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 September 30, 2003
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-7865
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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 October 31, 2003.
HMG/COURTLAND PROPERTIES, INC.
Index
PAGE
NUMBER
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PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 2003 (Unaudited) and December 31, 2002.........................................1
Condensed Consolidated Statements of Operations for the
Three and Nine Months Ended September 30, 2003 and 2002 (Unaudited)..........................2
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 2003 and 2002 (Unaudited)....................................3
Notes to Condensed Consolidated Financial Statements (Unaudited).............................4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................................9
Item 3. Controls and Procedures............................................................11
PART II. Other Information
Item 1. Legal Proceedings . . . ..........................................................11
Item 4. Submission of Matters to a Vote of Security Holders ..............................11
Item 6. Exhibits and Reports on Form 8-K..................................................11
Signatures...............................................................................................12
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
---------------------------------------------------------------------------------------------------------------------------------
September 30, December 31,
2003 2002
ASSETS (UNAUDITED)
Investment properties, net of accumulated depreciation:
Commercial and industrial $2,642,415 $2,737,158
Hotel and club facility 4,311,771 4,607,964
Yacht slips 285,478 379,332
Land held for development 1,083,855 1,854,318
------------------------ ------------------------
Total investment properties, net 8,323,519 9,578,772
Cash and cash equivalents 2,567,928 1,863,534
Investments in marketable securities 4,229,464 3,730,820
Other investments 5,442,711 5,694,448
Investment in affiliate 2,919,776 2,894,196
Cash restricted pending delivery of securities 180,367 23,921
Loans, notes and other receivables 1,057,341 1,142,882
Notes and advances due from related parties 1,003,376 1,414,974
Deferred taxes 651,000 801,000
Other assets 165,496 195,612
------------------------ ------------------------
TOTAL ASSETS 26,540,978 27,340,159
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LIABILITIES
Mortgages and notes payable 8,419,707 8,622,406
Accounts payable and accrued expenses 365,901 235,948
Sales of securities pending delivery 80,117
Other liabilities 679,891
------------------------ ------------------------
TOTAL LIABILITIES 8,785,608 9,618,362
Minority interests 299,509 270,738
------------------------ ------------------------
COMMITMENTS AND CONTINGENCIES
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 39,226,891 38,840,780
Undistributed losses from operations (47,740,773) (47,329,464)
------------------------ ------------------------
19,373,725 19,398,923
Less: Treasury stock, at cost (226,500 shares) (1,659,114) (1,659,114)
Notes receivable from exercise of stock options (258,750) (288,750)
------------------------ ------------------------
TOTAL STOCKHOLDERS' EQUITY 17,455,861 17,451,059
------------------------ ------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $26,540,978 $27,340,159
------------------------ ------------------------
See notes to the condensed consolidated financial statements
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
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Three months ended Nine months ended
September 30, September 30,
REVENUES 2003 2002 2003 2002
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Real estate rentals and related revenue $445,336 $409,154 $1,260,110 $1,223,970
Marina revenues 120,553 108,717 362,152 350,267
Net gain (loss) from investments in marketable securities 190,626 (535,065) 490,481 (1,290,240)
Net (loss) gain from other investments (105,527) (118,396) 40,752 (156,510)
Interest, dividend and other income 78,867 55,729 209,289 206,519
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Total revenues 729,855 (79,861) 2,362,784 334,006
EXPENSES
Operating expenses:
Rental and other properties 144,943 141,096 413,540 433,193
Marina expenses 99,817 86,556 281,926 259,267
Depreciation and amortization 145,016 150,056 437,362 453,754
Adviser's base fee 225,000 165,000 675,000 495,000
General and administrative 70,781 54,107 218,188 174,866
Professional fees and expenses 54,509 57,595 163,857 136,672
Directors' fees and expenses 17,618 17,061 46,126 48,249
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Total operating expenses 757,684 671,471 2,235,999 2,001,001
Interest expense 123,371 133,205 374,054 405,168
Minority partners' interests in operating gain (loss) of
consolidated entities 3,331 (28,627) 14,040 (60,484)
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Total expenses 884,386 776,049 2,624,093 2,345,685
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Loss before sales of properties and income taxes (154,531) (855,910) (261,309) (2,011,679)
Gain on sales of properties, net 307,855 63,359 386,111 433,997
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Income (loss) before income taxes 153,324 (792,551) 124,802 (1,577,682)
Provision for (benefit from) income taxes 23,000 (354,851) 150,000 (661,101)
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Net income (loss) $130,324 ($437,700) ($25,198) ($916,581)
=================================================================
Net Income (Loss) Per Common Share:
Basic and diluted $0.12 ($0.40) ($0.02) ($0.84)
See notes to the condensed consolidated financial statements
