Unassociated Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(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, 2011
   
OR
   
o 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.)
     
1870 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)

Indicate by check mark 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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o
Accelerated filer o
Non-accelerated filer o
Smaller reporting company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the exchange Act).
Yes  o No x
 
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. 1,010,426 Common shares were outstanding as of August 15, 2011.

 
 

 
 
HMG/COURTLAND PROPERTIES, INC.

Index
 
       
PAGE
NUMBER
           
PART I. Financial Information      
           
 
Item 1.
Financial Statements
     
           
   
1
 
           
   
2
 
           
   
3
 
           
   
4
 
           
   
12
 
           
   
16
 
           
   
16
 
           
     
           
   
17
 
           
   
17
 
           
   
17
 
           
   
17
 
           
   
17
 
           
   
17
 
           
 
18
 
 
Cautionary Statement. This Form 10-Q 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-Q 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.
 
 
 

 
 
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS


   
June 30,
   
December 31,
 
   
2011
   
2010
 
   
(UNAUDITED)
       
ASSETS
           
Investment properties, net of accumulated depreciation:
           
Commercial properties
  $ 7,181,986     $ 7,259,225  
Hotel, club and spa facility
    3,552,216       3,649,217  
Marina properties
    1,999,626       2,110,445  
Land held for development
    27,689       27,689  
Total investment properties, net
    12,761,517       13,046,576  
                 
Cash and cash equivalents
    3,449,015       3,618,200  
Cash and cash equivalents-restricted
          2,379,947  
Investments in marketable securities
    1,923,382       2,093,109  
Other investments
    3,709,571       3,769,417  
Investment in affiliate
    2,834,264       2,813,634  
Loans, notes and other receivables
    537,099       742,411  
Notes and advances due from related parties
    703,100       698,341  
Deferred taxes
    530,000       480,000  
Goodwill
    5,628,627       5,628,627  
Other assets
    640,752       657,541  
TOTAL ASSETS
  $ 32,717,327     $ 35,927,803  
                 
LIABILITIES
               
Mortgages and notes payable
  $ 14,909,158     $ 17,509,155  
Accounts payable, accrued expenses and other liabilities
    854,248       894,894  
Interest rate swap contract payable
    1,380,000       1,462,000  
TOTAL LIABILITIES
    17,143,406       19,866,049  
                 
STOCKHOLDERS’ EQUITY
               
Excess common stock, $1 par value; 100,000 shares authorized: no shares issued
           
Common stock, $1 par value; 1,200,000 shares authorized and 1,023,955 issued
    1,023,955       1,023,955  
Additional paid-in capital
    24,313,341       24,313,341  
Less: Treasury stock at cost (13,529 shares as of June 30, 2011 and December 31, 2010)
    (60,388 )     (60,388 )
Undistributed gains from sales of properties, net of losses
    41,572,120       41,572,120  
Undistributed losses from operations
    (53,832,005 )     (53,443,832 )
Accumulated other comprehensive loss
    (690,000 )     (731,000 )
Total stockholders’ equity
    12,327,023       12,674,196  
Non controlling interest
    3,246,898       3,387,558  
TOTAL EQUITY
    15,573,921       16,061,754  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $ 32,717,327     $ 35,927,803  
 
See notes to the condensed consolidated financial statements
 
 
1

 

 

HMG/COURTLAND PROPERTIES, INC.  AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


   
For the three months ended
   
For the six months ended
 
   
June 30,
   
June 30,
 
   
2011
   
2010
   
2011
   
2010
 
REVENUES
                       
Real estate rentals and related revenue
  $ 464,209     $ 457,238     $ 927,561     $ 920,860  
Food & beverage sales
    1,607,675       1,649,699       3,295,691       3,143,611  
Marina revenues
    402,480       438,698       815,379       870,797  
Spa revenues
    97,678       106,976       209,797       215,591  
Total revenues
    2,572,042       2,652,611       5,248,428       5,150,859  
                                 
EXPENSES
                               
Operating expenses:
                               
Rental and other properties
    165,994       153,983       347,997       318,246  
Food and beverage cost of sales
    447,991       436,555       921,679       853,537  
Food and beverage labor and related costs
    340,129       357,504       685,631       721,161  
Food and beverage other operating costs
    526,091       536,609       1,063,951       1,011,418  
Marina expenses
    224,365       244,772       443,146       488,215  
Spa expenses
    107,078       96,892       209,898       192,027  
Depreciation and amortization
    236,448       228,819       617,742       510,429  
Adviser’s base fee
    255,000       255,000       510,000       510,000  
General and administrative
    78,916       121,573       172,959       217,126  
Professional fees and expenses
    109,204       113,891       196,330       188,673  
Directors’ fees and expenses
    21,306       23,762       45,306       52,975  
Total operating expenses
    2,512,522       2,569,360       5,214,639       5,063,807  
                                 
Interest expense
    218,461       271,782       470,650       531,704  
Total expenses
    2,730,983       2,841,142       5,685,289       5,595,511  
                                 
Loss before other income and income taxes
    (158,941 )     (188,531 )     (436,861 )     (444,652 )
                                 
Net realized and unrealized (losses) gains from investments in marketable securities
    (30,978 )     (156,303 )     31,980       (28,823 )
Net income from other investments
    35,978       19,910       45,312       218,186  
Realized loss on interest rate swap agreement
                (198,400 )      
Other than temporary impairment losses from other investments
    (86,707 )     (50,000 )     (86,707 )     (50,000 )
Interest, dividend and other income
    30,135       59,900       126,022       177,981  
Total other (loss) income
    (51,572 )     (126,493 )     (81,793 )     317,344  
                                 
Loss before income taxes
    (210,513 )     (315,024 )     (518,654 )     (127,308 )
                                 
Benefit from income taxes
    (59,000 )     (90,000 )     (50,000 )     (18,000 )
Net loss
    (151,513 )     (225,024 )     (468,654 )     (109,308 )
                                 
Less: Net (income) loss attributable to noncontrolling interest in consolidated entities
    (30,529 )     (62,403 )     80,481       (81,395 )
Net loss attributable to the Company
  $ (182,042 )   $ (287,427 )   $ (388,173 )   $ (190,703 )
                                 
