UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly period ended March 31, 2005
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
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to
Commission file number 1-7865
HMG/COURTLAND PROPERTIES, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 59-1914299
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1870 S. Bayshore Drive, Coconut Grove, Florida 33133
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(Address of principal executive offices) (Zip Code)
305-854-6803
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by
Sections 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
1,089,135 Common shares were outstanding as of March 31, 2005.
HMG/COURTLAND PROPERTIES, INC.
Index
PAGE
NUMBER
PART I. Financial Information ------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
March 31, 2005 (Unaudited) and December 31, 2004.....................................................1
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 2005 and 2004 (Unaudited)...............................................2
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2005 and 2004 (Unaudited)...............................................3
Notes to Condensed Consolidated Financial Statements (Unaudited).....................................4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.....................................................7
Item 3. Controls and Procedures.....................................................................9
PART II. Other Information
Item 1. Legal Proceedings . . . ..................................................................10
Item 2. Changes in Securities and Small Business Issuer Purchases of Equity Securities............10
Item 3. Defaults Upon Senior Securities . . . ................................................... 10
Item 4. Submission of Matters to a Vote of Security Holders ..................................... 10
Item 5. Other Information ....................................................................... 10
Item 6. Exhibits and Reports on Form 8-K......................................................... 10
Signatures.......................................................................................................11
Cautionary Statement. This Form 10-QSB contains certain statements relating to
future results of the Company that are considered "forward-looking statements"
within the meaning of the Private Litigation Reform Act of 1995. Actual results
may differ materially from those expressed or implied as a result of certain
risks and uncertainties, including, but not limited to, changes in political and
economic conditions; interest rate fluctuation; competitive pricing pressures
within the Company's market; equity and fixed income market fluctuation;
technological change; changes in law; changes in fiscal, monetary, regulatory
and tax policies; monetary fluctuations as well as other risks and uncertainties
detailed elsewhere in this Form 10-QSB or from time-to-time in the filings of
the Company with the Securities and Exchange Commission. Such forward-looking
statements speak only as of the date on which such statements are made, and the
Company undertakes no obligation to update any forward-looking statement to
reflect events or circumstances after the date on which such statement is made
or to reflect the occurrence of unanticipated events.
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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March 31, December 31,
2005 2004
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ASSETS (UNAUDITED)
Investment properties, net of accumulated depreciation:
Commercial properties $ 4,672,470 $ 4,721,261
Commercial properties- construction in progress 286,489 210,965
Hotel and club facility 3,731,393 3,827,201
Hotel and club facility-Spa improvements 2,124,089 1,489,702
Marina properties 2,465,570 2,515,265
Land held for development 589,419 589,419
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Total investment properties, net 13,869,430 13,353,813
Cash and cash equivalents 2,837,821 3,410,408
Investments in marketable securities 7,433,105 7,132,542
Other investments 4,967,872 5,190,543
Investment in affiliate 3,022,278 2,993,649
Loans, notes and other receivables 2,029,258 2,027,119
Notes and advances due from related parties 877,504 973,242
Deferred taxes 413,000 28,000
Goodwill 7,728,627 7,728,627
Other assets 672,437 536,706
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TOTAL ASSETS $ 43,851,332 $ 43,374,649
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LIABILITIES
Mortgages and notes payable $ 18,448,359 $ 18,483,069
Accounts payable and accrued expenses 1,057,259 885,132
Margin payable to broker 1,581,426 1,448,605
Income taxes payable 250,000 250,000
Interest rate swap contract payable 286,000 579,000
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TOTAL LIABILITIES 21,623,044 21,645,806
Minority interests 3,048,537 2,837,944
