UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
--
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
-- EXCHANGE ACT OF 1934
For the Quarterly period ended June 30, 2004
------------------
OR
-- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
--
For the transition period from______________________to
Commission file number 1-7865
--------
HMG/COURTLAND PROPERTIES, INC.
------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 59-1914299
--------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1870 S. Bayshore Drive, Coconut Grove, Florida 33133
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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
--------------------------------------------------------------------------------
(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 June 30, 2004.
HMG/COURTLAND PROPERTIES, INC.
Index
PAGE
NUMBER
------
PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
June 30, 2004 (Unaudited) and December 31, 2003....................................................1
Condensed Consolidated Statements of Operations for the
Three and Six Months Ended June 30, 2004 and 2003 (Unaudited)......................................2
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 2004 and 2003 (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 2. Changes in Securities and Small Business Issuer Purchases of Equity Securities...........11
Item 3. Defaults Upon Senior Securities . . . ...................................................11
Item 4. Submission of Matters to a Vote of Security Holders . . . ...............................11
Item 5. Other Information . . . .................................................................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
----------------------------------------------------------------------------------------------------------------
June 30, December 31,
2004 2003
---- ----
ASSETS (UNAUDITED)
Investment properties, net of accumulated depreciation:
Commercial and industrial $998,627 $2,611,777
Hotel and club facility 4,016,529 4,212,734
Yacht slips 131,620 169,073
Land held for development 1,083,855 1,083,855
--------------------- ---------------------
Total investment properties, net 6,230,631 8,077,439
Cash and cash equivalents 3,533,544 2,624,643
Cash restricted pending delivery of securities 95,986 -
Investments in marketable securities 6,659,481 4,892,908
Other investments 5,240,828 5,048,016
Investment in affiliate 2,960,035 2,926,326
Loans, notes and other receivables 905,726 1,015,118
Notes and advances due from related parties 778,369 1,003,243
Deferred taxes 464,000 478,000
Other assets 195,605 234,036
--------------------- ---------------------
TOTAL ASSETS $27,064,205 $26,299,729
--------------------- ---------------------
LIABILITIES
Mortgages and notes payable $7,367,445 $8,086,227
Accounts payable and accrued expenses 258,814 229,461
Accrued income taxes payable 182,000 -
Sales of securities pending delivery 112,830 -
--------------------- ---------------------
TOTAL LIABILITIES 7,921,089 8,315,688
Minority interests 301,478 322,193
--------------------- ---------------------
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 41,327,464 39,478,523
Undistributed losses from operations (48,455,569) (47,786,418)
--------------------- ---------------------
20,759,502 19,579,712
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)
--------------------- ---------------------
TOTAL STOCKHOLDERS' EQUITY 18,841,638 17,661,848
--------------------- ---------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $27,064,205 $26,299,729
--------------------- ---------------------
See notes to the condensed consolidated financial statements
(1)
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
------------------------------------------------
Three months ended June 30, Six months ended June 30,
REVENUES 2004 2003 2004 2003
---- ---- ---- ----
Real estate rentals and related revenue $367,028 $402,951 $795,516 $814,774
Marina revenues 116,176 118,030 232,854 241,599
Net (loss) gain from investments in marketable securities (249,477) 324,500 (135,228) 299,855
Net gain from other investments 152,270 77,650 104,371 146,279
Interest, dividend and other income 106,310 67,489 185,351 130,422
-----------------------------------------------------------------
Total 492,307 990,620 1,182,864 1,632,929
EXPENSES
Operating expenses:
Rental and other properties 117,961 121,187 241,591 268,597
Marina expenses 96,778 87,565 208,892 182,109
Depreciation and amortization 122,465 145,411 266,790 292,346
Adviser's base fee 225,000 225,000 450,000 450,000
General and administrative 80,736 74,277 158,801 147,407
Professional fees and expenses 40,634 64,252 69,817 109,348
Directors' fees and expenses 13,258 16,708 30,211 28,508
-----------------------------------------------------------------
Total operating expenses 696,832 734,400 1,426,102 1,478,315
