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 June 30, 2000
-------------
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.
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(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.)
1870 S. Bayshore Drive, Coconut Grove, Florida 33133
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(Address of principal executive (Zip Code)
offices)
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.
1,019,135 Common shares were outstanding as of July 31, 2000.
<PAGE>
HMG/COURTLAND PROPERTIES, INC.
Index
PAGE
NUMBER
PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
June 30, 2000 (Unaudited) and December 31, 1999....................1
Condensed Consolidated Statements of Operations for the
Three and Six Months Ended June 30, 2000 and 1999 (Unaudited)......2
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 2000 and 1999 (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 1. Legal Proceedings .......................................9
-------
Item 6. Reports on Form 8-K......................................9
-------
Cautionary Statement. This Form 10-QSB contains certain statements relating to
future results of the Company that are considered "forward-looking statements"
within the meaning of the Private Litigation Reform Act of 1995. Actual results
may differ materially from those expressed or implied as a result of certain
risks and uncertainties, including, but not limited to, changes in political and
economic conditions; interest rate fluctuation; competitive pricing pressures
within the Company's market; equity and fixed income market fluctuation;
technological change; changes in law; changes in fiscal, monetary, regulatory
and tax policies; monetary fluctuations as well as other risks and uncertainties
detailed elsewhere in this Form 10-QSB or from time-to-time in the filings of
the Company with the Securities and Exchange Commission. Such forward-looking
statements speak only as of the date on which such statements are made, and the
Company undertakes no obligation to update any forward-looking statement to
reflect events or circumstances after the date on which such statement is made
or to reflect the occurrence of unanticipated events.
<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)
June 30, December 31,
2000 1999
---- ----
ASSETS
Investment Properties, net of accumulated depreciation:
Commercial and Industrial $3,020,862 $3,097,027
Hotel and Club Facility 5,707,033 5,924,872
Yacht Slips 1,652,635 1,699,853
Land Held for Development 2,200,608 2,451,404
------------------------- -------------------------
Total investment properties, net 12,581,138 13,173,156
Investments in Marketable Securities 5,664,536 4,166,747
Other Investments 8,592,408 6,543,353
Cash and Cash Equivalents 2,499,345 3,410,476
Cash Restricted Pending Delivery of Securities 1,162,964 2,268,559
Loans, Notes and Other Receivables 819,589 1,319,420
Notes and Advances Due From Related Parties 896,886 925,130
Other Assets 735,514 355,643
------------------------- -------------------------
TOTAL ASSETS $32,952,380 $32,162,484
========================= =========================
LIABILITIES
Accounts Payable and Accrued Expenses $736,985 $971,098
Mortgages and Notes payable 9,433,980 9,808,478
Sales of Securities Pending Delivery 635,435 1,215,355
Income taxes payable 465,000 465,000
Other Liabilities 711,185 879,844
------------------------- -------------------------
TOTAL LIABILITIES 11,982,585 13,339,775
Minority Interests 389,408 372,729
------------------------- -------------------------
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 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 37,561,172 37,314,284
Undistributed Losses From Operations (43,370,713) (46,095,572)
Accumulated other comprehensive income 520,185 1,084,775
------------------------- -------------------------
22,239,501 19,832,344
Less: Treasury Stock, at cost (226,500 and 165,000 shares as of
June 30, 2000 and December 31, 1999, respectively) (1,659,114) (1,382,364)
------------------------- -------------------------
TOTAL STOCKHOLDERS' EQUITY 20,580,387 18,449,980
------------------------- -------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $32,952,380 $32,162,484
========================= =========================
See notes to condensed consolidated financial statements
1
</TABLE>
<PAGE>
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(UNAUDITED)
Three months ended Six months ended
REVENUES June 30, June 30,
2000 1999 2000 1999
--------------------------------------------------------------------
Rentals and related revenue $423,136 $406,468 $838,347 $839,557
Marina revenues 123,589 112,474 258,369 274,307
Net gain from sale of marketable securities 966,435 131,726 2,564,628 226,618
Unrealized gain from sales of securities pending delivery 391,521 391,521
(Loss) gain from other investments (22,187) 35,562 29,703 143,679
Interest and dividends from invested cash and other 99,045 55,389 168,350 107,865
--------------------------------------------------------------------
Total revenues 1,981,539 741,619 4,250,918 1,592,026
--------------------------------------------------------------------
EXPENSES
Operating expenses:
Rental Properties and other 155,528 138,594 297,023 300,734
Marina 97,267 88,576 189,641 236,932
Advisor's fee 165,000 165,000 330,000 330,000
General and administrative 41,562 74,172 89,972 120,146
Professional fees and expenses 49,122 852,419 69,863 1,149,939
Directors' fees and expenses 9,883 11,868 21,763 20,455
Depreciation and amortization 178,428 224,466 359,950 452,302