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STOCKHOLDERS' EQUITY
Preferred stock, $1 par value; 2,000,000 shares
authorized; none issued -- --
Excess common stock, $1 par value; 500,000 shares authorized;
none issued -- --
Common stock, $1 par value; 1,500,000 shares authorized;
1,315,635 shares issued and outstanding 1,315,635 1,315,635
Additional paid-in capital 26,571,972 26,571,972
Undistributed gains from sales of properties, net of losses 41,735,070 41,735,070
Undistributed losses from operations (48,382,062) (48,524,414)
Accumulated other comprehensive loss (143,000) (289,500)
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21,097,615 20,808,763
Less: Treasury stock, at cost (226,500 shares) (1,659,114) (1,659,114)
Notes receivable from exercise of stock options (258,750) (258,750)
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TOTAL STOCKHOLDERS' EQUITY 19,179,751 18,890,899
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 43,851,332 $ 43,374,649
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See notes to the condensed consolidated financial statements
(1)
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
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Three months ended March 31,
REVENUES 2005 2004
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Real estate rentals and related revenue $ 382,955 $ 428,488
Food & beverage sales 1,564,448 --
Marina revenues 394,223 116,678
Spa revenues 61,124 --
Net gain from investments in marketable securities 7,780 114,249
Net loss from other investments (83,631) (47,899)
Interest, dividend and other income 142,419 79,041
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Total 2,469,318 690,557
EXPENSES
Operating expenses:
Rental and other properties 219,751 123,630
Food and beverage cost of sales 451,758 --
Food and beverage labor and related costs 296,718 --
Food and beverage other operating costs 477,062 --
Marina expenses 212,195 112,114
Spa expenses 51,767 --
Depreciation and amortization 227,049 144,325
Adviser's base fee 225,000 225,000
General and administrative 71,802 78,065
Professional fees and expenses 58,418 29,183
Directors' fees and expenses 16,732 16,953
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Total operating expenses 2,308,252 729,270
Interest expense 342,694 112,720
Minority partners' interests in operating gain (loss) of
consolidated entities 61,020 (3,355)
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Total expenses 2,711,966 838,635
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Loss before sales of properties and income taxes (242,648) (148,078)
Gain on sales of properties, net -- 47,606
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Loss before income taxes (242,648) (100,472)
(Benefit from) provision for income taxes (385,000) 62,000
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Net income (loss) $ 142,352 ($ 162,472)
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Other comprehensive income:
Unrealized gain on interest rate swap agreement 146,500 --
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Total other comprehensive income 146,500
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Comprehensive income (loss) $ 288,852 ($ 162,472)
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Net Income (Loss) Per Common Share:
Basic and diluted $ 0.13 ($ 0.15)
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Weighted average common shares outstanding 1,089,135 1,089,135
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See notes to the condensed consolidated financial statements
(2)
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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Three months ended March 31,
2005 2004
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 142,352 ($ 162,472)
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Depreciation and amortization 227,049 144,325
Net gain from other investments 92,856 47,899
Gain on sales of properties, net -- (47,606)
Net gain from investments in marketable securities (7,780) (114,249)
Minority partners' interest in operating (losses) gains 61,020 (3,355)
Deferred income tax (benefit) expense (385,000) 62,000
Changes in assets and liabilities:
Increase in other assets and other recievables (154,121) (74,208)
Net proceeds from sales and redemptions of securities 157,068 817,106
Increased investments in marketable securities (449,852) (1,659,096)
Increase in accounts payable and accrued expenses 172,127 93,120
Increase in margin payable to brokers and other liabilities 132,821 --
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Total adjustments (153,812) (734,064)
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Net cash used in operating activities (11,460) (896,536)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Improvements of properties (714,246) --
Net proceeds from disposals of properties -- 69,752
Decrease in notes and advances from related parties 95,738 16,019
Additions in mortgage loans and notes receivables (100,000) --
