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 September 30, 2012
 
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 incorporation or organization)      (I.R.S. Employer 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 x   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.                          
992,326 Common shares were outstanding as of November 14, 2012.

 
 
 
 
HMG/COURTLAND PROPERTIES, INC.
Index

     
PAGE
     
NUMBER
PART I.
Financial Information
  
       
 
Item 1.
Financial Statements
  
       
 
Condensed Consolidated Balance Sheets as of September 30, 2012 (Unaudited) and December 31, 2011
1
       
 
Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2012 and 2011 (Unaudited)
2
       
 
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2012 and 2011 (Unaudited)
3
       
 
Notes to Condensed Consolidated Financial Statements (Unaudited)
4
       
 
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
   12
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risks
16
 
Item 4.
Controls and Procedures
16
       
PART II.
Other Information
  
 
Item 1.
Legal Proceedings
16
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
17
 
Item 3.
Defaults Upon Senior Securities
17
 
Item 4.
Mine Safety Disclosures
17
 
Item 5.
Other Information
17
 
Item 6.
Exhibits
17
Signatures
  
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 Securities 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

   
September 30,
    
December 31,
  
   
2012
    
2011
  
ASSETS
  
(UNAUDITED)
        
Investment properties, net of accumulated depreciation:
            
Commercial properties
   $ 6,976,674     $ 7,057,005  
Hotel, club and spa facility
     3,287,216       3,447,870  
Marina properties
     1,719,571       1,893,452  
Land held for development
     -       27,689  
Total investment properties, net
     11,983,461       12,426,016  
                 
Cash and cash equivalents
     2,637,520       2,366,363  
Investments in marketable securities
     1,903,681       2,019,476  
Other investments
     3,691,087       3,745,327  
Investment in affiliate
     2,730,735       2,686,887  
Loans, notes and other receivables
     735,304       683,998  
Notes and advances due from related parties
     705,614       696,909  
Deferred taxes
     629,000       632,000  
Goodwill
     5,628,627       5,628,627  
Other assets
     604,109       710,227  
TOTAL ASSETS
   $ 31,249,138     $ 31,595,830  
                 
LIABILITIES
                
Mortgages and notes payable
   $ 14,114,747     $ 14,531,833  
Accounts payable, accrued expenses and other liabilities
     665,675       740,618  
Interest rate swap contract payable
     2,066,000       1,975,000  
TOTAL LIABILITIES
     16,846,422       17,247,451  
                 
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 992,326 issued
     992,326       1,023,955  
Additional paid-in capital
     24,238,575       24,366,099  
Less: Treasury stock at cost (13,529 as of December 31, 2011)
     -       (60,388 )
Undistributed gains from sales of properties, net of losses
     41,572,120       41,572,120  
Undistributed losses from operations
     (54,244,646 )     (54,383,928 )
Accumulated other comprehensive loss
     (1,033,000 )     (987,500 )
Total stockholders' equity
     11,525,375       11,530,358  
Non controlling interest
     2,877,341       2,818,021  
TOTAL EQUITY
     14,402,716       14,348,379  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
   $ 31,249,138     $ 31,595,830  

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 nine months ended
  
   
September 30,
    
September 30,
  
REVENUES
  
2012
    
2011
    
2012
    
2011
  
Real estate rentals and related revenue
   $ 500,760     $ 475,230     $ 1,462,710     $ 1,402,791  
Food & beverage sales
     1,271,635       1,218,886       4,628,472       4,514,577  
Marina revenues
     407,686       384,640       1,238,978       1,200,019  
Spa revenues
     110,324       211,226       350,587       421,023  
Total revenues
     2,290,405       2,289,982       7,680,747       7,538,410  
                                 
EXPENSES
                                
Operating expenses:
                                
Rental and other properties
     178,861       211,684       478,751       559,681  
Food and beverage cost of sales
     357,382       344,710       1,324,379       1,266,389  
Food and beverage labor and related costs
     334,066       304,758       1,059,782       990,389  
Food and beverage other operating costs
     463,826       474,202       1,541,511       1,538,153  
Marina expenses
     223,310       212,670       640,572       655,816  
Spa expenses
     95,877       204,238       345,944       414,136  
Depreciation and amortization
     222,843       237,079       668,611       854,821  
Adviser's base fee
     255,000       255,000       765,000       765,000  
General and administrative
     83,747       117,293       274,255       290,252  
Professional fees and expenses
     46,721       108,871       172,289       305,201  
Direc    tors' fees and expenses
     25,649       25,285       69,149       70,591  
Total operating expenses
     2,287,282       2,495,790       7,340,243       7,710,429  
                                 
Interest expense
     215,843       216,837       656,626       687,487  
Total expenses
     2,503,125       2,712,627       7,996,869       8,397,916  
                                 
Loss before other income (loss) and income taxes
     (212,720 )     (422,645 )     (316,122 )     (859,506 )
                                 