--------------------------------------------------------------------
Total operating expenses 696,790 1,555,095 1,358,212 2,610,508
Interest expense 212,992 195,082 436,144 387,038
Minority partners' interests in operating
gains (losses) of consolidated entities 31,015 (22,757) 115,429 (2,752)
--------------------------------------------------------------------
Total expenses 940,797 1,727,420 1,909,785 2,994,794
--------------------------------------------------------------------
Income (loss) before sales of real estate and income
from litigation 1,040,742 (985,801) 2,341,133 (1,402,768)
Gain on sales of real estate, net 246,888 167,802 246,888 367,378
Income from litigation 275,342 383,726
--------------------------------------------------------------------
Net income (loss) $1,562,972 ($817,999) $2,971,747 ($1,035,390)
====================================================================
Net Income (Loss) Per Common Share:
Basic $1.50 ($0.74) $2.80 ($0.94)
===== ======= ===== =======
Diluted $1.48 ($0.74) $2.77 ($0.94)
===== ======= ===== =======
See notes to condensed consolidated financial statements
2
</TABLE>
<PAGE>
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
<S> <C> <C>
(UNAUDITED)
Six months ended
June 30,
2000 1999
------------------ -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $2,971,747 ($1,035,390)
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Depreciation and amortization 359,950 452,302
Gain from other investments (29,703) (143,679)
Gain on sales of real estate, net (246,888) (367,378)
Net gain from sales of marketable securities (2,564,628) (226,618)
Unrealized gain from sales of securities pending delivery (391,521)
Minority partners' interest in operating gains (losses) 115,429 (2,752)
Changes in assets and liabilities:
Increase in other assets (250,883) (94,209)
Increase (decrease) in due from affiliates 28,244 (53,343)
(Decrease) increase in accounts payable and accrued expenses (234,113) 1,104,942
(Decrease) increase in other liabilities (168,659) 28,129
------------------ -----------------
Total adjustments (3,382,772) 697,394
------------------ -----------------
Net cash used in operating activities (411,025) (337,996)
------------------ -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Aquisitions and improvements of properties (5,168) (1,693)
Net proceeds from disposals of properties 522,414 801,135
Increase in mortgage loans, notes and other receivables (453,394) (35,999)
Decrease in mortgage loans, notes and other receivables 410,447 69,093
Contributions to other investments, net of distributions (2,019,352) (468,611)
Net proceeds from sales and redemptions of securities 3,396,995 633,597
Decrease in restricted cash from sales of securities pending delivery 1,105,595
Net decreases in sales of securities pending delivery (188,399)
Increased investments in marketable securities (2,894,746) (560,453)
------------------ -----------------
Net cash (used in) provided by investing activities (125,608) 437,069
------------------ -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of mortgages and notes payables (374,498) (444,174)
Additions to mortgages and notes payables 500,000
Distributions to minority partners 2,598
------------------ -----------------
Net cash (used in) provided by financing activities (374,498) 58,424
------------------ -----------------
Net (decrease) increase in cash and cash equivalents (911,131) 157,497
Cash and cash equivalents at beginning of the period 3,410,476 1,834,365
------------------ -----------------
Cash and cash equivalents at end of the period $2,499,345 $1,991,862
================== =================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $286,000 $264,000
================== =================
See notes to condensed consolidated financial statements
3
</TABLE>
<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,
1999. The balance sheet as of December 31, 1999 was derived from audited
financial statements as of that date. The results of operations for the six
months ended June 30, 2000 are not necessarily indicative of the results to be
expected for the full year.
2. NEW ACCOUNTING PRONOUNCEMENTS
In March 2000 the Financial Accounting Standards Board (FASB)
issued FASB Interpretation No. 44 (Interpretation 44), Accounting for Certain
Transactions Involving Stock Compensation. Interpretation 44 provides criteria
for the recognition of compensation expense in certain stock-based compensation
arrangements that are accounted for under Accounting Principles Board Opinion
No. 25, Accounting for Stock-Based Compensation. Interpretation 44 is effective
July 1, 2000, with certain provisions that are effective retroactively to
December 15, 1998 and January 12, 2000. Interpretation 44 is not expected to
have an impact on the Company's financial statements.
3. GAIN ON SALES OF REAL ESTATE
In April 2000, The Grove Towne Center-Texas, Ltd. sold
approximately 1.9 acres of vacant land located in Houston, Texas for
approximately $591,000. The Company recognized a net gain of approximately
$247,000.
4. INVESTMENTS IN MARKETABLE SECURITIES
Investments in marketable securities are composed primarily of
large capital corporate equity securities in varying industries. These
securities are classified as available-for-sale and carried at fair value, based
on quoted market prices. The net unrealized gains or losses on these investments
are reported as a separate component of stockholders' equity. Gross unrealized
gains on available-for-sale securities as of June 30, 2000 were approximately
$1,440,000. Gross unrealized losses as of June 30, 2000 were approximately
$526,000.