Collections of mortgage loans and notes receivables 87,831 97,998
Distributions from other investments 235,451 442,294
Contributions to other investments (131,192) (290,000)
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Net cash (used in) provided by investing activities (526,418) 336,063
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CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of mortgages and notes payables (34,709) (34,428)
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Net cash used in financing activities (34,709) (34,428)
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Net increase in cash and cash equivalents (572,587) (594,901)
Cash and cash equivalents at beginning of the period 3,410,408 2,624,643
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Cash and cash equivalents at end of the period $ 2,837,821 $ 2,029,742
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 343,000 $ 113,000
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See notes to the condensed consolidated financial statements
(3)
HMG/COURTLAND PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of the Company, the accompanying unaudited condensed consolidated
financial statements prepared in accordance with instructions for Form 10-QSB,
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, 2004. The
balance sheet as of December 31, 2004 was derived from audited financial
statements as of that date. The results of operations for the three months ended
March 31, 2005 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. SPA AT GROVE ISLE BEGINS OPERATIONS
As previously reported, in September 2004 the Company entered into an agreement
with Noble House Associates, LLC ("NHA"), an affiliate of the Company's tenant
at its Grove Isle property (Westgroup Grove Isle Associates, Ltd., or
"Westgroup"), for the purpose of developing and operating on the Grove Isle
property a commercial project consisting of a first class spa, together with
related improvements and amenities (the "Spa Property"). The Spa Property
construction has been completed and spa operations began in the first quarter
2005.
3. UNAUDITED PRO-FORM RESULTS OF OPERATIONS FOR ACQUISITION OF RESTAURANT,
MARINA AND OFFICE/RETAIL PROPERTY, COCONUT GROVE, FLORIDA
As previously reported On August 20, 2004, the Company, through two 50%-owned
entities, Bayshore Landing, LLC ("Landing") and Bayshore Rawbar, LLC ("Rawbar"),
(collectively, "Bayshore") purchased a restaurant, office/retail and marina
property located in Coconut Grove (Miami), Florida known as Monty's (the
"Monty's Property") for approximately $13.9 million. The following are the
Company's results of operations for the three months ended March 31, 2005 with
comparative results of operations for the three months ended March 31, 2004, as
if the acquisition of the Monty's property had taken place at the beginning of
the years.
2005 2004
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Revenues $2,469,000 $2,509,000
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Net income $142,000 $80,000
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Earnings per share $.13 $.07
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(4)
HMG/COURTLAND PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
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 gain (loss) from investments in marketable securities for the three months
ended March 31, 2005 and 2004 is summarized below:
Three Months Ended March 31,
-----------------------------------
Description 2005 2004
----------------------------------------- ------------------- -----------
Net realized gain (loss) from sales of $ 42,000 ($ 8,000)
securities
Unrealized net (loss) gain in trading
securities (34,000) 122,000
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Total net gain from investments in
marketable securities $ 8,000 $ 114,000
========= =========
For the three months ended March 31, 2005 net realized gain from sales of
marketable securities of approximately $42,000 consisted of approximately
$49,000 of gross gains net of $7,000 of gross losses. For the three months ended
March 31, 2004 net realized loss from sales of marketable securities of
approximately $8,000 consisted of approximately $79,000 of gross losses net of
$71,000 of gross gains.
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)
HMG/COURTLAND PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
5. OTHER INVESTMENTS
As of March 31, 2005, the Company has committed to invest approximately $10.5
million in other investments primarily in private capital funds, of which
approximately $9.6 million has been funded. The carrying value of other
investments (which reflects distributions and valuation adjustments) is
approximately $5.0 million. During the three months ended March 31, 2005 the
Company has made follow-on contributions to four existing investments of
approximately $122,000 and has received approximately $232,000 in distributions
from other investments.