Net realized and unrealized gains (losses) from investments in marketable securities
     44,826       (173,206 )     141,922       (141,226 )
Net income from other investments
     20,247       10,189       336,693       55,502  
Realized loss on interest rate swap agreement
     -       -       -       (198,400 )
Other than temporary impairment losses from other investments
     -       -       (27,666 )     (86,707 )
Interest, dividend and other income
     43,404       34,346       112,275       160,368  
Total other income (loss)
     108,477       (128,671 )     563,224       (210,463 )
                                 
(Loss) income before income taxes
     (104,243 )     (551,316 )     247,102       (1,069,969 )
                                 
Provision for (benefit from) income taxes
     20,000       (230,000 )     3,000       (280,000 )
Net (loss) income
     (124,243 )     (321,316 )     244,102       (789,969 )
                                 
Less: Net loss (income) attributable to noncontrolling interest in consolidated entities
     29,834       91,283       (104,820 )     171,764  
Net (loss) income attributable to the Company
   $ (94,409 )   $ (230,033 )   $ 139,282     $ (618,205 )
                                 
Other comprehensive loss:
                                
Unrealized loss on interest rate swap agreement
   $ (3,500 )   $ (298,000 )   $ (45,500 )   $ (257,000 )
Total other comprehensive loss
     (3,500 )     (298,000 )     (45,500 )     (257,000 )
                                 
Comprehensive (loss) income
   $ (97,909 )   $ (528,033 )   $ 93,782     $ (875,205 )
Net (loss) income Per Common Share:
                                
Basic and diluted
   $ (0.09 )   $ (0.23 )   $ 0.14     $ (0.61 )
Weighted average common shares outstanding-Basic and diluted
     1,010,108       1,010,426       1,008,492       1,010,426  
 
See notes to the condensed consolidated financial statements
 
 
2
 

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

   
For the nine months ended September 30,
  
   
2012
    
2011
  
CASH FLOWS FROM OPERATING ACTIVITIES:
            
Net income (loss) attributable to the Company
   $ 139,282     $ (618,205 )
Adjustments to reconcile net income (loss) attributable to the Company to net cash provided by operating activities:
                
Depreciation and amortization
     668,611       854,821  
Non-employee stock compensation expense
     13,455       48,646  
Net income from other investments, excluding impairment losses
     (336,693 )     (55,502 )
Other than temporary impairment losses from other investments
     27,666       86,707  
Net (gain) loss from investments in marketable securities
     (141,922 )     141,226  
Realized loss on interest rate swap agreement
     -       198,400  
Net income (loss) attributable to non controlling interest
     104,820       (171,764 )
Deferred income tax expense (benefit)
     3,000       (280,000 )
Changes in assets and liabilities:
                
Other assets and other receivables
     56,646       (52,758 )
Accounts payable, accrued expenses and other liabilities
     (74,947 )     (104,467 )
Total adjustments
     320,636       665,309  
Net cash provided by operating activities
     459,918       47,104  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Purchases and improvements of properties
     (227,889 )     (170,196 )
Increase in notes and advances from related parties
     (8,705 )     (7,246 )
Distributions from other investments
     527,557       168,794  
Contributions to other investments
     (227,327 )     (174,713 )
Net proceeds from sales and redemptions of securities
     971,374       1,165,181  
Purchase of marketable securities
     (694,465 )     (1,099,976 )
Net cash provided by (used in) investing activities
     340,545       (118,156 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
                
Repayment of mortgages and notes payables
     (417,086 )     (2,710,884 )
Partial settlement of interest rate swap contract
     -       (198,400 )
Withdrawals from restricted cash
     -       2,379,947  
Distributions to minority partners
     -       (101,181 )
Purchase treasury stock
     (112,220 )     -  
Net cash used in financing activities
     (529,306 )     (630,518 )
                 
Net increase (decrease) in cash and cash equivalents
     271,157       (701,570 )
                 
Cash and cash equivalents at beginning of the period
     2,366,363       3,618,200  
                 
Cash and cash equivalents at end of the period
   $ 2,637,520     $ 2,916,630  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
                
Cash paid during the period for interest
   $ 657,000     $ 687,000  
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 consolidated 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 on Form 10-K for the year ended December 31, 2011.  The condensed consolidated balance sheet as of December 31, 2011 was derived from audited consolidated financial statements as of that date. The results of operations for the three and nine months ended September 30, 2012 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
Refer to the consolidated financial statements and footnotes thereto included in the HMG/Courtland Properties, Inc. Annual Report on Form 10-K for the year ended December 31, 2011 for recent accounting pronouncements.  The Company does not believe that any recently issued, but not yet effective accounting standards, if currently adopted, will have a material effect on the Company’s consolidated financial position, results of operations and cash flows.

 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”).
 