Unrealized gain from sales of securities pending delivery is
reported on the statement of operations. For the three and six months ended June
30, 2000 such gains were approximately $391,000. There was no such gain or loss
in 1999.
Gross gains on sales of marketable securities of approximately
$982,000 and $2,620,000 were realized during the three and six months ended June
30, 2000, respectively. Gross losses of approximately $16,000 and $55,000 were
realized during the three and six months ended June 30, 2000, respectively.
Gross gains and losses are based on the average cost method of determining cost,
net of incentive fee.
4
<PAGE>
HMG/COURTLAND PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
5. PURCHASE OF MINORITY PARTNERSHIP INTERESTS
On May 31, 2000 the Company purchased the 25% minority partnership
interest in The Grove Towne Center-Texas, Ltd. for $275,000.
On January 1, 2000 the Company purchased the 10% minority
partnership interest in Fashion Square Partnership for approximately $266,000.
This was paid for by the cancellation of a promissory note in the same amount.
6. BASIC AND DILUTED EARNINGS PER SHARE
Basic and diluted earnings per share for the three and six months
ended June 30, 2000 and 1999 are computed as follows:
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic:
Net Income (loss) $1,562,972 ($817,999) $2,971,747 ($1,035,390)
Weighted average shares outstanding 1,039,954 1,100,235 1,060,072 1,100,235
-----------------------------------------------------------
Basic earnings (loss) per share $1.50 ($0.74) $2.80 ($0.94)
===========================================================
Diluted:
Net Income (loss) $1,562,972 ($817,999) $2,971,747 ($1,035,390)
Weighted average shares outstanding 1,039,954 1,100,235 1,060,072 1,100,235
Options to acquire common stock 18,381 --- 12,307 ---
-----------------------------------------------------------
Diluted weighted average common shares 1,058,335 1,100,235 1,072,379 1,100,235
Diluted earnings (loss) per share $1.48 ($0.74) $2.77 ($0.94)
===========================================================
</TABLE>
5
<PAGE>
HMG/COURTLAND PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company reported net income of approximately $1,563,000 (or $1.50
per share) and $2,972,000 (or $2.80 per share) for the three and six months
ended June 30, 2000, respectively. This is as compared with net losses of
approximately $818,000 (or $.74 per share) and $1,035,000 (or $.94 per share)
for the three and six months ended June 30, 1999, respectively. Total revenues
for the three and six months ended June 30, 2000, as compared with the same
periods in 1999, increased by approximately $1,240,000 (or 167%) and $2,659,000
(or 167%), respectively. Total expenses for the three and six months ended June
30, 2000, as compared with the same periods in 1999, decreased by approximately
$787,000 (or 46%) and $1,085,000 (or 36%), respectively. Gain on sales of real
estate for the three and six months ended June 30, 2000 was approximately
$247,000, as compared with approximately $168,000 and $367,000 for the three and
six months ended June 30, 1999, respectively.
REVENUES
Net gains from the sale of marketable securities for the three and six
months ended June 30, 2000 were approximately $966,000 and $2,565,000,
respectively. This is as compared with approximately $132,000 and $227,000 for
the same comparable periods in 1999. These increases of approximately $835,000
(or 634%) and $2,338,000 (or 1,032%), respectively, for the three and six month
comparable periods were primarily the result of the sale of two securities which
were distributed to Courtland Investments, Inc. from one of its investments in a
privately-held partnership.
Unrealized gain from sales of securities pending delivery for the
three and six months ended June 30, 2000 was approximately $391,000. There was
no such gain or loss in 1999.
(Loss) gain from other investments for the three and six months ended
June 30, 2000 were approximately ($22,000) and $30,000, respectively. This is as
compared with approximately $36,000 and $144,000, respectively, for the same
periods in 1999. These decreases of approximately $58,000 (or 162%) and $114,000
(or 79%) for the three and six month comparable periods were primarily
attributable to a loss of $75,000 on the redemption of a mortgage fund in June
2000.
Interest and dividends from invested cash and other for the three and
six months ended June 30, 2000 were approximately $99,000 and $168,000,
respectively. This is as compared with approximately $55,000 and $108,000,
respectively, for the same periods in 1999. These increases of approximately
$44,000 (or 80%) and $60,000 (or 56%) for the three and six month comparable
periods were primarily the result of increased dividend income from investments
in marketable securities.