Other comprehensive income (loss):
                               
Unrealized (loss) gain on interest rate swap agreement
  $ (89,500 )   $ (217,000 )   $ 41,000     $ (271,000 )
Total other comprehensive (loss) income
    (89,500 )     (217,000 )     41,000       (271,000 )
                                 
Comprehensive loss
  $ (271,542 )   $ (504,427 )   $ (347,173 )   $ (461,703 )
                                 
Net loss Per Common Share:
                               
Basic and diluted
  $ (0.18 )   $ (0.28 )   $ (0.38 )   $ (0.19 )
Weighted average common shares outstanding-Basic and diluted
    1,010,426       1,021,383       1,010,426       1,021,383  

See notes to the condensed consolidated financial statements

 
2

 

HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


   
For the six months
 
   
ended June 30,
 
   
2011
   
2010
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net loss attributable to the Company
  $ (388,173 )   $ (190,703 )
Adjustments to reconcile net loss attributable to the Company to net cash provided by operating activities:
               
Depreciation and amortization
    617,742       510,429  
Net income from other investments, excluding impairment losses
    (45,312 )     (218,186 )
Other than temporary impairment loss from other investments
    86,707       50,000  
Net (gain) loss from investments in marketable securities
    (31,980 )     28,823  
Realized loss on interest rate swap agreement
    198,400        
Net (loss) income attributable to non controlling interest
    (80,481 )     81,395  
Deferred income tax benefit
    (50,000 )     (18,000 )
Changes in assets and liabilities:
               
Other assets and other receivables
    52,477       (161,878 )
Accounts payable, accrued expenses and other liabilities
    (43,084 )     127,887  
Total adjustments
    704,469       400,470  
Net cash provided by operating activities
    316,296       209,767  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Purchases and improvements of properties
    (163,057 )     (90,137 )
Decrease in notes and advances from related parties
    (4,759 )     7,710  
Collections of mortgage loans and notes receivables
          163,975  
Distributions from other investments
    119,222       233,064  
Contributions to other investments
    (118,963 )     (108,577 )
Net proceeds from sales and redemptions of securities
    641,788       2,632,920  
Purchase of marketable securities
    (440,081 )     (825,889 )
Net cash provided by investing activities
    34,150       2,013,066  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Repayment of mortgages and notes payables
    (2,599,997 )     (426,669 )
Partial settlement of interest rate swap contract
    (198,400 )      
Withdrawals from (deposits to) restricted cash
    2,379,947       (839,424 )
Distributions to minority partners
    (101,181 )     (13,551 )
Net cash used in financing activities
    (519,631 )     (1,279,644 )
                 
Net (decrease) increase in cash and cash equivalents
    (169,185 )     943,189  
                 
Cash and cash equivalents at beginning of the year
    3,618,200       1,909,218  
                 
Cash and cash equivalents at end of the year
  $ 3,449,015     $ 2,852,407  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
               
Cash paid during the period for interest
  $ 471,000     $ 532,000  
Cash paid during the period for income taxes
  $     $  
 
See notes to the condensed consolidated financial statements

 
3

 
 
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
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 prepared in accordance with instructions for Form 10-Q, 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 accounting principles generally accepted in the United States of America 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, 2010. The balance sheet as of December 31, 2010 was derived from audited financial statements as of that date. The results of operations for the three and six months ended June 30, 2011 are not necessarily indicative of the results to be expected for the full year.

The condensed consolidated financial statements include the accounts of HMG/Courtland Properties, Inc. (the “Company”) and entities in which the Company owns a majority voting interest or controlling financial interest. All material transactions and balances with consolidated and unconsolidated entities have been eliminated in consolidation or as required under the equity method.

2.  RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Standards
In December 2010, the Financial Accounting Standards Board (“FASB”) amended its existing guidance for goodwill and other intangible assets. This authoritative guidance modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if there are qualitative factors indicating that it is more likely than not that a goodwill impairment exists. The qualitative factors are consistent with the existing guidance which requires goodwill of a reporting unit to be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. This authoritative guidance becomes effective for the Company in fiscal 2012. The implementation of this authoritative guidance is not expected to have a material impact on the Company’s consolidated financial position or results of operations.

In April 2011, the FASB issued new guidance clarifying when a debt restructuring by a creditor constitutes a troubled debt restructuring, which is effective July 1, 2011 for all restructurings that occurred on or after January 1, 2011. Specifically, the guidance clarifies that a troubled debt restructuring only exists when a creditor makes a concession in interest rates or payment terms to a debtor experiencing financial difficulties. It provides additional guidance on determining what constitutes a concession, and on the use of probability in determining if a debtor could be experiencing financial difficulty prior to defaulting on payments. The adoption of this new guidance is not expected to have a material impact on the Company’s consolidated financial position or results of operations.

In May 2011, the FASB issued Accounting Standard Update (“ASU”) 2011-04, which generally aligns the principles for fair value measurements contained in Accounting Standard Codification (“ASC”) 820, and the related disclosures under U.S. GAAP and International Financial Reporting Standards (“IFRS”). The amendments to ASC 820 generally relate to changes to a principle or requirement for measuring fair value, clarifications of the FASB’s intent regarding the application of existing requirements and additional disclosure requirements. This ASU is effective in interim and annual periods beginning after December 15, 2011. Early adoption is not permitted. The Company is presently evaluating the impact, if any of this ASU on its consolidated financial statements.

In June 2011, the FASB issued ASU 2011-05 amending ASC Topic 220 related to comprehensive income. The amendment to ASC 220 requires companies to present items of net income, items of other comprehensive income (“OCI”) and total comprehensive income in one continuous statement or two separate but consecutive statements. Companies will no longer be allowed to present OCI in the statement of stockholders’ equity. The reclassification adjustments between OCI and net income will be presented separately on the face of the financial statements. This ASU is effective in interim and annual periods beginning after December 15, 2011. Early adoption is permitted. The Company is presently evaluating the impact, if any, of this ASU on its consolidated financial statements.
 