Summarized combined statements of income for Landing and Rawbar for the three and nine months ended September 30, 2012 and 2011 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
September 30, 2012
    
For the three months ended
September 30, 2011
    
For the nine
months ended
September 30, 2012
    
For the nine
months ended
September 30, 2011
  
                         
Revenues:
                        
Food and Beverage Sales
   $ 1,272,000     $ 1,219,000     $ 4,628,000     $ 4,515,000  
Marina dockage and related
     268,000       243,000       822,000       800,000  
Retail/mall rental and related
     174,000       158,000       483,000       452,000  
Total Revenues
     1,714,000       1,620,000       5,933,000       5,767,000  
                                 
Expenses:
                                
Cost of food and beverage sold
     357,000       344,000       1,324,000       1,266,000  
Labor and related costs
     284,000       255,000       911,000       845,000  
Entertainers
     50,000       49,000       149,000       145,000  
Other food and beverage related costs
     117,000       113,000       400,000       420,000  
Other operating costs
     40,000       71,000       123,000       141,000  
Repairs and maintenance
     106,000       76,000       296,000       290,000  
Insurance
     115,000       150,000       377,000       404,000  
Management fees
     64,000       93,000       201,000       253,000  
Utilities
     71,000       71,000       185,000       195,000  
Ground rent
     219,000       220,000       676,000       666,000  
Interest
     161,000       166,000       487,000       533,000  
Depreciation and amortization
     164,000       167,000       492,000       650,000  
Realized loss on interest rate swap
     -       -       -       198,000  
Total Expenses
     1,748,000       1,775,000       5,621,000       6,006,000  
Net (loss) income
   $ (34,000 )   $ (155,000 )   $ 312,000     $ (239,000 )
 
 
4
 
 
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.

Net realized and unrealized gain (loss) from investments in marketable securities for the three and nine months ended September 30, 2012 and 2011 is summarized below:

   
Three months ended
 September 30,
    
Nine months ended
 September 30,
  
Description
  
2012
    
2011
    
2012
    
2011
  
Net realized (loss) gain from sales of securities
   $ (12,000 )   $ 36,000     $ 55,000     $ 115,000  
Unrealized net gain (loss) in trading securities
     57,000       (209,000 )     87,000       (256,000 )
Total net gain (loss) from investments in marketable securities
   $ 45,000     $ (173,000 )   $ 142,000     $ (141,000 )

For the three and nine months ended September 30, 2012, net unrealized gains from trading securities were $57,000 and $87,000, respectively. This is compared to net unrealized losses of $209,000 and $256,000 for the three and nine months ended September 30, 2011, respectively.

For the three months ended September 30, 2012, net realized loss from sales of marketable securities of approximately $12,000 consisted of $35,000 of gross losses net of $23,000 of gross gains. For the nine months ended September 30, 2012 net realized gain from sales of marketable securities of approximately $55,000 consisted of $126,000 of gross gains net of $71,000 of gross losses.

For the three months ended September 30, 2011 net realized gain from sales of marketable securities of approximately $36,000 consisted of $65,000 of gross gains net of $29,000 of gross losses. For the nine months ended September 30, 2011 net realized gain from sales of marketable securities of approximately $115,000 consisted of $169,000 of gross gains net of $54,000 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 September 30, 2012, the Company’s portfolio of other investments had an aggregate carrying value of approximately $3.7 million.  As of September 30, 2012, the Company has committed to fund approximately $812,000 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 nine months ended September 30, 2012, the Company contributed a total of $227,000 in other investments.  These contributions include one new investment in a medical technology related company for $51,000 which was fully funded in January 2012 and follow on contributions totaling $176,000 towards funding commitments in various other existing investments. Cash distributions received from other investments for the nine months ended September 30, 2012 totaled approximately $528,000, including $274,000 from real estate funds, $234,000 from funds investing in diversified businesses and $20,000 from investments in technology related partnerships.
 
 
 
5
 
Net income from other investments for the three and nine months ended September 30, 2012 and 2011, is summarized below (excluding other than temporary impairment loss):
 
   
Three months ended September 30,
    
Nine months ended September 30,
  
Description
  
2012
    
2011
    
2012
    
2011
  
Partnerships owning diversified businesses
   $ 7,000     $ -     $ 38,000     $ 25,000  
Partnerships owning real estate and related investments
     -       -       255,000       -  
Partnerships owning technology related businesses
             1,000               1,000  
Income from investment in 49% owned affiliate (T.G.I.F. Texas, Inc.)
     13,000       9,000       44,000       30,000  
Total net  income from other investments (excluding other than temporary impairment losses)
   $ 20,000     $ 10,000     $ 337,000     $ 56,000  
 
The following tables present gross unrealized losses and fair values for those investments that were in an unrealized loss position as of September 30, 2012 and December 31, 2011, aggregated by investment category and the length of time that investments have been in a continuous loss position:

   
As of September 30, 2012
  
   
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
   $ 11,000     $ (13,000 )   $ 371,000     $ (67,000 )   $ 382,000     $ (80,000 )
Partnerships owning diversified businesses
     -       -       213,000       (37,000 )     213,000       (37,000 )
Partnerships owning real estate and related investments
     -       -       241,000       (51,000 )     241,000       (51,000 )
Total
   $ 11,000     $ (13,000 )   $ 825,000     $ (155,000 )   $ 836,000     $ (168,000 )

   
As of December 31, 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
   $ 327,000     $ (20,000 )   $ 47,000     $ (39,000 )   $ 374,000     $ (59,000 )
Partnerships owning diversified businesses
     -       -       228,000       (61,000 )     228,000       (61,000 )
Partnerships owning real estate and related investments
     -       -       256,000       (56,000 )     256,000       (56,000 )
Total
   $ 327,000     $ (20,000 )   $ 531,000     $ (156,000 )   $ 858,000     $ (176,000 )
 
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, the Company recorded a loss of approximately $28,000 from an investment in a partnership which operates and leases executive suites in Miami, Florida during the three and six months ended June 30, 2012. 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. In June 2011 the Company recognized an impairment loss of approximately $84,000 from this same investment. There were no OTTI impairment valuation adjustments for the three months ended September 30, 2012.
 
 
6
 

 6. 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 amount 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.

As of September 30, 2012 the fair value of this hedge was an unrealized loss of approximately $2,066,000, as compared to an unrealized loss of $1,975,000 as of December 31, 2011 which resulted in an unrealized loss of $91,000 (or $45,500, net of non-controlling interest) for the nine months ended September 30, 2012.  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:

Fair Values of Derivative Instruments:

     Liability Derivative  
      September 30, 2012  
 
  
   
Balance
Sheet
Location
  
Fair
Value
  
Balance
Sheet
Location
  
 
Fair
Value
  
Derivatives designated as hedging instruments:
                  
Interest rate swap contract
  
Liabilities
   $ 2,066,000  
Liabilities
   $ 1,975,000  
Total derivatives designated as hedging instruments under ASC Topic 815
  
 
   $ 2,066,000  
 
   $ 1,975,000  

The Effect of Derivative Instruments on the Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2012 and 2011:
 
The Effect of Derivative Instruments on the Statements of Comprehensive Income

Recognized in OCI on Derivative
                        
(Effective Portion)
                        
   
For the three
    
For the three Months
    
For the nine Months
    
For the nine Months
  
   
Months ended
    
ended
    
ended
    
ended
  
   
September 30, 2012
    
September 30, 2011
    
September 30, 2012
    
September 30, 2011
  
Interest rate swap contracts
   $ (3,500 )   $ (298,000 )   $ (45,500 )   $ (257,000 )
Total
   $ (3,500 )   $ (298,000 )   $ (45,500 )   $ (257,000 )

 
 
7
 
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
 
In accordance with ASC Topic 820, the Company measures cash equivalents, marketable securities, other investments and interest rate swap contract at fair value. Our cash equivalents, marketable securities and interest rate swap contract are classified within Level 1 or Level 2. This is because our cash equivalents, marketable securities and interest rate swap are valued using quoted market prices or alternative pricing sources and models utilizing observable market inputs. Our other investments are classified within Level 3 because they are valued using valuation models which use some inputs that are unobservable and supported by little or no market activity and are significant.
 
Assets and liabilities measured at fair value on a recurring basis are summarized below:

   
Fair value measurement at reporting date using
  
   
Total
    
Quoted Prices in Active
    
Significant Other
    
Significant
  
   
September 30,
    
Markets for Identical Assets
    
Observable Inputs
    
Unobservable Inputs
  
Description
  
2012
    
(Level 1)
    
(Level 2)
    
(Level 3)
  
Assets:
                        
Cash equivalents:
                        
Time deposits
   $ 54,000       -     $ 54,000       -  
Money market mutual funds
     1,512,000     $ 1,512,000       -       -  
Marketable securities:
                                
Corporate debt securities
     758,000       -       758,000       -  
Marketable equity securities
     1,146,000       1,146,000       -       -  
Total assets
   $ 3,470,000     $ 2,658,000     $ 812,000     $ -  
                                 
Liabilities:
                                
Interest rate swap contract
     2,066,000       -       2,066,000       -  
Total liabilities
   $ 2,066,000       -     $ 2,066,000       -  
 
   
Fair value measurement at reporting date using
  
   
Total
    
Quoted Prices in Active
    
Significant Other
    
Significant
  
   
December 31,
    
Markets for Identical Assets
    
Observable Inputs
    
Unobservable Inputs
  
Description
  
2011
    
(Level 1)
    
(Level 2)
    
(Level 3)
  
Assets:
                        
Cash equivalents:
                        
Time deposits
   $ 54,000       -     $ 54,000       -  
Money market mutual funds
     1,537,000     $ 1,537,000       -       -  
Marketable securities:
                                
Corporate debt securities
     885,000       -       885,000       -  
Marketable equity securities
     1,134,000       1,134,000       -       -  
Total assets
   $ 3,610,000     $ 2,671,000     $ 939,000     $ -  
                                 