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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Nine months ended September 30,
2003 2002
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($25,198) ($916,581)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 437,362 453,754
Net (gain) loss from other investments (40,827) 156,510
Gain on sales of properties, net (386,111) (433,997)
Net (gain) loss from investments in marketable securities (490,481) 1,290,240
Minority partners' interest in operating gains (losses) 14,040 (60,484)
Deferred income tax expense (benefit) 150,000 (455,000)
Changes in assets and liabilities:
Decrease in other assets and other receivables 122,558 71,302
Net proceeds from sales and redemptions of securities 1,985,168 2,417,861
(Increase) decrease in restricted cash (260,466) 139,924
Increased investments in marketable securities (1,971,213) (1,541,700)
Increase in accounts payable and accrued expenses 129,953 103,006
Decrease in current income taxes payable (219,174)
Decrease in other liabilities (679,891) (219,454)
Repayment of note receivable from stock options exercised 30,000
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Total adjustments (959,908) 1,702,788
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Net cash (used in) provided by operating activities (985,106) 786,207
----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from disposals of properties 1,227,802 617,379
Decrease (increase) in notes and advances from related parties 411,598 (416,792)
Net (increase) decrease in mortgage loans and notes receivables (25,195) 194,960
Distributions from other investments 839,044 94,679
Contributions to other investments (561,050) (999,751)
----------------- -----------------
Net cash provided by (used in) investing activities 1,892,199 (509,525)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of mortgages and notes payables (202,699) (272,876)
Dividends paid (326,741)
Net distributions to minority partners (30,443)
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Net cash used in financing activities (202,699) (630,060)
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Net increase in cash and cash equivalents 704,394 (353,378)
Cash and cash equivalents at beginning of the period 1,863,534 2,598,536
----------------- -----------------
Cash and cash equivalents at end of the period $2,567,928 $2,245,158
----------------- -----------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $318,000 $262,000
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Cash paid during the period for income taxes $2,000 $11,000
----------------- -----------------
See notes to the condensed consolidated financial statements
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. 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, 2002. The balance sheet as of December 31, 2002 was
derived from audited financial statements as of that date. The results of
operations for the three and nine months ended September 30, 2003 are not
necessarily indicative of the results to be expected for the full year.
2. RECENT ACCOUNTING PRONOUNCEMENTS.
------------------------------------
In June 2002, the FASB issued Statement 146, Accounting for Costs Associated
with Exit or Disposal Activities. This Statement requires the recognition of a
liability for a cost associated with an exit or disposal activity when the
liability is incurred versus the date the Company commits to an exit plan. In
addition, this Statement states the liability should be initially measured at
fair value. The Statement is effective for exit or disposal activities that are
initiated after December 31, 2002. The primary effect to the Company's financial
statements would be in the timing of accounting recognition of potential future
exit activities. The adoption of this pronouncement did not have a material
effect on the Company's financial statements.
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation--Transition and Disclosure. This statement provides alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, this Statement
also amends the disclosure requirements of SFAS No. 123 to require more
prominent and frequent disclosures in the financials statements about the
effects of stock-based compensation. The transitional guidance and annual
disclosure provisions of this Statement is effective for the December 31, 2002
financial statements. The interim reporting disclosures requirements were
effective beginning with the Company's March 31, 2003 10-QSB. Because the
Company continues to account for employee stock-based compensation under APB
opinion No. 25, the transitional guidance of SFAS No. 148 has no effect on the
financial statements at this time. There was no pro forma effect for stock based
compensation during the three and nine months ended September 30, 2003 and 2002.
(4)
HMG/COURTLAND PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
During April 2003, the FASB issued SFAS 149 - "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities", effective for contracts entered
into or modified after June 30, 2003, except as stated below and for hedging
relationships designated after June 30, 2003. In addition, except as stated
below, all provisions of this Statement should be applied prospectively. The
provisions of this Statement that relate to Statement 133 Implementation Issues
that have been effective for fiscal quarters that began prior to June 15, 2003,
should continue to be applied in accordance with their respective effective
dates. In addition, paragraphs 7(a) and 23(a), which relate to forward purchases
or sales of then-issued securities or other securities that do not yet exist,
should be applied to both existing contracts and new contracts entered into
after June 30, 2003. The Company does not participate in such transactions,
however, is evaluating the effect of this new pronouncement, if any, and will
adopt FASB 149 within the prescribed time.