Net (loss) gain from other investments for the three months ended March 31, 2005
and 2004, is summarized below:
2005 2004
------------------------
Others, net ($133,000) ($ 3,000)
Real estate development and operation -- 38,000
Venture capital fund - technology 20,000 (104,000)
Income from investment in 49% owned
affiliate (T.G.I.F. Texas, Inc.) 29,000 21,000
------------------------
Total net (loss) gain from other investments ($ 84,000) ($ 48,000)
========================
In March 2005, the Company reduced the remaining carrying value (approximately
$147,000) of one of its investments in a privately held company in the personal
cosmetic industry. This investment experienced a decline in demand for its
product which is believed to result in an other-than-temporary decline in the
value of the investment. This write down is included in others, net in the table
above.
In March 2004, the Company reduced the carrying value of one of its investments
in a venture capital fund by $104,000. This fund experienced a decline in the
market value of its holdings in publicly-traded companies having a concentration
in technology and communications.
(6)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
---------------------
The Company reported net income of approximately $142,000 (or $.13 per share)
for the three months ended March 31, 2005. This is as compared with a net loss
of approximately $162,000 (or $.15 per share) for the three months ended March
31, 2004.
As discussed further below, total revenues for the three months ended March 31,
2005 as compared with the same period in 2004, increased by approximately $1.8
million or 258%. Total expenses for the three months ended March 31, 2005, as
compared with the same periods in 2004, increased by approximately $1.9 million
or 223%. There were no sales of properties for the three months ended March 31,
2005 as compared with gains of approximately $48,000 for the three months ended
March 31, 2004.
REVENUES
Rentals and related revenues for the three months ended March 31, 2005 as
compared with the same comparable periods in 2004 decreased by $46,000 (11%).
This decrease was primarily due to decreased rental revenue of approximately
$89,000 as a result of the sale in April 2004 of the Fashion Square shopping
center located near Jacksonville, Florida. This decrease in rental revenue was
partially offset by increased rental revenue of approximately $31,000 from the
retail space of the Monty's property in Miami, Florida which was acquired in
August 2004.
Food and beverage sales of $1.6 million for the three months ended March 31,
2005 consists of sales from Bayshore Rawbar, LLC, which is the restaurant
portion of the Monty's property acquired in August 2004.
Marina revenues for the three months ended March 31, 2005 as compared with the
same comparable periods in 2004 increased by $278,000 (or 238%). This increase
was almost entirely from transient rental dockage fees from the marina at the
Monty's property acquired in August 2004.
Spa revenues for the three months ended March 31, 2005 of approximately $61,000
were from the newly constructed spa at the Grove Isle property which began
operations in the first quarter 2005.
Net gain (loss) from investments in marketable securities for the three months
ended March 31 2005 as a gain of approximately $8,000, as compared with a net
gain from investments in marketable securities of approximately $114,000 for the
same comparable period in 2004. For further details refer to Note 4 to Condensed
Consolidated Financial Statements (unaudited).
Net loss from other investments for the three months ended March 31, 2005 was
approximately $84,000. This is as compared with a net loss of approximately
$48,000 for the same comparable period in 2004. The increase loss was primarily
from the write down of one investment for $147,000. For further details refer to
Note 5 to Condensed Consolidated Financial Statements (unaudited).
(7)
Management's Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
Interest and dividend income for the three months ended March 31, 2005 was
approximately $142,000 as compared with approximately $79,000, for the same
comparable period in 2004. The increase from last year of $63,000 (or 80%)
consists primarily of approximately $20,000 interest income from notes
receivable (Key West restaurant operator) and approximately $29,000 increased
interest and dividends from investments in bonds, other fixed income securities
and equity securities which pay dividends.
EXPENSES
Expenses for rental and other properties for the three months ended March 31,
2005 increased by approximately $96,000 (or 78%) as compared to that for the
three months ended March 31, 2004. This increase was primarily due to operating
expenses relating to the rental operations of the Monty's property acquired in
August 2004.
Food and beverage cost of sales, labor and related costs and other operating
costs are all related to the Monty's property acquired in August 2004.