Liabilities:
                                
Interest rate swap contract
     1,975,000       -       1,975,000       -  
Total liabilities
   $ 1,975,000       -     $ 1,975,000       -  

 
8
 

Assets measured at fair value on a nonrecurring basis are summarized below:
 
   
Fair value measurement at reporting date using
    
Total losses
  
   
Total
    
Quoted Prices in Active
    
Significant Other
    
Significant
    
for the three and nine
  
   
September 30,
    
Markets for Identical Assets
    
Observable Inputs
    
Unobservable Inputs
    
months ended
  
Description
  
2012
    
(Level 1)
    
(Level 2) (a)
    
(Level 3) (b)
    
9/30/2012
  
Assets:
                              
Other investments by investment focus:
                              
Technology & Communication
   $ 518,000     $ -     $ 518,000     $ -     $ -  
Diversified businesses
     1,409,000       -       1,409,000       -       -  
Real estate and related
     1,464,000       -       511,000       953,000       (28,000 )
Other
     300,000       -       —       300,000       -  
    $ 3,691,000     $ -     $ 2,438,000     $ 1,253,000     $ (28,000 )
                                         
Goodwill (Bayshore)
     5,629,000                       5,629,000          
Total assets
   $ 9,320,000     $ -     $ 2,438,000     $ 6,882,000     $ (28,000 )
 
   
Fair value measurement at reporting date using
    
Total
  
   
Total
    
Quoted Prices in Active
    
Significant Other
    
Significant
    
losses for
  
   
December 31,
    
Markets for Identical Assets
    
Observable Inputs
    
Unobservable Inputs
    
year ended
  
Description
  
2011
    
(Level 1)
    
(Level 2) (a)
    
(Level 3) (b)
    
12/31/2011
  
Assets:
                              
Other investments by investment focus:
                              
Technology & Communication
   $ 478,000     $ -     $ 478,000     $ -     $ (2,000 )
Diversified businesses
     1,445,000       -       1,445,000       -       -  
Real estate and related
     1,523,000       -       542,000       981,000       (84,000 )
Other
     300,000       -       —       300,000       -  
    $ 3,746,000     $ -     $ 2,465,000     $ 1,281,000     $ (86,000 )
                                         
Goodwill (Bayshore)
     5,629,000               -       5,629,000          
Total assets
   $ 9,375,000     $ -     $ 2,465,000     $ 6,910,000     $ (86,000 )

(a)  
Other investments measured at fair value on a non-recurring basis 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 September 30, 2012, 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. During the nine months ended September 30, 2012, the Company made contributions totaling $227,000 in this type of investment.  These contributions include one new investment in a medical technology related company for $51,000 which was fully funded in January 2012 and follow on contributions totaling $176,000 towards funding commitments in various other existing investments. As of September 30, 2012, the amount of the Company’s unfunded commitments related to the aforementioned investments is approximately $812,000.
 
 
9
 
 
(b)  
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 $953,000 include one investment in a commercial building located near the Company’s offices purchased in 2005 with a carrying value as of September 30, 2012 of $724,000.  These investments are 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. 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 nine months ended September 30, 2012:
 
   
Level 3 Investments:
  
Balance at January 1, 2012
   $ 1,281,000  
Additional investment in limited partnership
     -  
Other than temporary impairment loss
     (28,000 )
Transfers from Level 2
     -  
Balance at September 30, 2012
   $ 1,253,000  
 
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 related 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 each individually do not meet the criteria as a reportable segment.
 
 
10
 
 
   
Three months ended
    
Nine months ended
  
   
September 30,
    
September 30,
  
   
2012
    
2011
    
2012
    
2011
  
Net Revenues:
                        
Real estate and marina rentals
   $ 908,000     $ 860,000     $ 2,702,000     $ 2,603,000  
Food and beverage sales
     1,272,000       1,219,000       4,628,000       4,515,000  
Spa revenues
     110,000       211,000       350,000       421,000  
Total net revenues
   $ 2,290,000     $ 2,290,000     $ 7,680,000     $ 7,539,000  
                                 
Income (loss) before income taxes:
                                
Real estate and marina rentals
   $ 267,000     $ 235,000     $ 829,000     $ 729,000  
Food and beverage sales
     (26,000 )     (42,000 )     98,000       72,000  
Other investments and related income
     (315,000 )     (653,000 )     (785,000 )     (1,699,000 )
Total net (loss) income attributable to the Company before income taxes
   $ (74,000 )   $ (460,000 )   $ 142,000     $ (898,000 )
 
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. 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, 2008, 2009, 2010 and 2011, the tax years which remain subject to examination by major tax jurisdictions as of September 30, 2012.
     
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 general and administrative expense.

