 (or 6%),
respectively. Gain on sales of real estate for the three and nine months ended
September 30, 1998 was zero and approximately $1.5 million, respectively, as
compared with approximately $271,000 and $573,000 for the three and nine months
ended September 30, 1997, respectively.
REVENUES
Rentals and related revenues for the three and nine months ended
September 30, 1998 were approximately $429,000 and $1,283,000, respectively.
This is as compared with approximately $438,000 and $1,343,000, for the same
periods in 1997, respectively. These decreases of $9,000 (or 2%) and $60,000 (or
4%) for the three and nine-month comparable periods, respectively, were not
material.
Marina revenues for the three and nine months ended September 30, 1998
were approximately $118,000 and $383,000, respectively. This is as compared with
approximately $118,000 and $411,000, for the same periods in 1997, respectively.
The decrease of $28,000 (or 7%) for the nine month comparable periods was
primarily attributable to decreased marina slip rental revenue and decreased
marina store sales.
Gains from the sales of marketable securities for the three and nine
months ended September 30, 1998 were approximately $71,000 and $274,000,
respectively. This is as compared with approximately $55,000 and $64,000,
respectively, for the same comparable periods in 1997. These increases of
approximately $16,000 (or 30%) and $210,000 (or 329%) for the three and
nine-month comparable periods, respectively, were primarily the result of
increased sales of securities for cash flow purposes.
Gains from unconsolidated investments for the three and nine months
ended September 30, 1998 were approximately $12,000 and $77,000, respectively.
This is as compared with approximately $16,000 and $620,000 for the same
comparable periods in 1997, respectively. These decreases of approximately
$4,000 (or 26%) and $543,000 (or 87%) for the three and nine-month comparable
periods, respectively, were primarily attributable to non-recurring gains from
CII's investment in TGIF Texas, Inc. during the second quarter of 1997.
Interest from invested cash, dividends and other for the three and
nine months ended September 30, 1998 was approximately $57,000 and $167,000,
respectively. This is as compared with approximately $264,000 and $572,000 for
the same comparable periods in 1997, respectively. These decreases of
approximately $207,000 (or 78%) and $405,000 (or 71%) for the three and
nine-month comparable periods, respectively, were primarily attributable to the
July 1997 forfeiture of a $225,000 non-refundable deposit from a prospective
buyer of a land sale which did not close, and the gain on the sale of a boat
slip of approximately $107,000 in February 1997. Both amounts were included in
other income in 1997.
( 6 )
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(continued)
EXPENSES
Operating expenses of rental properties and other for the three and
nine months ended September 30, 1998 were approximately $161,000 and $501,000,
respectively. This is as compared with approximately $200,000 and $608,000 for
the same periods in 1997, respectively. These decreases of approximately
$107,000 (or 18%) and $39,000 (or 19%) for the three and nine-month comparable
periods, respectively, were primarily attributable to decreased operating costs
of The Grove Towne Center-Texas, Ltd. and HMG- Fieber Associates as the result
of sales of properties.
Marina related expenses for the three and nine months ended September
30, 1998 were approximately $123,000 and $381,000, respectively. This is as
compared with approximately $139,000 and $412,000 for the same periods in 1997.
These decreases of approximately $16,000 (or 12%) and $31,000 (or 7%) for the
three and nine-month comparable periods, respectively, were primarily
attributable to lower operating costs due to decreased revenues from marina
operations.
Advisor's fee expense for the three and nine months ended September
30, 1998 was approximately $165,000 and $495,000, respectively. This is as
compared with approximately $219,000 and $656,000 for the same periods in 1997,
respectively. These decreases of approximately $54,000 (or 25%) and $161,000 (or
25%) for the three and nine-month comparable periods, respectively, were the
result of a change in the advisory agreement effective January 1, 1998, as
previously reported.
General and administrative expenses for the three and nine months
ended September 30, 1998 were approximately $80,000 and $321,000, respectively.
This is as compared with approximately $84,000 and $404,000 for the same periods
in 1997, respectively. These decreases of approximately $4,000 (or 5%) and
$83,000 (or 20%) for the three and nine-month comparable periods, respectively,
were primarily attributable to approximately $197,000 of non-recurring costs
incurred in the first quarter of 1997 relating to the termination of Grove Isle
Club operations. This decrease in general and administrative expenses was
partially offset by increased general and administrative expenses of Courtland
Investments, Inc. of approximately $117,000.
Professional fees for the three and six months ended September 30,
1998 were approximately $306,000 and $757,000, respectively. This is as compared
with approximately $47,000 and $208,000 for the same periods in 1997. These
increases of approximately $259,000 (or 556%) and $549,000 (or 265%) for the
three and nine-month comparable periods, respectively, were primarily the result
of increased legal fees relating to ongoing litigation, as previously reported.
Interest expense for the three and nine months ended September 30,
1998 was approximately $218,000 and $658,000, respectively. This is as compared
with approximately $240,000 and $696,000 for the same periods in 1997,
respectively. These decreases of approximately $22,000 (or 9%) and $38,000 (or
5%) for the three and nine-month comparable periods, respectively, were
primarily due to decreased interest expense from The Grove Towne Center-Texas,
Ltd. due to a decrease in the average balance of outstanding debt. This decrease
was partially offset by an increase in interest expense from Courtland
Investments, Inc. due to an increase in the average balance of its outstanding
debt.
( 7 )
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(continued)
Minority partners' interest in operating losses of consolidated
entities for the three and nine months ended September 30, 1998 was
approximately $5,000 and $14,000, respectively. This is as compared with
approximately $77,000 and $185,000 for the same periods in 1997, respectively.
These decreases of approximately $72,000 (or 93%) and $171,000 (or 92%) for the
three and nine-month comparable periods, respectively, were primarily due to
decreased losses from The Grove Towne Center-Texas, Ltd.
All other expenses for the three and nine months ended September 30,
1998 as compared with the same periods in 1997 remained consistent or were
immaterial.
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 nine months ended September 30, 1998, net cash provided by
investing activities was approximately $1.7 million. This consisted primarily of
net proceeds from disposal of properties of approximately $3.4 million and net
proceeds from the sales and redemptions of securities of approximately $1.1
million. These increases were partially offset by increased investments in
marketable securities of approximately $2.2 million and acquisitions,
improvements of properties of approximately $367,000 and contributions to
unconsolidated entities (net of distributions) of approximately $206,000.
For the nine months ended September 30, 1998, net cash used in
financing activities was approximately $911,000. This consisted primarily of
repayment of mortgages payable of $5.2 million and purchase of treasury stock of
approximately $325,000. This was partially offset by additions to mortgages and
notes payable of approximately $4.6 million.
In September 1998, the Company refinanced its mortgage note payable
which is collateralized by the Grove Isle property. The outstanding balance of
the mortgage note payable was increased form approximately $3.9 million to $4.5
million. The terms of the new mortgage note include a twenty-five (25) year
amortization period with all outstanding principal and interest due in September
2010. The interest rate is fixed at 7.75% for the first three years of the loan.
The rate will then be re-adjusted and become fixed at 290 basis points above the
then five (5) year Treasury Note rate for the next three years, and re-adjusted
every three years thereafter at the then five (5) year Treasury Note rate.
( 8 )
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) There were no reports on Form 8-K filed for the quarter ended
September 30, 1998.
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: November 13, 1998 /s/ Lawrence Rothstein
Lawrence Rothstein
Director, Senior Vice President, Treasurer &
Secretary
Dated: November 13, 1998 /s/ Carlos Camarotti
Carlos Camarotti
Vice President - Finance and Controller
( 9 )
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000311817
<NAME> HMG/Courtland Properties, Inc.
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,130,761
<SECURITIES> 0
<RECEIVABLES> 1,584,472
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 19,793,954
<DEPRECIATION> 5,265,713
<TOTAL-ASSETS> 24,531,999
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 1,245,635
0
0
<OTHER-SE> 12,177,717
<TOTAL-LIABILITY-AND-EQUITY> 24,531,999
<SALES> 2,183,856
<TOTAL-REVENUES> 2,183,856
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,247,072
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 657,682
<INCOME-PRETAX> (202,141)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (202,141)
<EPS-PRIMARY> (0.18)
<EPS-DILUTED> 0
</TABLE>