EXPENSES
Operating expenses of rental properties and other for the three and
six months ended June 30, 2000 were approximately $156,000 and $297,000,
respectively. This is as compared with approximately $139,000 and $301,000,
respectively, for the same periods in 1999. The increase in the three months
comparable periods of approximately $17,000 (or 12%) was primarily the result of
lower insurance costs relating to the Grove Isle property and lower real estate
taxes relating to the Grove Towne Center-Texas, Ltd. land. The change in the
six-month comparable periods was not significant.
6
<PAGE>
HMG/COURTLAND PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
Marina related expenses for the three and six months ended June 30,
2000 were approximately $97,000 and $190,000, respectively. This is as compared
with approximately $89,000 and $237,000, respectively, for the same periods in
1999. The decrease in the six months comparable periods of approximately $47,000
(or 20%) was primarily attributable to lower operating costs due to the closing
of the marina store in March 1999. The increase in the three-month comparable
periods of approximately $8,000 (or 9%) was the result of higher operating
costs of the marina.
General and administrative expenses for the three and six months ended
June 30, 2000 were approximately $42,000 and $90,000, respectively. This is as
compared with approximately $74,000 and $120,000, respectively, for the same
periods in 1999. These decreases of approximately $33,000 (or 44%) and $30,000
(or 25%), respectively, for the three and six months comparable periods were
attributable to decreased state taxes.
Professional fees for the three and six months ended June 30, 2000
were approximately $49,000 and $70,000, respectively. This is as compared with
approximately $852,000 and $1,150,000, respectively, for the same periods in
1999. These decreases of approximately $803,000 (or 94%) and $1,080,000 (or
94%), respectively, for the three and six months comparable periods were
attributable to decreased legal fees as a result of the culmination of
previously reported litigation.
Depreciation and amortization expense for the three and six months
ended June 30, 2000 was approximately $178,000 and $360,000, respectively. This
is as compared with approximately $224,000 and $452,000, respectively, for the
same periods in 1999. These decreases of approximately $46,000 (or 21%) and
$92,000 (or 20%), respectively, for the three and six months comparable periods
were 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 and six months ended June 30, 2000 was
approximately $213,000 and $436,000, respectively. This is as compared with
approximately $195,000 and $387,000, respectively, for the same periods in
1999.These increases of approximately $18,000 (or 9%) and $49,000 (13%),
respectively, for the three and six months comparable periods were primarily due
to increased amounts due to TGIF Texas, Inc. and increases in margin balances.
Minority partners' interests in operating gains (losses) of
consolidated entities for the three and six months ended June 30, 2000 were
approximately $31,000 and $115,000, respectively. This is as compared with
approximately ($23,000) and ($3,000) for the same comparable periods in 1999.
These increases of approximately $54,000 and $118,000 for the three and six
months comparable periods were primarily the result of increased income from
95%-owned Courtland Investments, Inc.
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.
7
<PAGE>
HMG/COURTLAND PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
MATERIAL COMPONENTS OF CASH FLOWS
For the six months ended June 30, 2000, net cash used in investing
activities was approximately $126,000. This was comprised primarily of increased
investments in marketable securities of approximately $2,895,000, contributions
to other investments of approximately $2,019,000, increased receivables of
approximately $453,000 and net decreases in sales of securities pending delivery
of approximately $188,000. These amounts were partially offset by net proceeds
from sales and redemptions of securities of approximately $3,397,000, decreased
restricted cash from sales of security pending delivery of approximately
$1,106,000, decrease in receivables of approximately $410,000 and net proceeds
from the disposals of property of approximately $522,000.
For the six months ended June 30, 2000, net cash used in financing
activities was approximately $374,000, which consisted of approximately $374,000
of repayments of mortgages payable.
NEW ACCOUNTING PRONOUNCEMENTS
In March 2000 the Financial Accounting Standards Board (FASB) issued
FASB Interpretation No. 44 (Interpretation 44), Accounting for Certain
Transactions Involving Stock Compensation. Interpretation 44 provides criteria
for the recognition of compensation expense in certain stock-based compensation
arrangements that are accounted for under Accounting Principles Board Opinion
No. 25, Accounting for Stock-Based Compensation. Interpretation 44 is effective
July 1, 2000, with certain provisions that are effective retroactively to
December 15, 1998 and January 12, 2000. Interpretation 44 is not expected to
have an impact on the Company's financial statements.
8
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
As previously reported, on August 31, 1999 the court issued a final
order and judgment in favor of the Company relating to its litigation with two
former Directors. The monetary award to the Company was $4,538,294. The total
amount of the award plus $79,427 in post judgment interest has been collected.
Item 6. Exhibits and Reports on Form 8-K
(a) There were no reports on Form 8-K filed for the quarter ended
June 30, 2000.
9
<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 14, 2000
Lawrence Rothstein
Director, President, Treasurer & Secretary
Dated: August 14, 2000
Carlos Camarotti
Vice President - Finance and Controller
10