10. COMMON STOCK
During September 2012, we repurchased 18,100 shares of our common stock under a stock repurchase program approved by our Board of Directors in November 2008.  The cost of the shares was $112,200.  These shares plus 13,529 previously-acquired shares - representing the entire balance of unretired treasury shares - were retired during the three months ended September 30, 2012.  The par value of the retired shares was charged to common stock, with the excess of the purchase price over par value charged to additional paid-in capital.

 
11
 
 
Item 2.          Management's Discussion and Analysis of
                      Financial Condition and Results of Operations

RESULTS OF OPERATIONS
For the three months ended September 30, 2012 and 2011, the Company reported net losses of approximately $94,000 ($.09 per share) and $230,000 ($.23 per share), respectively.  For the nine months ended September 30, 2012 and 2011, the Company reported net income of approximately $139,000 ($.14 per share) and a net loss of $618,000 ($.61 per share), respectively.
 
 
Total revenues for the nine months ended September 30, 2012 as compared with the same period in 2011, increased by approximately $142,000 or 2%.  Total revenues for the three months ended September 30, 2012 as compared with the same period in 2011 remained essentially unchanged.

Total expenses for the nine months ended September 30, 2012, as compared with the same period in 2011, decreased by approximately $401,000 or 5%.  Total expenses for the three months ended September 30, 2012, as compared with the same period in 2011, decreased by approximately $210,000 or 8%.

REVENUES
Rentals and related revenues for the three and nine months ended September 30, 2012 as compared with the same period in 2011 increased by $26,000 (5%) and $60,000 (4%), respectively.  This was primarily as a result of increased rental income from tenants at the Monty’s Property and also due to annual inflation adjustment in rent due from the tenant at Grove Isle.

Restaurant operations:
Summarized statements of income for the Company’s Monty’s restaurant for the three and nine months ended September 30, 2012 and 2011 are presented below:

   
For the three months
    
For the nine months
  
   
ended September 30,
    
ended September 30,
  
   
2012
    
2011
    
2012
    
2011
  
Revenues:
                        
Food and Beverage Sales
   $ 1,272,000     $ 1,219,000     $ 4,628,000     $ 4,515,000  
                                 
Expenses:
                                
Cost of food and beverage sold
     357,000       344,000       1,324,000       1,266,000  
Labor and related costs
     284,000       255,000       911,000       845,000  
Entertainers
     50,000       49,000       149,000       145,000  
Other food and beverage direct costs
     59,000       57,000       214,000       188,000  
Other operating costs
     58,000       56,000       186,000       232,000  
Repairs and maintenance
     48,000       42,000       167,000       122,000  
Insurance
     72,000       83,000       231,000       240,000  
Management and accounting fees
     35,000       48,000       105,000       112,000  
Utilities
     57,000       60,000       170,000       188,000  
Rent (as allocated)
     134,000       129,000       468,000       457,000  
Total Expenses
     1,154,000       1,123,000       3,925,000       3,795,000  
                                 
Income before depreciation and non controlling interest
   $ 118,000     $ 96,000     $ 703,000     $ 720,000  

 
12
 
 
Amounts above are presented as a percentage of sales below:
 
   
For the three months
ended September 30,
    
For the nine months
ended September 30,
  
   
2012
    
2011
    
2012
    
2011
  
Revenues:
                        
Food and Beverage Sales
     100 %     100 %     100 %     100 %
                                 
Expenses:
                                
Cost of food and beverage sold
     28 %     28 %     29 %     28 %
Labor and related costs
     22 %     21 %     20 %     19 %
Entertainers
     4 %     4 %     3 %     3 %
Other food and beverage direct costs
     5 %     5 %     4 %     4 %
Other operating costs
     5 %     5 %     4 %     5 %
Repairs and maintenance
     4 %     3 %     4 %     3 %
Insurance
     6 %     7 %     5 %     5 %
Management and accounting fees
     3 %     4 %     2 %     3 %
Utilities
     4 %     4 %     4 %     4 %
Rent (as allocated)
     10 %     11 %     10 %     10 %
Total Expenses
     91 %     92 %     85 %     84 %
Income before depreciation and non-controlling interest
     9 %     8 %     15 %     16 %

For the nine months ended September 30, 2012 as compared with the same period in 2011, restaurant sales increased by approximately $113,000 (2%), with food sales increasing by $95,000 (3%) and beverage sales increasing $18,000 (1%).

For the three months ended September 30, 2012 as compared with the same period in 2011, restaurant sales increased by $53,000 (4%), with food sales increasing by $39,000 (6%) and beverage sales increasing $14,000 (2%).

For the three and nine months ended September 30, 2012 as compared with the same periods in 2011, total restaurant expenses increased by $31,000 (3%) and $130,000 (3%), respectively.  This was primarily due to higher food costs and increased labor costs.
 