During May 2003, the FASB issued SFAS 150 - "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity", effective for
financial instruments entered into or modified after May 31, 2003, and otherwise
is effective at the beginning of the first interim period beginning after June
15, 2003. This Statement establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both liabilities
and equity. It requires that an issuer classify a freestanding financial
instrument that is within its scope as a liability (or an asset in some
circumstances). Many of those instruments were previously classified as equity.
Some of the provisions of this Statement are consistent with the current
definition of liabilities in FASB Concepts Statement No. 6, "Elements of
Financial Statements". The Company does not participate in such transactions
however, is evaluating the effect of this new pronouncement, if any, and will
adopt FASB 150 within the prescribed time.
In November 2002, the FASB issued Interpretation No. 45, Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness to Others, an interpretation of FASB Statements No. 5, 57, and 107
and a rescission of FASB Interpretation No. 34. This Interpretation elaborates
on the disclosures to be made by a guarantor in its interim and annul financial
statements about its obligations under guarantees issued. The Interpretation
also clarifies that a guarantor is required to recognize, at inception of a
guarantee, a liability for the fair value of the obligation undertaken. The
initial recognition and measurement provisions of the Interpretation are
applicable to guarantees issued or modified after December 31, 2002 and did not
have a material effect on the Company's financial statements.
In January 2003, the FASB issued FASB Interpretation No. 46 (" FIN 46"),
"Consolidation of Variable Interest Entities." FIN 46 clarifies the application
of Accounting Research Bulletin No. 51, "Consolidated Financial Statements," to
certain entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. FIN 46 applies immediately to variable interest
entities ("VIE's") created after January 31, 2003, and to VIE's in which an
enterprise obtains an interest after that date. It applies in the first fiscal
year or interim period beginning after June 15, 2003, to VIE's in which an
enterprise holds a variable interest that it acquired before February 1, 2003.
FIN 46 applies to public enterprises as of the beginning of the applicable
interim or annual period. We are evaluating the effects, if any the adoption of
FIN 46 may have on the Company's consolidated financial position, liquidity, or
results of operations.
(5)
HMG/COURTLAND PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
3. GAIN ON SALES OF PROPERTIES
-------------------------------
For the nine months ended September 30, 2003 Grove Isle Yacht Club Associates
(GIYCA) sold three yacht slips located in Miami, Florida resulting in a total
net gain to the Company of approximately $105,000.
In September 2003, The Grove Towne Center-Texas, Ltd (TGTC) sold approximately 5
acres of vacant land in Houston, Texas resulting in a net gain to the Company of
approximately $281,000.
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 and nine
months ended September 30, 2003 and 2002 is summarized below:
Three Months Ended September 30, Nine Months Ended September 30,
---------------------------------- ------------------------------------------ -----------------------------------
Description 2003 2002 2003 2002
------------------------------------- ---------------------- ------------------ --------------- -----------------
Net realized gain (loss) from sales $178,942 ($489,629) $103,658 ($389,242)
of securities
Unrealized net (loss) gain in
trading securities (3,169) (87,090) 410,727 (739,428)
Net change in sales of securities
pending delivery 14,853 41,654 (23,904) (161,570)
---------------------- ------------------ --------------- -----------------
Total net gain (loss) $190,626 ($535,065) $490,481 ($1,290,240)
====================== ================== =============== =================
For the three months ended September 30, 2003 net realized gain from sales of
marketable securities of approximately $179,000 consisted of approximately
$199,000 of gross gains net of approximately $20,000 of gross losses. For the
nine months ended September 30, 2003 net realized gain from sales of marketable
securities of approximately $104,000 consisted of approximately $328,000 of
gross gains net of approximately $224,000 of gross gains. For the three months
ended September 30, 2002 net realized loss from sales of marketable securities
of approximately $490,000 consisted of approximately $82,000 of gross gains net
of $572,000 of gross losses. For the nine months ended September 30, 2002 net
realized loss from sales of marketable securities of approximately $389,000
consisted of approximately $583,000 of gross gains net of $972,000 of gross
losses.
Net change in sales of securities pending delivery represents the changes in the
market value of those securities and the delivery of securities to realize gain
or loss from these transactions. In September 2003, the Company covered all
remaining short sales utilizing stock distributions from investments in one
venture capital fund. The Company realized a gain on short sales covered for the
three months ended September 30, 2003 of approximately $192,000. This amount is
included in the realized gain on sale of securities described above.