 
4

 

3.  RESULTS OF OPERATIONS FOR MONTY’S RESTAURANT, MARINA AND OFFICE/RETAIL PROPERTY, COCONUT GROVE, FLORIDA
The Company, through two 50%-owned entities, Bayshore Landing, LLC (“Landing”) and Bayshore Rawbar, LLC (“Rawbar”), (collectively, “Bayshore”) owns a restaurant, office/retail and marina property located in Coconut Grove (Miami), Florida known as Monty’s (the “Monty’s Property”).

In March 2011 Bayshore amended its loan agreement with the same bank. Effective March 11, 2011 the principal balance of the loan was paid down by approximately $1.6 million to $8.8 million with the proceeds of the restricted cash balance and the remaining restricted cash balances were released by the bank. The loan is to be repaid in monthly installments of approximately $81,500 including principal and interest. Interest remains at the same terms, and the swap agreement remains in place for the reduced balance. The note is due, with a balloon payment on August 19, 2020. The agreement with the bank contains certain covenants with which the Company is in compliance. In conjunction with this loan amendment Bayshore was required to pay down the interest rate swap contract liability by $198,400, as discussed in Note 7 below.

Summarized combined statements of income for Landing and Rawbar for the three and six months ended June 30, 2011 and 2010 are presented below (Note: the Company’s ownership percentage in these operations is 50%):
 
Summarized Combined statements of income
Bayshore Landing, LLC and
Bayshore Rawbar, LLC
 
For the three months ended
June 30, 2011
   
For the three months ended
June 30, 2010
   
For the six
months ended
June 30, 2011
   
For the six
months ended
June 30, 2010
 
                         
Revenues:
                       
Food and Beverage Sales
  $ 1,608,000     $ 1,650,000     $ 3,296,000     $ 3,144,000  
Marina dockage and related
    271,000       315,000       557,000       619,000  
Retail/mall rental and related
    147,000       144,000       294,000       296,000  
Total Revenues
    2,026,000       2,109,000       4,147,000       4,059,000  
                                 
Expenses:
                               
Cost of food and beverage sold
    448,000       437,000       922,000       854,000  
Labor and related costs
    292,000       308,000       590,000       626,000  
Entertainers
    48,000       49,000       96,000       95,000  
Other food and beverage related costs
    150,000       158,000       307,000       295,000  
Other operating costs
    28,000       61,000       70,000       131,000  
Repairs and maintenance
    108,000       68,000       214,000       121,000  
Insurance
    130,000       143,000       254,000       285,000  
Management fees
    76,000       65,000       160,000       126,000  
Utilities
    70,000       72,000       124,000       125,000  
Ground rent
    224,000       210,000       446,000       419,000  
Interest
    166,000       218,000       367,000       424,000  
Depreciation and amortization (a)
    168,000       177,000       483,000       360,000  
Realized loss on interest rate swap (Note 7)
                198,000        
Total Expenses
    1,908,000       1,966,000       4,231,000       3,861,000  
                                 
Net income (loss)
  $ 118,000     $ 143,000     $ (84,000 )   $ 198,000  

 
(a)
Includes approximately $145,000 loan costs which were fully amortized in conjunction with the Monty’s loan modification in March 2011.

4.  INVESTMENTS IN MARKETABLE SECURITIES

Investments in marketable securities consist primarily of large capital corporate equity and debt securities in varying industries or issued by government agencies with readily determinable fair values. These securities are stated at market value, as determined by the most recent traded price of each security at the balance sheet date. Consistent with the Company’s overall current investment objectives and activities its entire marketable securities portfolio is classified as trading.
 
 
5

 
 
Net realized and unrealized gain (loss) from investments in marketable securities for the three and six months ended June 30, 2011 and 2010 is summarized below:
 
   
Three months ended
June 30,
   
Six months ended
June 30,
 
Description
 
2011
   
2010
   
2011
   
2010
 
Net realized (loss) gain from sales of securities
  $ (2,000 )   $ 7,000     $ 78,000     $ 253,000  
Unrealized net loss in trading securities
    (29,000 )     (163,000 )     (46,000 )     (282,000 )
Total net (loss) gain from investments in marketable securities
  $ (31,000 )   $ (156,000 )   $ 32,000     $ (29,000 )
 
For the three and six months ended June 30, 2011 net unrealized losses from trading securities were $29,000 and $46,000, respectively. This is compared to net unrealized losses of $163,000 and $282,000 for the three and six months ended June 30, 2010, respectively.

For the three months ended June 30, 2011 net realized loss from sales of marketable securities of approximately $2,000, and consisted of approximately $10,000 of gross losses net of $9,000 of gross gains. For the six months ended June 30, 2011 net realized gain from sales of marketable securities of approximately $78,000, and consisted of approximately $103,000 of gross gains net of $25,000 of gross losses.

For the three and six months ended June 30, 2010 net realized gain from sales of marketable securities of approximately $7,000, and consisted of approximately $170,000 of gross gains net of $163,000 of gross losses. For the six months ended June 30, 2010 net realized gain from sales of marketable securities of approximately $253,000, and consisted of approximately $437,000 of gross gains net of $184,000 of gross losses.

Investment gains and losses on marketable securities may fluctuate significantly from period to period in the future and could have a significant impact on the Company’s net earnings. However, the amount of investment gains or losses on marketable securities for any given period has no predictive value and variations in amount from period to period have no practical analytical value.

5.  OTHER INVESTMENTS
As of June 30, 2011, the Company’s portfolio of other investments had an aggregate carrying value of approximately $3.7 million. The Company has committed to fund an additional $614,000 as required by agreements with the investees. The carrying value of these investments is equal to contributions less distributions and loss valuation adjustments. During the three months ended June 30, 2011 the Company committed to a new investment of approximately $37,000. This investment was a feeder fund for an existing real estate fund which spun off an individual property. Total cash contributions to other investments for the three and six months ended June 30, 2011 were approximately $64,000 and $119,000, respectively. Total cash distributions from other investments for the three and six months ended June 30, 2011 were approximately $89,000 and $119,000, respectively. These distributions were primarily from investments in partnerships owning diversified operating companies.

Net income from other investments for the three and six months ended June 30, 2011 and 2010, is summarized below (excluding other than temporary impairment loss):

   
Three months ended June 30,
   
Six months ended June 30,
 
Description
 
2011
   
2010
   
2011
   
2010
 
Partnership owning diversified businesses
  $ 25,000     $     $ 25,000     $ 180,000  
Technology and related
          2,000               2,000  
Income from investment in 49% owned affiliate (T.G.I.F. Texas, Inc.)
    11,000       18,000       20,000       36,000  
Total net income from other investments (excluding other than temporary impairment losses)
  $ 36,000     $ 20,000     $ 45,000     $ 218,000  
 
Other than temporary impairment losses from other investments for the three and six months ended June 30, 2011 and 2010, are summarized below:

   
Three months ended June 30,
   
Six months ended June 30,
 
Description
 
2011
   
2010
   
2011
   
2010
 
Real estate and related (a)
  $ (84,000 )   $ (50,000 )   $ (84,000 )   $ (50,000 )
Other
    (3,000 )           (3,000 )      
Total other than temporary impairment losses from other investments
  $ (87,000 )   $ (50,000 )   $ (87,000 )   $ (50,000 )

 
(a)
In June 2011 the Company recognized an impairment loss of approximately $84,000 from an investment in a partnership which operates and leases executive suites in Miami, Florida. The Company has funded $120,000 to date in this investment and the losses incurred were associated with the initial start up of the venture in 2010.
 
 
6

 
 
The following tables present gross unrealized losses and fair values for those investments that were in an unrealized loss position as of June 30, 2011 and December 31, 2010, aggregated by investment category and the length of time that investments have been in a continuous loss position:

   
As of June 30, 2011
 
   
Less than 12 Months
   
Greater than 12 Months
 
Total
 
Investment Description
 
Fair Value
   
Unrealized
Loss
   
Fair Value
   
Unrealized
Loss
   
Fair Value
   
Unrealized
Loss
 
Partnerships owning investments in technology related industries
  $ 324,000     $ (13,000 )   $ 43,000     $ (44,000 )   $ 367,000     $ (57,000 )
Partnerships owning diversified businesses
                626,000       (89,000 )     626,000       (89,000 )
Partnerships owning real estate and related investments
                302,000       (49,000 )     302,000       (49,000 )
Total
  $ 324,000     $ (13,000 )   $ 971,000     $ (182,000 )   $ 1,295,000     $ (195,000 )

   
As of December 31, 2010
 
   
Less than 12 Months
   
Greater than 12 Months
   
Total
 
Investment Description
 
Fair Value
   
Unrealized
Loss
   
Fair Value
   
Unrealized
Loss
   
Fair Value
   
Unrealized
Loss
 
Partnerships owning investments in technology related industries
              $ 52,000     $ (34,000 )   $ 52,000     $ (34,000 )
Partnerships owning diversified businesses
                737,000       (104,000 )     737,000       (104,000 )
investments
                398,000       (105,000 )     398,000       (105,000 )
Total
              $ 1,187,000     $ (243,000 )   $ 1,187,000     $ (243,000 )

When evaluating the investments for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer and any changes thereto, and the Company’s intent to sell, or whether it is more likely than not it will be required to sell, the investment before recovery of the investment’s amortized cost basis.

In accordance with ASC Topic 320-10-65, Recognition and Presentation of Other-Than-Temporary Impairments (“OTTI”) as of June 30, 2011 OTTI impairment valuation adjustments totaled $87,000 primarily from an investment in a real estate partnership which leases executive suites in Miami, Florida (as discussed above). As of June 30, 2010 OTTI impairment valuation adjustments totaled $50,000 primarily from an investment in a real estate fund.

6.  FAIR VALUE OF FINANCIAL INSTRUMENTS
In accordance with ASC Topic 820, the Company discloses the fair value of its financial instruments in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (level 1measurements), and gives the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (level 3 measurements). Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset and liability, either directly or indirectly, for substantially the full term on the financial instrument.
 
 
7

 
 
Assets and liabilities measured at fair value on a recurring basis are summarized below by hierarchy as of June 30 2011 and December 31, 2010:

   
Fair value measurement at reporting date using
 
   
Total
June 30,
   
Quoted Prices in Active Markets for Identical Assets
   
Significant Other Observable Inputs
   
Significant Unobservable Inputs
 
Description
 
2011
   
(Level 1)
   
(Level 2)
   
(Level 3)
 
Assets:
                       
Cash equivalents:
                       
Time deposits
  $ 54,000           $ 54,000        
Money market mutual funds
    2,107,000     $ 2,107,000              
Marketable securities:
                               
Corporate debt securities
    527,000             527,000        
Marketable equity securities
    1,396,000       1,396,000              
Total assets
  $ 4,084,000     $ 3,503,000     $ 581,000     $  
                                 
Liabilities:
                               
Interest rate swap contract
    1,380,000             1,380,000        
Total liabilities
  $ 1,380,000           $ 1,380,000        

   
Fair value measurement at reporting date using
 
   
Total
December 31,
   
Quoted Prices in Active Markets for Identical Assets
   
Significant Other Observable Inputs
   
Significant Unobservable Inputs
 
Description
 
2010
   
(Level 1)
   
(Level 2)
   
(Level 3)
 
Assets:
                       
Cash equivalents:
                       
Time deposits
  $ 53,000           $ 53,000        
Money market mutual funds
    2,450,000     $ 2,450,000              
Cash equivalents – restricted:
                               
Money market mutual funds
    2,380,000       2,380,000              
Marketable securities:
                               
Corporate debt securities
    730,000             730,000        
Marketable equity securities
    1,364,000       1,364,000              
Total assets
  $ 6,977,000     $ 6,194,000     $ 783,000        
                                 
Liabilities:
                               
Interest rate swap contract
    1,462,000             1,462,000        
Total liabilities
  $ 1,462,000           $ 1,462,000        
 
 
8

 
 
Assets measured at fair value on a nonrecurring basis are summarized below by hierarchy as of June 30, 2011 and December 31, 2010:

   
Fair value measurement at reporting date using
       
   
Total
June 30,
   
Quoted Prices in Active Markets for Identical Assets
   
Significant Other Observable Inputs
   
Significant Unobservable Inputs
   
Total losses for the three and six months ended
 
Description
 
2011
   
(Level 1)
   
(Level 2) (a)
   
(Level 3) (b)
   
6/30/2011
 
Assets:
                             
Other investments by investment focus:
                             
Technology & Communication
  $ 468,000     $     $ 468,000     $     $ (3,000 )
Diversified businesses
    1,416,000             1,416,000              
Real estate and related
    1,526,000             545,000       981,000       (84,000 )
Other
    300,000                   300,000        
    $ 3,710,000     $     $ 2,429,000     $ 1,281,000     $ (87,000 )
                                         
Goodwill (Bayshore)
    5,628,000                       5,628,000          
Total assets
  $ 9,338,000     $     $ 2,429,000     $ 6,909,000     $ (87,000 )
 
   
Fair value measurement at reporting date using
       
   
Total
December 31,
   
Quoted Prices in Active Markets for Identical Assets
   
Significant Other Observable Inputs
   
Significant Unobservable Inputs
   
Total gains (losses) for year ended
 
Description
 
2010
   
(Level 1)
   
(Level 2) (a)
   
(Level 3) (b)
   
12/31/2010
 
Assets:
                             
Other investments by investment focus:
                             
Technology & Communication
  $ 469,000     $     $ 469,000     $     $ (44,000 )
Diversified businesses
    1,461,000             1,461,000             187,000  
Real estate and related
    1,539,000             539,000       1,000,000       (45,000 )
Other
    300,000                   300,000     $ 14,000  
    $ 3,769,000     $     $ 2,469,000     $ 1,300,000     $ 112,000  
                                         
Goodwill (Bayshore)
    5,628,000                       5,628,000       (2,100,000 )
Total assets
  $ 9,397,000     $     $ 2,469,000     $ 6,928,000     $ (1,988,000 )
 
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

For the six months ended June 30, 2011 and 2010, respectively, $87,000 and $50,000 of OTTI adjustments were recognized. No OTTI adjustments were recognized for the three months ended March 31, 2011 and 2010.

The OTTI loss for the three months ended June 30, 2011 primarily consists of a recognized impairment loss of approximately $84,000 in an investment in a partnership which operates and leases executive suites in Miami, Florida. The Company has funded $120,000 to date in this investment and the losses incurred were primarily associated with the initial start up of the venture in 2010.

 
(a)
This class of other investments above which are measured on a nonrecurring basis using Level 2 input or recent observable information. These include investments in certain entities that calculate net asset value per share (or its equivalent such as member units or an ownership interest in partners’ capital to which a proportionate share of net assets is attributed, “NAV”). This class primarily consists of private equity funds that have varying investment focus. These investments can never be redeemed with the funds. Instead, the nature of the investments in this class is that distributions are received through the liquidation of the underlying assets of the fund. If these investments were held it is estimated that the underlying assets of the fund would be liquidated over 5 to 10 years. As of June 30, 2011 and December 31, 2010, it is probable that all of the investments in this class will be sold at an amount different from the NAV of the Company’s ownership interest in partners’ capital. Therefore, the fair values of the investments in this class have been estimated using recent observable information such as audited financial statements and/or statements of partners’ capital obtained directly from investees on a quarterly or other regular basis. As of June 30, 2011 and December 31, 2010 the amount of the Company’s unfunded commitments related to the aforementioned investments is approximately $610,000 and $665,000, respectively.
 
 
9

 
 
 
(b)
This class of other investments above which are measured on a nonrecurring basis using Level 3 unobservable inputs consist of investments primarily in commercial real estate in Florida through private partnerships and two investments in the stock of private banks in Florida and Texas. The Company does not know when it will have the ability to redeem the investments and has categorized them as a Level 3 fair value measurement. The Level 3 real estate and related investments of approximately $1 million primarily consist of one investment in a commercial building located near the Company’s offices purchased in 2005. This investment is measured using primarily inputs provided by the managing member of the partnerships with whom the Company has done similar transactions in the past and is well known to management. The fair values of these real estate investments have been estimated using the net asset value of the Company’s ownership interest in partners’ capital. There have been no gains or losses realized or unrealized relating to these investments. The investments in private bank stocks include a private bank and trust located in Coral Gables, Florida in the amount of $250,000 made in 2009, and a $50,000 investment in a bank located in El Campo, Texas made in 2010. The fair values of these bank stock investments have been estimated using the cost method less distributions received and other than temporary impairments. This investment is valued using inputs provided by the management of the banks.

The following table includes a roll-forward of the investments classified within level 3 of the fair value hierarchy for the six months ended June 30, 2011:

   
Level 3 Investments:
 
Balance at January 1, 2011
  $ 1,300,000  
Additional investment in limited partnership
    30,000  
Other than temporary impairment loss
    (87,000 )
Transfers from Level 2
    38,000  
Balance at June 30, 2011
  $ 1,281,000  

For the six months ended June 30, 2011 the Company transferred approximately $38,000 from level 2 to level 3 to correct a misclassification of an investment in a real estate partnership as of December 31, 2010.

7.  INTEREST RATE SWAP CONTRACT
The Company is exposed to interest rate risk through its borrowing activities. In order to minimize the effect of changes in interest rates, the Company has entered into an interest rate swap contract under which the Company agrees to pay an amount equal to a specified rate of 7.57% times a notional principal approximating the outstanding loan balance, and to receive in return an amount equal to 2.45% plus the one-month LIBOR Rate times the same notional amount. The Company designated this interest rate swap contract as a cash flow hedge.

In conjunction with amendment of the Bayshore bank loan in March 2011 (Note 3), the interest rate swap contract liability was paid down by $198,400 (in the same proportion as the amount of the loan principal paid down). This amount represents a previously unrealized loss which upon pay down of the swap was reclassified from accumulated other comprehensive income and recorded as a realized loss on interest rate swap contract within the condensed consolidated statements of comprehensive income for the six months ended June 30, 2011.
 