Marina operations:
Summarized and combined statements of income for marina operations for the three and nine months ended September 30, 2012 and 2011 (The Company owns 50% of the Monty’s marina and 95% of the Grove Isle marina) are presented below:
 
   
For the three months
    
For the nine months
  
   
ended September 30,
    
ended September 30,
  
   
2012
    
2011
    
2012
    
2011
  
Marina Revenues:
                        
Monty's dockage fees and related income
   $ 282,000     $ 259,000     $ 861,000     $ 850,000  
Grove Isle marina slip owners dues and dockage fees
     126,000       126,000       378,000       350,000  
Total marina revenues
     408,000       385,000       1,239,000       1,200,000  
                                 
    Marina Expenses:
                                
Labor and related costs
     61,000       70,000       191,000       201,000  
Insurance
     22,000       24,000       69,000       67,000  
Management fees
     18,000       17,000       54,000       54,000  
Utilities, net of tenant reimbursement
     12,000       4,000       (9,000 )     (14,000 )
Rent and bay bottom lease expense
     63,000       49,000       173,000       159,000  
Repairs and maintenance
     29,000       26,000       86,000       121,000  
Other
     19,000       21,000       77,000       68,000  
Total marina expenses
     224,000       211,000       641,000       656,000  
                                 
Income before depreciation and non controlling interest
   $ 184,000     $ 174,000     $ 598,000     $ 544,000  
 
 
13
 
 
Total marina revenues for the three and nine months ended September 30, 2012 as compared to the same periods in 2011 increased by $23,000 (6%) and $39,000 (3%).  This was primarily due to a rate increased in the Grove Isle Marina slip owner’s dues.

Total marina expenses for the three months ended September 30, 2012 as compared to the same period in 2011 increased by $13,000 (6%), primarily due to increased rent expense.  Total marina expenses for the nine months ended September 30, 2012 as compared to the same period in 2011 decreased by $15,000 (2%), primarily due to lower repairs and maintenance expense.

Spa operations:
Below are summarized statements of income for Grove Spa operations for the three and nine months ended September 30, 2012 and 2011.  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 September 30, 2012
    
Three months ended September 30, 2011
    
Nine months ended September 30, 2012
    
Nine months ended September 30, 2011
  
Revenues:
                        
Services provided
   $ 96,000     $ 196,000     $ 296,000     $ 367,000  
Membership and other
     15,000       16,000       54,000       54,000  
Total spa revenues
     111,000       212,000       350,000       421,000  
Expenses:
                                
Cost of sales (commissions and other)
     19,000       33,000       63,000       67,000  
Salaries, wages and related
     38,000       40,000       115,000       105,000  
Other operating expenses
     32,000       119,000       144,000       209,000  
Management and administrative fees
     6,000       11,000       14,000       23,000  
Other non-operating expenses
     1,000       2,000       10,000       11,000  
Total Expenses
     96,000       205,000       346,000       415,000  
                                 
Income (loss) before interest, depreciation and non-controlling interest
   $ 15,000     $ 7,000     $ 4,000     $ 6,000  

Spa revenues for the three and nine months ended September 30, 2012 as compared with the same periods in 2011 decreased by $101,000 (48%) and $70,000 (17%), respectively.  Spa expenses for the three and nine months ended September 30, 2012 as compared with the same periods in 2011 decreased by $109,000 (53%) and $68,000 (16%), respectively.  These decreases in were primarily due to the termination of a high discount sales promotional program which had been in place for almost a year.

Net realized and unrealized gain (loss) from investments in marketable securities:
Net realized and unrealized gain from investments in marketable securities for the three and nine months ended September 30, 2012 was approximately $45,000 and $142,000, respectively. This is as compared to net realized and unrealized loss from investments in marketable securities for the three and nine months ended September 30, 2011 of approximately $173,000 and $141,000, respectively.  For further details refer to Note 4 to Condensed Consolidated Financial Statements (unaudited).

Net income from other investments:
Net income from other investments for the three and nine months ended September 30, 2012 was approximately $20,000 and $337,000, respectively.  This is as compared to net income from other investments for the three and nine months ended September 30, 2011 of $10,000 and $56,000, respectively.  For further details refer to Note 5 to Condensed Consolidated Financial Statements (unaudited).

Realized loss from interest rate swap contract:
In conjunction with amendment of the Bayshore bank loan in March 2011 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).  As a result, the Company reclassified a previously unrealized loss of $198,400 from accumulated other comprehensive income to realized loss on interest rate swap contract within the condensed consolidated statements of comprehensive income for the three months ended March 31, 2011. There was no realized loss from the interest rate swap contract for the three and nine months ended September 30, 2012.
 
 
14
 

Interest, dividend and other income:
Interest, dividend and other income for the three and nine months ended September 30, 2012 was approximately $43,000 and $112,000, respectively.  This is as compared to income of approximately $34,000 and $160,000 for the three and nine months ended September 30, 2011.  This decrease of $48,000 (30%) for the nine months ended September 30, 2012 was primarily due to a decrease in service related income from the Company’s subsidiary Courtland Houston.