(6)
HMG/COURTLAND PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
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, 2003, the Company has committed to invest approximately
$11.9 million in other investments primarily in private capital funds, of which
approximately $10.2 million has been funded. The carrying value of other
investments (which reflects distributions and valuation adjustments) is
approximately $5.4 million. During the three and nine months ended September 30,
2003, the Company has made contributions to existing and new investments of
approximately $300,000 and $561,000, respectively, and has received
approximately $433,000 and $839,000, respectively, in distributions from other
investments. The distributions in 2003 primarily consisted of one return of
capital distribution in the amount of $567,000 from an investment in a
partnership which sold one of its operating businesses and distributed the
proceeds to its partners and $133,000 distributed from a partnership which sold
an investment in real estate.
Net loss from other investments for the three and nine months ended September
30, 2003 and 2002, is summarized below:
Three Months Ended September30, Nine Months Ended September 30,
---------------------------------- --------------------------------
2003 2002 2003 2002
----------------- ---------------- -------------- -----------------
Real estate development and $ -- $3,000 $138,000 $16,000
operation
Technology related funds (114,000) (122,000) (114,000) (180,000)
Income from investment in 49%
owned affiliate (T.G.I.F. Texas,
Inc.) 11,000 4,000 26,000 16,000
Others, net (3,000) (3,000) (9,000) (9,000)
----------------- ---------------- -------------- -----------------
Total net (loss) gain from other
investments ($106,000) ($118,000) $41,000 ($157,000)
================= ================ ============== =================
6. NOTES AND ADVANCES DUE FROM AND TRANSACTIONS WITH RELATED PARTIES
---------------------------------------------------------------------
In March 2003, the Company received a cash payment of $500,000 from the Adviser
as payment on amounts due from the Adviser to the Company. As of September 30,
2003 the amount due from the Adviser is approximately $245,000.
(7)
7. BASIC AND DILUTED EARNINGS PER SHARE
-----------------------------------------
Basic and diluted earnings per share for the three and nine months ended
September 30, 2003 and 2002 are computed as follows:
For the three months ended For the nine months ended
September 30, September 30,
2003 2002 2003 2002
Basic: ---- ---- ---- ----
Net Income (loss) $130,324 ($437,700) ($25,198) ($916,581)
Weighted average shares outstanding 1,089,135 1,089,135 1,089,135 1,089,135
-------------------------------------------------------------
Basic earnings (loss) per share $0.12 ($0.40) ($0.02) ($0.84)
=============================================================
Diluted:
--------
Net Income (loss) $130,324 ($437,700) ($25,198) ($916,581)
Weighted average shares outstanding 1,089,135 1,089,135 1,089,135 1,089,135
Plus incremental shares from assumed conversion: Stock
options 8,192 -- 6,726 --
-------------------------------------------------------------
Diluted weighted average common shares 1,097,327 1,089,135 1,095,861 1,089,135
-------------------------------------------------------------
Diluted earnings (loss) per share $0.12 ($0.40) ($0.02) ($0.84)
=============================================================
The effect of 86,000 options to purchase shares of the Company's common stock
were not included in the calculation of diluted earnings per share for the three
and nine months ended September 30, 2003 and 2002, as their effect would have
been anti-dilutive.
(8)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
---------------------
The Company reported net income of approximately $130,000 (or $.12 per share)
for the three months ended September 30, 2003 and a net loss of approximately
$25,000 (or $.02 per share) for the nine months ended September 30, 2003. This
is as compared with a net loss of approximately $438,000 (or $.40 per share) and
$917,000 (or $.84 per share) for the three and nine months ended September 30,
2002, respectively. Total revenues for the three and nine months ended September
30, 2003 as compared with the same periods in 2002, increased by approximately
$810,000 and $2 million, respectively. Total expenses for the three and nine
months ended September 30, 2003, as compared with the same periods in 2002,
increased by approximately $108,000 (or 14%) and $278,000 (or 12%),
respectively. Gain on sales of properties for the three and nine months ended
September 30, 2003 was approximately $308,000 and $386,000, respectively, as
compared with gains of approximately $63,000 and $434,000, respectively, for the
three and nine months ended September 30, 2002.
REVENUES
Rentals and related revenues for the three and nine months ended September 30,
2003 as compared with the same comparable periods in 2002 remained relatively
consistent.
Net gain from investments in marketable securities for the three and nine months
ended September 30, 2003 was approximately $191,000 and $490,000, respectively,
as compared with a net loss of approximately $535,000 and $1,290,000,
respectively, for the same comparable three and nine month periods in 2002. See
discussion in Note 4 to Condensed Consolidated Financial Statements (unaudited).