 
10

 
 
As of June 30, 2011 the fair value of this hedge was an unrealized loss of approximately $1,380,000, as compared with an unrealized loss of $1,462,000 as of December 31, 2010 which resulted in an unrealized gain of $82,000 (or $41,000, net of non controlling interest) for the six months ended June 30, 2011. This amount has been recorded as other comprehensive income and will be reclassified to interest expense over the life of the contract.

The following tables present the required disclosures in accordance with ASC Topic 815-10:

    Liability Derivative  
   
June 30, 2011
 
December 31, 2010
 
Fair Values of Derivative Instruments:
 
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
 
                   
Derivatives designated as hedging instruments:
                 
Interest rate swap contract
 
Liabilities
  $ 1,380,000  
Liabilities
  $ 1,462,000  
                       
Total derivatives designated as hedging instruments under ASC Topic 815
      $ 1,380,000       $ 1,462,000  

The Effect of Derivative Instruments on the Statements of Comprehensive Income

Amount of Gain or (Loss) Recognized in OCI on
                       
Derivative (Effective Portion)
                       
   
For the three
   
For the three
   
For the six
   
For the six
 
   
Months ended
   
Months ended
   
Months ended
   
Months ended
 
   
June 30, 2011
   
June 30, 2010
   
June 30, 2011
   
June 30, 2010
 
                         
Interest rate swap contracts
  $ (89,500 )   $ (217,000 )   $ 41,000     $ (271,000 )
Total
  $ (89,500 )   $ (217,000 )   $ 41,000     $ (271,000 )
 
 
11

 
 
8.  SEGMENT INFORMATION
The Company has three reportable segments: Real estate rentals; Food and Beverage sales; and Other investments and related income. The Real estate and rentals segment primarily includes the leasing of its Grove Isle property, marina dock rentals at both Monty’s and Grove Isle marinas, and the leasing of office and retail space at its Monty’s property. The Food and Beverage sales segment consists of the Monty’s restaurant operation. Lastly, the Other investment and related income segment includes all of the Company’s other investments, marketable securities, loans, notes and other receivables and the Grove Isle spa operations which individually do not meet the criteria as a reportable segment.

   
Three months ended
   
Six months ended
 
   
June 30,
   
June 30,
 
   
2011
   
2010
   
2011
   
2010
 
Net Revenues:
                       
Real estate and marina rentals
  $ 867,000     $ 896,000     $ 1,743,000     $ 1,792,000  
Food and beverage sales
    1,607,000       1,650,000       3,295,000       3,144,000  
Spa revenues
    98,000       107,000       210,000       216,000  
Total net revenues
  $ 2,572,000     $ 2,653,000     $ 5,248,000     $ 5,152,000  
                                 
Income (loss) before income taxes:
                               
Real estate and marina rentals
  $ 239,000     $ 298,000     $ 495,000     $ 441,000  
Food and beverage sales
    56,000       40,000       114,000       43,000  
Other investments and related income
    (536,000 )     (715,000 )     (1,047,000 )     (693,000 )
Total net loss attributalbe to the Company before income taxes
  $ (241,000 )   $ (377,000 )   $ (438,000 )   $ (209,000 )
 
9.  INCOME TAXES
We adopted the provisions of ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes” on January 1, 2007. This topic clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with ASC Topic 740, “Accounting for Income Taxes”, and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The guidance requires that the Company determine whether the benefits of the Company’s tax positions are more likely than not of being sustained upon audit based on the technical merits of the tax position. Topic 740-10 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Based on our evaluation, we have concluded that there are no significant uncertain tax positions requiring recognition in our consolidated financial statements. Our evaluation was performed for the tax years ended December 31, 2007, 2008, 2009 and 2010, the tax years which remain subject to examination by major tax jurisdictions as of June 30, 2011.
 
We may from time to time be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results. In the event we have received an assessment for interest and/or penalties, it has been classified in the consolidated financial statements as selling, general and administrative expense.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

RESULTS OF OPERATIONS
For the three and six months ended June 30, 2011 the Company reported a net loss of approximately $182,000 ($.18 per share) and $388,000 ($.38 per share), respectively. For the three and six months ended June 30, 2010 the Company reported a net loss of approximately $287,000 ($.28 per share) and $191,000 ($.19 per share), respectively.

Total revenues for the six months ended June 30, 2011 as compared with the same period in 2010, increased by approximately $98,000 or 2%. Total revenues for the three months ended June 30, 2011 as compared with the same period in 2010, decreased by approximately $81,000 or 3%.

Total expenses for the six months ended June 30, 2011, as compared with the same periods in 2010, increased by approximately $90,000 or 2%. Total expenses for the three months ended June 30, 2011, as compared with the same periods in 2010, decreased by approximately $110,000 or 4%.

REVENUES
Rentals and related revenues for the three and six months ended June 30, 2011 as compared with the same periods in 2010 increased by $7,000 (1%) and $7,000 (1%).

 
12

 
 
Restaurant operations:
Summarized statements of income for the Company’s Monty’s restaurant for the three and six months ended June 30, 2011 and 2010 is presented below:

   
For the three months
   
For the six months
 
   
ended June 30,
   
ended June 30,
 
   
2011
   
2010
   
2011
   
2010
 
Revenues:
                       
Food and Beverage Sales
  $ 1,608,000     $ 1,650,000     $ 3,296,000     $ 3,144,000  
                                 
Expenses:
                               
Cost of food and beverage sold
    448,000       437,000       922,000       854,000  
Labor and related costs
    292,000       308,000       590,000       626,000  
Entertainers
    48,000       49,000       96,000       95,000  
Other food and beverage direct costs
    64,000       68,000       131,000       129,000  
Other operating costs
    86,000       90,000       176,000       166,000  
Repairs and maintenance
    35,000       49,000       80,000       86,000  
Insurance
    81,000       68,000       157,000       139,000  
Management and accounting fees
    26,000       22,000       64,000       57,000  
Utilities
    65,000       65,000       128,000       123,000  
Rent (as allocated)
    170,000       175,000       328,000       312,000  
Total Expenses
    1,315,000       1,331,000       2,672,000       2,587,000  
                                 