EXPENSES
Expenses for rental and other properties for the three and nine months ended September 30, 2012 were $179,000 and $479,000, respectively.  This is as compared to the same expenses of approximately $212,000 and $560,000 for the three and nine months ended September 30, 2011. The decreases in the three and nine month comparable periods of $33,000 (15%) and $81,000 (14%), respectively was due to decreased expenses of the Company’s Monty’s real estate operations, including decreased repairs, maintenance and insurance expense.

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 nine months ended September 30, 2012 compared to the same periods in 2011 decreased by $14,000 (6%) and $186,000 (22%), respectively. The decrease in the nine month comparable periods was primarily due to the non-recurring amortization expense of loan costs associated with the Monty’s loan modification completed in March 2011.

General and administrative expense for the three and nine months ended September 30, 2012 compared to the same periods in 2011 decreased by approximately $33,000 (29%) and $16,000 (6%), respectively. This was primarily due to a decrease in non-employee stock compensation expense.
 
Professional fees and expenses for the three and nine months ended September 30, 2012 compared to the same periods in 2011 decreased by $62,000 (57%) and $133,000 (44%), respectively.  These changes were primarily due to lower 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 $3.2 million in 2012 and contributions committed to other investments of approximately $812,000 due upon demand.  The funds necessary to meet these obligations are expected to come from the proceeds from the sales of properties or investments, bank loans, refinancing of existing bank loans, distributions from investments and available cash.

In June 2012 the Company renewed and modified the existing bank mortgage note payable on the Grove Isle property with the same lender.  The renewal and modification extends the maturity date to June 30, 2016 and calls for the same monthly principal payments of $10,000 plus interest calculated at the one-month LIBOR rate plus 3% with an interest rate floor 4.5%.

Included in the maturing debt obligations for 2012 is a note payable to the Company’s 49% owned affiliate, T.G.I.F. Texas, Inc. (“TGIF”) of approximately $3.1 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.

 
15
 

MATERIAL COMPONENTS OF CASH FLOWS
For the nine months ended September 30, 2012, net cash provided by operating activities was approximately $460,000. This was primarily from the cash flow provided by the Company’s rental operations.
 
For the nine months ended September 30, 2012, net cash provided by investing activities was approximately $341,000. This consisted primarily of approximately $971,000 in net proceeds from sales of marketable securities and distributions from other investment of $528,000.  These sources of funds were partially offset by purchases of marketable securities of $694,000, contributions to other investments of $227,000 and additions to fixed assets of $228,000.
 
For the nine months ended September 30, 2012, net cash used in financing activities was approximately $529,000 consisting of loan principal repayments of $417,000 and purchase of treasury stock of $112,000.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk
Not applicable

Item 4.  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.
 
PART II.   OTHER INFORMATION
Item 1.     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 consolidated financial statements.

 
16
 
 
Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds:
(a)  
The following table presents information regarding the shares of our common stock we purchased during each of the nine calendar months ended September 30, 2012:
 
 
 
Period
  
 
 
Total Number of Shares Purchased
    
 
 
Average Price Paid per Share
    
Total Number of Shares Purchased as Part of Publicly Announced Plan (1)
    
Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plan(1)
  
January 1-31 2012
    
-
      
-
      
-
     $
239,612
  
Feb. 1 – 29 2012
    
-
      
-
      
-
     $
239,612
  
March 1–31  2012
    
-
      
-
      
-
     $
239,612
  
April 1 – 30  2012
    
-
      
-
      
-
     $
239,612
  
May 1 – 31  2012
    
-
      
-
      
-
     $
239,612
  
June 1 – 30  2012
      
-
      
-
      
-
   $
239,612
  
July 1 – 31  2012
      
-
      
-
      
-
   $
239,612
  
August 1–31 2012
      
-
      
-
      
-
   $
239,612
  
Sept. 1 –30 2012
    
18,100
 
     $
6.20
 
      
-
   $
127,392
  

1.
We have one program, which was announced in November 2008 after approval by our Board of Directors, to repurchase up to $300,000 of outstanding shares of our common stock from time to time in the open market at prevailing market prices or in privately negotiated transactions.  All of the shares we purchased during these periods were purchased on the open market pursuant to this program.  The repurchased shares of common stock have been retired and will not be reissued.

Item 3. Defaults Upon Senior Securities: None.

Item 4. Mine Safety Disclosures:  Not applicable
 
Item 5. Other Information: None
 
Item 6.     Exhibits:
 
(a)  Certifications pursuant to 18 USC Section 1350-Sarbanes-Oxley Act of 2002. Filed herewith.

 
17
 
 
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
  HMG/COURTLAND PROPERTIES, INC.  
       
Dated:  November 14, 2012 
 
 /s/ Larry Rothstein  
    President, Treasurer and Secretary  
    Principal Financial Officer  

Dated:  November 14, 2012 
 
 /s/ Carlos Camarotti    
    Vice President- Finance and Controller  
    Principal Accounting Officer  
 
 
18