Marina expenses for the three months ended March 31, 2005 increased by
approximately $100,000 (or 89%), as compared with the same comparable period in
2004. This was primarily due to increased operating expenses of the marina
portion of Monty's property acquired in August 2004.
Spa expenses for the three months ended March 31, 2005 were approximately
$52,000 and all related to the opening of the spa at Grove Isle in the first
quarter of 2005.
Depreciation expense for the three months ended March 31, 2005 increase by
approximately $83,000 (or 57%) primarily as the result of acquisition of
property in August 2004.
Professional fees expense for the three months ended March 31, 2005 increased by
approximately $29,000 (or 100%) as compared with the same comparable period in
2004. This increase was primarily the result of an increase in professional
services (accounting and legal) relating to the aforementioned acquisitions and
improvements of properties.
Interest expense for the three months ended March 31, 2005 increased by
approximately $230,000 (or 204%), as compared with the same comparable period in
2004. This increase was primarily from new debt related to the acquisition of
the Monty's property in August 2004.
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.
(8)
Management's Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
LIQUIDITY, CAPITAL EXPENDITURE REQUIREMENTS AND CAPITAL RESOURCES
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The Company's material commitments in 2005 primarily consist of maturities of
debt obligations of approximately $3.9 million and commitments to fund private
capital investments of approximately $872,000 due upon demand. The funds
necessary to meet these obligations are expected to be available from the
proceeds of sales of properties or investments, refinancing, distributions from
investments and available cash. The majority of maturing debt obligations for
2005 is a note payable to the Company's 49% owned affiliate, T.G.I.F. Texas,
Inc. ("TGIF") of approximately $3.7 million. This amount is due on demand. It is
expected that this obligation when due to TGIF would be paid with funds
available from distributions from its investment in TGIF and from available
cash.
MATERIAL COMPONENTS OF CASH FLOWS
---------------------------------
For the three months ended March 31, 2005, net cash used by operating activities
was approximately $11,000. Included in this amount are increased investments in
marketable securities of approximately $450,000 and increased other assets and
other receivables of $154,000. These uses of funds were partially offset by
proceeds from sales of marketable securities of $157,000, increased accounts
payable and accrued expenses of $172,000 and increased in margin payable to
brokers and other liabilities.
For the three months ended March 31, 2005, net cash used in investing activities
was approximately $526,000. This was comprised primarily of improvements of
properties of $714,000, additions to mortgage loans and notes receivable of
$100,000 and contributions to other investments of $131,000. These uses of funds
were partially offset by distributions from other investments of $235,000,
collections of notes and advances from related parties of $96,000 and
collections of mortgage loans and notes receivable of $88,000.
For the three months ended March 31, 2005, net cash used in financing activities
was approximately $35,000 consisting of repayments of mortgages and notes
payable.
(9)
Item 3. 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 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-QSB have concluded that, based on such evaluation, our
disclosure controls and procedures were adequate 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 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) There were no significant changes in the Company's internal controls or
in other factors that could significantly affect these controls during the
quarter covered by this report or from the end of the reporting period to the
date of this Form 10-QSB.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings: None.
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Item 2. Changes in Securities and Small Business Issuers Purchase of
Equity Securities: None.
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Item 3. Defaults Upon Senior Securities: None.
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Item 4. Submission of Matters to a Vote of Security Holders: None.
------- ----------------------------------------------------
Item 5. Other Information: None.
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Item 6. Exhibits and Reports on Form 8-K:
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(a) Certifications pursuant to 18 USC Section 1350-Sarbanes-Oxley Act of
2002. Filed herewith.
(b) Reports on Form 8-K filed for the quarter ended March 31, 2005: None.
(10)
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: May 12, 2005 ---------------------------------------
/s/Lawrence Rothstein
President, Treasurer and Secretary
Principal Financial Officer
Dated: May 12, 2005 ---------------------------------------
/s/Carlos Camarotti
Vice President - Finance and Controller
Principal Accounting Officer
(11)
Exhibits: