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 March 31, 1999
--------------------------
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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2701 S. Bayshore Drive, Coconut Grove, Florida 33133
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(Address of principal executive offices) (Zip Code)
305-854-6803
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(Registrant's telephone number, including area code)
Not Applicable
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(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 April 30, 1999.
<PAGE>
HMG/COURTLAND PROPERTIES, INC.
Index
PAGE
NUMBER
PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
March 31, 1999 (Unaudited) and December 31, 1998...................1
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 1999 and 1998 (Unaudited).............2
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1999 and 1998 (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........................................8
<PAGE>
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES Part I Financial Information
Item I Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
March 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Investment Properties, net of accumulated depreciation:
Commercial and Industrial $ 3,231,491 $ 3,267,582
Hotel and Club Facility 6,361,985 6,521,428
Yacht Slips 1,488,445 1,508,291
Land Held for Development 2,712,337 3,013,272
------------ ------------
Total investment properties, net 13,794,258 14,310,573
Investments In and Receivables From Unconsolidated Entities 4,924,628 4,603,047
Notes and Advances Due From Related Parties 752,644 719,937
Loans, Notes and Other Receivables 889,331 875,614
Cash and Cash Equivalents 1,603,124 1,834,365
Investments in marketable securities 1,918,727 1,621,488
Other Assets 399,781 402,674
------------ ------------
TOTAL ASSETS $ 24,282,493 $ 24,367,698
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Expenses 1,264,033 1,058,959
Mortgages and Notes payable 9,316,049 9,555,129
Other Liabilities 355,645 349,767
------------ ------------
TOTAL LIABILITIES 10,935,727 10,963,855
Minority interests 436,858 424,925
------------ ------------
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 36,869,887 36,670,311
Undistributed Losses From Operations (50,432,635) (50,015,668)
Accumulated other comprehensive income 264,936 116,555
------------ ------------
14,231,045 14,300,055
Less: Treasury Stock, at cost (145,400 shares) (1,321,137) (1,321,137)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 12,909,908 12,978,918
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 24,282,493 $ 24,367,698
============ ============
</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
REVENUES March 31,
1999 1998
----------- -----------
<S> <C> <C>
Rentals and related revenue $ 433,089 $ 427,285
Marina revenues 161,833 134,426
Gain from sale of marketable securities 94,892 164,298
Gain from unconsolidated investments 108,117 34,435
Interest from invested cash, dividends and other 52,476 50,030
----------------------------
Total revenues 850,407 810,474
----------------------------
EXPENSES
Operating expenses:
Rental Properties and other 162,140 166,095
Marina 148,356 137,594
Advisor's fee 165,000 165,000
General and administrative 45,974 123,572
Professional fees and expenses 297,520 159,743
Directors' fees and expenses 8,587 6,250
Depreciation and amortization 227,836 250,930
----------------------------
Total operating expenses 1,055,413 1,009,184
Interest expense 191,956 219,913
Minority partners' interests in operating
gains (losses) of consolidated entities 20,005 (2,897)
----------------------------
Total expenses 1,267,374 1,226,200
----------------------------
Loss before sales of real estate (416,967) (415,726)
Gain on sales of real estate, net 199,576 897,565
----------------------------
Net (Loss) income ($ 217,391) $ 481,839
============================
Net (Loss) Income Per Common Share, Basic and
Diluted (Based on weighted average shares
outstanding of 1,100,235 and 1,166,835 for
the periods ended March 31, 1999 and 1998
respectively)
($ 0.20) $ 0.41
=========== ===========
</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)
Three months ended
March 31,
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income ($ 217,391) $ 481,839
Adjustments to reconcile net (loss) income to net cash used in
operating activities:
Depreciation and amortization 227,836 250,930
Gain from unconsolidated investments (108,117) (34,435)
Gain on sales of real estate, net (199,576) (897,565)
Gain from sales of marketable securities, net (94,892) (164,298)
Minority partners' interest in operating gains (losses) 20,005 (2,897)
Changes in assets and liabilities:
(Increase) decrease in other assets (4,531) 277,184
Increase in due from affiliates (32,707) (19,104)
Increase (decrease) in accounts payable and accrued expenses 205,074 (51,345)
Increase (decrease) in other liabilities 5,878 (230,856)
----------- -----------
Total adjustments 18,970 (872,386)
----------- -----------
Net cash used in operating activities (198,421) (390,547)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Aquisitions and improvements of properties (5,032) (110,960)
Net proceeds from disposals of properties 494,314 2,457,008
Increase in mortgage loans, notes and other loans receivable (31,503) (16,698)
Decrease in mortgage loans, notes and other loans receivable 17,786 52,295
Net contributions to unconsolidated investments (213,464) 89,491
Net proceeds from sales and redemptions of securities 273,608 180,412
Increase in investments in securities (327,574) (802,249)
----------- -----------
Net cash provided by investing activities 208,135 1,849,299
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of mortgages and notes payables (239,080) (1,114,406)
Additions to mortgages and notes payables 65,408
Net (distributions to) contributions from minority partners (1,875) 4,376
----------- -----------
Net cash used in financing activities (240,955) (1,044,622)
----------- -----------
Net (decrease) increase in cash and cash equivalents (231,241) 414,130
Cash and cash equivalents at beginning of the period 1,834,365 2,492,059
----------- -----------
Cash and cash equivalents at end of the period $ 1,603,124 $ 2,906,189
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 131,000 $ 155,000
=========== ===========
</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,
1998. The results of operations for the three months ended March 31, 1999 are
not necessarily indicative of the results to be expected for the full year.
2. GAIN ON SALES OF REAL ESTATE
In March 1999, The Grove Towne Center-Texas, Ltd. sold approximately
2.3 acres of vacant land located in Houston, Texas for approximately $557,000.
The Company recognized a net gain of approximately $199,000.
3. 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 March 31, 1999 were approximately $329,000. Gross unrealized
losses as of March 31, 1999 were approximately $64,000.
Gross gains on sales of marketable securities of approximately $96,000
were realized during the three months ended March 31, 1999. Gross losses of
approximately $1,000 were realized during the three months ended March 31, 1999.
Gross gains and losses are based on the average cost method of determining cost.
4. COMPREHENSIVE INCOME (LOSS)
The Company 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 January 1, 1999 $116,555
Changes in First Quarter 148,381
--------
Balance as of March 31, 1999 $264,936
========
( 4 )
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company reported a net loss of approximately $217,000 (or $.20 per
share) for the three months ended March 31, 1999. This is as compared with net
income of approximately $482,000 (or $.41 per share) for the three months ended
March 31, 1998. Total revenues for the three months ended March 31, 1999, as
compared with the same period in 1998, increased by approximately $40,000 (or
5%). Total expenses for the same comparable periods increased by approximately
$41,000 (or 3%). Gain on sales of real estate for the three months ended March
31, 1999 was approximately $200,000, as compared with approximately $898,000 for
the three months ended March 31, 1998.
REVENUES
Rentals and related revenues for the three months ended March 31, 1999
were approximately $433,000. This is as compared with approximately $427,000 for
the same period in 1998. This increase of approximately $6,000 (or 1%) for the
three month comparable periods was not significant.
Marina revenues for the three months ended March 31, 1999 were
approximately $162,000. This is as compared with approximately $134,000 for the
same period in 1998. This increase of approximately $28,000 (or 20%) for the
three month comparable periods was primarily attributable to increased marina
slip rental revenue.
Gain from the sale of marketable securities for the three months ended
March 31, 1999 was approximately $95,000. This is as compared with approximately
$164,000 for the same comparable period in 1998. This decrease of approximately
$69,000 (or 42%) for the three month comparable periods was primarily the result
of decreased sales of securities.
Gain from unconsolidated investments for the three months ended March
31, 1999 was approximately $108,000. This is as compared with approximately
$34,000 for the same comparable period in 1998. This increase of approximately
$74,000 (or 214%) for the three month comparable periods was primarily
attributable to increased gains from CII's investment in various partnerships
whose purpose is to make equity investments in growth-oriented enterprises, and
from CII's investment in T.G.I.F. Texas, Inc.
EXPENSES
Operating expenses of rental properties and other for the three months
ended March 31, 1999 were approximately $162,000. This is as compared with
approximately $166,000 for the same period in 1998. This decrease of
approximately $4,000 (or 2%) for the three month comparable periods was not
significant.
Marina related expenses for the three months ended March 31, 1999 were
approximately $148,000. This is as compared with approximately $138,000 for the
same period in 1998. This increase of approximately $10,000 (or 7%) for the
three month comparable periods was primarily attributable to higher operating
costs due to increased revenues from marina operations.
General and administrative expenses for the three months ended March
31, 1999 were approximately $46,000. This is as compared with approximately
$124,000 for the same period in 1998.
( 5 )
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
This decrease of approximately $78,000 (or 63%) for the three month comparable
periods was attributable to decreased general and administrative expenses of
Courtland Investments, Inc. primarily relating to decreased other taxes.
Professional fees for the three months ended March 31, 1999 were
approximately $298,000. This is as compared with approximately $160,000 for the
same period in 1998. This increase of approximately $138,000 (or 86%) for the
three month comparable periods was primarily the result of increased legal fees
relating to ongoing litigation, as previously reported.
Depreciation and amortization expense for the three months ended March
31, 1999 was approximately $228,000. This is as compared with approximately
$251,000 for the same period in 1998. This decrease of approximately $23,000 (or
9%) for the three month comparable periods was primarily due to decreased
depreciation of furniture and fixtures owned by Grove Isle Club, Inc. ("GICI").
The majority of GICI's fixed assets have reached their useful life and are fully
depreciated.
Interest expense for the three months ended March 31, 1999 was
approximately $192,000. This is as compared with approximately $220,000 for the
same period in 1998. This decrease of approximately $28,000 (or 13%) for the
three month comparable periods was primarily due to decreased interest expense
from Grove Isle Associates, Ltd. as the result of the refinancing of debt as
previously reported.
Minority partners' interest in operating gains (losses) of
consolidated entities for the three months ended March 31, 1999 was
approximately $20,000. This is as compared with approximately ($3,000) for the
same period in 1998. This change of approximately $23,000 for the three month
comparable periods was primarily due to decreased losses from The Grove Towne
Center-Texas, Ltd.
All other expenses for the three months ended March 31, 1999 as
compared with the same period in 1998 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 three months ended March 31, 1999, net cash provided by
investing activities was approximately $208,000. This consisted primarily of net
proceeds from disposal of properties of approximately $494,000 and net proceeds
from the sales and redemptions of securities of approximately $274,000. These
increases were partially offset by uses of cash resulting from increased
investments in marketable securities of approximately $327,000 and increased
contributions to unconsolidated investments of approximately $213,000.
For the three months ended March 31, 1999, net cash used in financing
activities was approximately $241,000. This consisted primarily of repayment of
mortgages payable of $239,000.
( 6 )
<PAGE>
YEAR 2000
Background
In the past, many computer software programs were written using two
digits rather than four to define the applicable year. As a result,
date-sensitive computer software may recognize a date using "00" as the year
1900 rather than the year 2000. This is generally referred to as the Year 2000
issue. If this situation occurs, the potential exists for computer system
failures or miscalculations by computer programs, which could disrupt
operations.
State of Readiness, Costs and Risks
The Company has completed the conversion of its computer system to use
4-digit year fields and is therefore believed to be "Year 2000" compliant. The
cost of such conversion was not material to the Company's financial condition or
results of operations, nor did the Company experience any material disruption in
its operations with respect thereto. The Company's computer system is small,
consisting of only six personal computers connected via one local area network
server located in one facility. The Company utilizes its computer system to
perform accounting and word processing functions only. The Company has no other
operations which rely on computers or other equipment that would be affected by
the Year 2000 issue.
The Company is exposed to the risk that one or more of its tenants
could experience Year 2000 problems that impact their ability to meet lease
obligations to the Company. To date, the Company is not aware of any tenant Year
2000 issue that would have a material adverse impact on the Company's
operations. The Company has received an interim status report from its primary
tenant at its Grove Isle property in Florida that this tenant is addressing its
Year 2000 readiness. The Company has no means of ensuring that this or any other
tenant will be Year 2000 ready. The inability of tenants to complete their Year
2000 resolution process in a timely fashion could have an adverse impact on the
Company. The effect of non-compliance by tenants is not determinable at this
time.
The Company's Year 2000 risks are considered minimal and no continency
plans are believed to be necessary.
Widespread disruptions in the national or international economy,
including disruptions affecting the financial markets, resulting from Year 2000
issues, or in certain industries, such as commercial or investment banks, could
also have an adverse impact on the Company. The likelihood and effect of such
disruptions is not determinable at this time
Readers are cautioned that forward-looking statements contained in the
Year 2000 discussion should be read in conjunction with the Company's
disclosures regarding forward-looking statements contained in its Form 10-KSB.
( 7 )
<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
March 31, 1999.
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.
/s/ Lawrence Rothstein
Dated: May 13, 1999 ---------------------------------------
Lawrence Rothstein
Director, President, Treasurer &
Secretary
/s/ Carlos Camarotti
Dated: May 13, 1999 ---------------------------------------
Carlos Camarotti
Vice President - Finance and Controller
( 8 )
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000311817
<NAME> HMG/COURTLAND PROPERTIES, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,603,124
<SECURITIES> 1,918,727
<RECEIVABLES> 1,641,975
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 19,538,145
<DEPRECIATION> 5,743,887
<TOTAL-ASSETS> 24,282,493
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 1,245,635
0
0
<OTHER-SE> 11,664,273
<TOTAL-LIABILITY-AND-EQUITY> 24,282,493
<SALES> 850,407
<TOTAL-REVENUES> 850,407
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,075,418
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 191,956
<INCOME-PRETAX> (217,391)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (217,391)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> 0
</TABLE>