Income before depreciation and non controlling interest
  $ 293,000     $ 319,000     $ 624,000     $ 557,000  
 
Amounts above are presented as a percentage of sales below:
 
For the three months
   
For the six months
 
   
ended June 30,
   
ended June 30,
 
   
2011
   
2010
   
2011
   
2010
 
Revenues:
                       
Food and Beverage Sales
    100 %     100 %     100 %     100 %
                                 
Expenses:
                               
Cost of food and beverage sold
    28 %     26 %     28 %     27 %
Labor and related costs
    18 %     19 %     18 %     20 %
Entertainers
    3 %     3 %     3 %     3 %
Other food and beverage direct costs
    4 %     4 %     4 %     4 %
Other operating costs
    5 %     6 %     5 %     5 %
Repairs and maintenance
    2 %     3 %     2 %     3 %
Insurance
    5 %     4 %     5 %     4 %
Management fees
    2 %     1 %     1 %     2 %
Utilities
    4 %     4 %     4 %     4 %
Rent (as allocated)
    11 %     11 %     11 %     10 %
Total Expenses
    82 %     81 %     81 %     82 %
Income before depreciation and non-controlling interest
    18 %     19 %     19 %     18 %
 
For the six months ended June 30, 2011 as compared with the same period in 2010 restaurant sales increased by approximately $152,000 (5%), with food sales increasing by $158,000 (or 8%) and beverage sales decreasing $6,000 (or less than 1%).

For the three months ended June 30, 2011 as compared with the same period in 2010 restaurant sales decreased by approximately $42,000 (or 2%), with food sales increasing by $14,000 (1%) and beverage sales decreasing $56,000 (8%).

For the three and six months ended June 30, 2011 as compared with the same periods in 2010 cost of sales increased by $11,000 (3%) and $68,000 (8%), respectively. This was due to higher food costs.

 
13

 
 
Marina operations:
Summarized and combined statements of income for marina operations:
(The Company owns 50% of the Monty’s marina and 95% of the Grove Isle marina)

   
For the three months ended
June 30,
   
For the six months ended
June 30,
 
   
2011
   
2010
   
2011
   
2010
 
Marina Revenues:
                       
Monty’s dockage fees and related income
  $ 290,000     $ 315,000     $ 591,000     $ 619,000  
Grove Isle marina slip owners dues and dockage fees
    113,000       124,000       224,000       252,000  
Total marina revenues
    403,000       439,000       815,000       871,000  
                                 
Marina Expenses:
                               
Labor and related costs
    60,000       68,000       131,000       131,000  
Insurance
    21,000       50,000       43,000       99,000  
Management fees
    18,000       19,000       36,000       39,000  
Utilities, net of tenant reimbursement
    (2,000 )     (2,000 )     (18,000 )     (13,000 )
Rent and bay bottom lease expense
    54,000       61,000       110,000       119,000  
Repairs and maintenance
    54,000       19,000       95,000       56,000  
Other
    22,000       30,000       48,000       57,000  
Total marina expenses
    227,000       245,000       445,000       488,000  
                                 
Income before depreciation and non controlling interest
  $ 176,000     $ 194,000     $ 370,000     $ 383,000  
 
Marina revenues for the three and six months ended June 30, 2011 as compared to the same periods in 2010 decreased by $36,000 (8%) and $56,000 (6%). This was primarily due to decreased transient dockage rental at both marinas.

Spa operations:
Below are summarized statements of income for Grove Isle spa operations for the three and six months ended June 30, 2011 and 2010. The Company owns 50% of the Grove Isle Spa with the other 50% owned by an affiliate of Grand Heritage, the tenant of the Grove Isle Resort:
 
Summarized statements of income of spa operations
 
Three months ended June 30, 2011
   
Three months ended June 30, 2010
   
Six months ended June 30, 2011
   
Six months ended June 30, 2010
 
Revenues:
                       
Services provided
  $ 78,000     $ 88,000     $ 172,000     $ 178,000  
Membership and other
    20,000       19,000       38,000       38,000  
Total spa revenues
    98,000       107,000       210,000       216,000  
Expenses:
                               
Cost of sales (commissions and other)
    16,000       17,000       34,000       29,000  
Salaries, wages and related
    33,000       31,000       65,000       68,000  
Other operating expenses
    47,000       41,000       91,000       71,000  
Management and administrative fees
    5,000       5,000       11,000       11,000  
Other non-operating expenses
    6,000       3,000       9,000       14,000  
Total Expenses
    107,000       97,000       210,000       193,000  
                                 
Income (loss) before interest, depreciation and non-controlling interest
  $ (9,000 )   $ 10,000     $ -0-     $ 23,000  
 
There were no significant changes in Spa operations for the three and six months ended June 30, 2011 as compared with the same periods in 2010.

Net realized and unrealized (loss) gain from investments in marketable securities:
Net realized and unrealized loss from investments in marketable securities for the three months ended June 30, 2011 and 2010 was approximately $31,000 and $156,000, respectively. Net realized and unrealized gain (loss) from investments in marketable securities for the six months ended June 30, 2011 and 2010 was approximately $32,000 and ($29,000), respectively.

 
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Net income from other investments:
Net income from other investments for the three and six months ended June 30, 2011 was approximately $36,000 and $45,000, respectively. This is as compared to gains of approximately $20,000 and $218,000 for the three and six months ended June 30, 2010. Additionally, for the three and six months ended June 30, 2011 and 2010 other than temporary impairment valuation losses of $87,000 and $50,000, respectively, were recognized. For further details refer to Note 5 to Condensed Consolidated Financial Statements (unaudited).
 
Interest, dividend and other income:
Interest, dividend and other income for the three and six months ended June 30, 2011 was approximately $30,000 and $126,000, respectively. This is as compared to income of approximately $60,000 and $178,000 for the three and six months ended June 30, 2010. The decreases in the three and six month comparable periods were $30,000 (50%) and $52,000 (29%), respectively. The decreases were primarily a result of reduced interest and dividends due to decreased investments in marketable securities.