Net loss from other investments for the three months ended September 30, 2003
was approximately $106,000, as compared with a net loss from other investments
of approximately $118,000 for the same three month period in 2002. Net gain from
other investments for the nine months ended September 30, 2003 was approximately
$41,000, as compared with a net loss from other investments of approximately
$157,000 for the same nine month period in 2002.See discussion in Note 5 to
Condensed Consolidated Financial Statements (unaudited).
Interest and dividend income for the three and nine months ended September 30,
2003 was approximately $79,000 and $209,000, respectively, as compared with
approximately $56,000 and $207,000, respectively, for the same three and nine
month comparable periods in 2002. The increase in the three month comparable
periods of approximately $23,000 (or 41%) was primarily due to an increase in
the number of investments in the portfolio that yielded interest and dividends,
primarily increased investments in bonds.
EXPENSES
Rental and other properties expenses for the three and nine months ended
September 30, 2003 remained consistent with that of the same comparable periods
in 2002.
Marina expenses for the three and nine months ended September 30, 2003 remained
consistent with that of the three and nine months ended September 30, 2002.
(9)
Management's Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
Adviser's base fee increased by $60,000 and $180,000 (or 36%) for the three and
nine months ended September 30, 2003, respectively, as compared with the same
periods in 2002. As previously disclosed, this was as a result of a
shareholder-approved contractual increase in the Adviser's base fee. This
amendment increased the annual Adviser base fee from $660,000 to $900,000
effective January 1, 2003.
General and Administrative expenses increase by approximately $17,000 (or 31%)
and $43,000 (or 25%), respectively for the three and nine months ended September
30, 2003 as compared with the same comparable periods in 2002. These increases
between the nine month comparable periods were primarily attributable to payroll
and related expense of approximately $24,000, increased travel and meals and
entertainment expenses of approximately $10,000, and increased dues and
subscriptions of approximately $7,000.
Professional fees increased by approximately $3,000 (or 5%) and $27,000 (or
20%), respectively for the three and nine months ended September 30, 2003 as
compared with the same comparable periods in 2002. These increases were
primarily attributable to increased legal costs associated with shareholder
relations.
Interest expense decrease by approximately $10,000 (or 7%) and $31,000 (or 7%),
respectively for the three and nine months ended September 30, 2003 as compared
with the same comparable periods in 2002. This was primarily as a result of
decreased variable interest rates and overall reduction in outstanding debt.
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 in 2003 primarily consist of maturities of debt obligations
of approximately $3.8 million and commitments to fund private capital
investments of approximately $1.7 million 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 2003 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 investments and from available cash.
MATERIAL COMPONENTS OF CASH FLOWS
For the nine months ended September 30, 2003, net cash used in operating
activities was approximately $985,000. Included in this amount are net proceeds
from sales and redemptions of marketable securities of approximately $2.0
million less increased investments in of marketable securities of approximately
$2.0 million, decreased other liabilities (margin payables) of approximately
$680,000 and increased restricted cash of approximately $260,000 from increased
sales of securities pending delivery (short sales).
(10)
Management's Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
For the nine months ended September 30, 2003, net cash provided by investing
activities was approximately $1.9 million. This was comprised primarily of net
proceeds from sales of properties of approximately $1.2 million, distributions
from other investments of approximately $839,000, repayments received on notes
and advances due from related parties of approximately $412,000, less
contributions to other investments of approximately $561,000.
For the nine months ended September 30, 2003, net cash used in financing
activities was approximately $203,000 consisting of repayments of mortgages and
notes payable.
RECENT ACCOUNTING PRONOUNCEMENTS. See discussion of new accounting
--------------------------------
pronouncements in note 2 to the financial statements.
Item 3. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures.
The Company's Principal Executive Officer and Principal Financial Officer have
reviewed the Company's disclosure controls and procedures within 90 days prior
to the filing of this report. Based upon this review, these officers believe
that the Company's disclosure controls and procedures are effective in ensuring
that material information related to the Company is made known to them by others
within the Company.
(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
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No items to report.
Item 4. Submission of Matters to a Vote of Security Holders.
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No items to report.
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) On October 8, 2003 the Company filed a Form 8-K which reported the
change in the Company's certifying accountant.
(11)
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.
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Dated: November 14, 2003
/s/Lawrence Rothstein
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President, Treasurer and Secretary
Principal Financial Officer
Dated: November 14, 2003
/s/Carlos Camarotti
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Vice President - Finance and Controller
Principal Accounting Officer
(12)
Exhibits:
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