EXPENSES
Expenses for rental and other properties for the three and six months ended June 30, 2011 were $165,000 and $348,000, respectively. This is as compared to the same expenses of approximately $154,000 and $319,000 for the three and six months ended June 30, 2010. These increases of $11,000 (7%) and $29,000 (9%) respectively were primarily due to increased repairs and maintenance expenses.

For comparisons of all food and beverage related expenses refer to Restaurant Operations (above) summarized statement of income for Monty’s restaurant.

For comparisons of all marina related expenses refer to Marina Operations (above) for summarized and combined statements of income for marina operations.

For comparisons of all spa related expenses refer to Spa Operations (above) for summarized statements of income for spa operations.

Depreciation and amortization expense for the three and six months ended June 30, 2011 compared to the same periods in 2010 increased by $7,000 (3%) and $107,000 (21%), respectively. This increase was primarily due to the amortization $145,000 of loan costs associated with the Monty’s loan modification completed in March 2011. The increases in amortization expense were partially offset by decreased depreciation expense of approximately $33,000 as a result of increased amount of fully depreciated fixed assets related to Grove Isle.

General and administrative expense for the three and six months ended June 30, 2011 compared to the same periods in 2010 decreased by approximately $43,000 (35%) and $44,000 (20%), respectively. This was due to decreased corporate administrative expenses.

Professional fees and expenses for the six months ended June 30, 2011 compared to the same period in 2010 increased by $8,000 (4%). Professional fees and expenses for the three months ended June 30, 2011 compared to the same period in 2010 decreased by $5,000 (4%). These changes were primarily due to legal costs relating to ongoing Grove Isle litigation.

EFFECT OF INFLATION:
Inflation affects the costs of operating and maintaining the Company’s investments. In addition, rentals under certain leases are based in part on the lessee’s sales and tend to increase with inflation, and certain leases provide for periodic adjustments according to changes in predetermined price indices.

LIQUIDITY, CAPITAL EXPENDITURE REQUIREMENTS AND CAPITAL RESOURCES
The Company’s material commitments primarily consist of maturities of debt obligations of approximately $6.4 million in 2011 and contributions committed to other investments of approximately $614,000 due upon demand. The funds necessary to meet these obligations are expected from the proceeds from the sales of properties or investments, bank construction loan, refinancing of existing bank loans, distributions from investments and available cash.

In April 2011 the Company renewed and modified the existing bank mortgage note payable on the Grove Isle property with the same lender. In conjunction with the renewal and modification the principal balance of the loan was paid down by $650,000. As of June 30, 2011 the principal amount outstanding is $2.9 million. The loan matures on December 31, 2011 and calls for the same monthly principal payments of $10,000 plus interest calculated at the one-month LIBOR rate plus 3%. At maturity we have an option to extend the loan to December 31, 2012 under essentially the same terms as the current loan agreement.

 
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Also included in the maturing debt obligations for 2011 is a note payable to the Company’s 49% owned affiliate, T.G.I.F. Texas, Inc. (“TGIF”) of approximately $3.3 million due on demand. The obligation due to TGIF will be paid with funds available from distributions from its investment in TGIF and from available cash.

MATERIAL COMPONENTS OF CASH FLOWS
For the six months ended June 30, 2011, net cash provided by operating activities was approximately $316,000. This was primarily from the Company’s rental operations cash flow.

For the six months ended June 30, 2011, net cash provided by investing activities was approximately $34,000. This consisted primarily of approximately $642,000 in net proceeds from sales of marketable securities and distributions from other investment of $119,000. These sources of funds were partially offset by purchases of marketable securities of $440,000, contributions to other investments of $119,000 and additions to fixed assets of $163,000.

For the six months ended June 30, 2011, net cash used in financing activities was approximately $520,000. This primarily consisted of loan principal repayments of $2.6 million, interest rate swap contract partial settlement of $198,000, and distributions to non controlling interests in consolidated entities. These uses of funds were partially offset sources of funds consisting of withdraws from restricted cash accounts of $2.4 million in conjunction with Bayshore loan amendment completed in March 2011 and after which no restricted cash balance remains.

Quantitative and Qualitative Disclosures about Market Risk
Not applicable

Controls and Procedures
 
(a) Evaluation of Disclosure Controls and Procedures.
Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in the Securities Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q have concluded that, based on such evaluation, our disclosure controls and procedures were effective and designed to ensure that material information relating to us and our consolidated subsidiaries, which we are required to disclose in the reports we file or submit under the Securities Exchange Act of 1934, was made known to them by others within those entities and reported within the time periods specified in the SEC’s rules and forms.

 
(b) Changes in Internal Control Over Financial Reporting.
There were no changes in the Company’s internal controls over financial reporting identified in connection with the evaluation of such internal control over financial reporting that occurred during our last fiscal quarter which have materially affected, or reasonably likely to materially affect, our internal control over financial reporting.

 
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PART II. OTHER INFORMATION
Legal Proceedings
The Company was a co-defendant in two lawsuits in the circuit court in Miami Dade County Florida. These cases arose from claims by a condominium association and resident seeking a declaratory judgment regarding certain provisions of the declaration of condominium relating to the Grove Isle Club and the developer. The claim by the association has been dismissed as to all counts related to the Company however the association has filed an appeal. The Company believes that the claims are without merit and intends to vigorously defend its position. The ultimate outcome of this litigation cannot presently be determined. However, in management’s opinion the likelihood of a material adverse outcome is remote. Accordingly, adjustments, if any that might result from the resolution of this matter have not been reflected in the financial statements.

Unregistered Sales of Equity Securities and Use of Proceeds: None

Defaults Upon Senior Securities: None.

Removed and Reserved

Other Information: None

Exhibits:

(a) Certifications pursuant to 18 USC Section 1350-Sarbanes-Oxley Act of 2002. Filed herewith.

 
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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: August 15, 2011
 
Lawrence Rothstein
   
President, Treasurer and Secretary
   
Principal Financial Officer

   
/s/ Carlos Camarotti
Dated: August 15, 2011
 
Carlos Camarotti
   
Vice President- Finance and Controller
   
Principal Accounting Officer
 
 
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