Interest expense 116,120 123,706 228,840 250,683
Minority partners' interests in operating gain of
consolidated entities 4,427 10,659 1,072 10,709
-----------------------------------------------------------------
Total expenses 817,379 868,765 1,656,014 1,739,707
-----------------------------------------------------------------
(Loss) income before sales of properties and income taxes (325,072) 121,855 (473,150) (106,778)
Gain on sales of properties, net 1,801,335 39,112 1,848,941 78,256
-----------------------------------------------------------------
Income (loss) before income taxes 1,476,263 160,967 1,375,791 (28,522)
Provision for income taxes 134,000 120,000 196,000 127,000
-----------------------------------------------------------------
Net Income (loss) $1,342,263 $40,967 $1,179,791 ($155,522)
=================================================================
Net Income (loss) Per Common Share:
Basic $1.23 $0.04 $1.08 ($0.14)
===== ===== ===== ======
Diluted $1.22 $0.04 $1.07 ($0.14)
===== ===== ===== ======
Weighted average common shares outstanding Basic 1,089,135 1,089,135 1,089,135 1,089,135
========= ========= ========= =========
Weighted average common shares outstanding Diluted 1,103,271 1,098,153 1,103,700 1,089,135
========= ========= ========= =========
See notes to the condensed consolidated financial statements
(2)
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
--------------------------------------------------------------------------------
Six months ended June 30,
2004 2003
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $1,179,791 ($155,522)
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Depreciation and amortization 266,790 292,346
Net gain from other investments (104,371) (146,279)
Gain on sales of properties, net (1,848,941) (78,256)
Net loss (gain) from investments in marketable securities 135,228 (299,855)
Minority partners' interest in operating gains 1,072 10,709
Deferred income tax expense 14,000 127,000
Changes in assets and liabilities:
(Increase) decrease in other assets and other receivables (153,263) 34,847
Net proceeds from sales and redemptions of securities 1,403,182 1,658,564
Increase in restricted cash (95,986) --
Increase (decrease) in sales of securities pending delivery 111,974 (8,273)
Increased investments in marketable securities (3,304,127) (555,866)
Increase in accounts payable and accrued expenses 185,682 14,202
Increase in accrued income taxes payable 182,000 --
Decrease in other liabilities -- (679,891)
---------- ---------
Total adjustments (3,206,760) 369,248
---------- ---------
Net cash (used in) provided by operating activities (2,026,969) 213,726
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from disposals of properties 3,440,649 127,500
Decrease in notes and advances from related parties 21,846 400,177
Net decrease in mortgage loans and notes receivables 291,902 56,485
Distributions from other investments 869,734 405,820
Contributions to other investments (939,036) (289,060)
---------- ---------
Net cash provided by investing activities 3,685,095 700,922
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of mortgages and notes payables (718,782) (55,092)
Net distributions to minority partners (30,443) --
---------- ---------
Net cash used in financing activities (749,225) (55,092)
---------- ---------
Net increase in cash and cash equivalents 908,901 859,556
Cash and cash equivalents at beginning of the period 2,624,643 1,863,534
---------- -----------
Cash and cash equivalents at end of the period $3,533,544 $2,723,090
---------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $229,000 $251,000
---------- ---------
Cash paid during the period for income taxes -- --
---------- ---------
See notes to 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 10QSB,
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, 2003. The
balance sheet as of December 31, 2003 was derived from audited financial
statements as of that date. The results of operations for the three and six
months ended June 30, 2004 are not necessarily indicative of the results to be
expected for the full year.
2. RECENT ACCOUNTING PRONOUNCEMENTS.
------------------------------------
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, and
accordingly, adoption of this statement did not have a material effect on the
Company's financial statements.
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,
and accordingly, adoption of this statement did not have a material effect on
the Company's financial statements.
(4)
HMG/COURTLAND PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
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. On October 9, 2003 the FASB
issued FASB Staff Position No. FIN 46-6 "Effective Date of FASB Interpretation
No.46 Consolidation of Variable Interest Entities," which defers the
implementation date for public entities that hold an interest in a variable
interest entity or potential variable interest entity from the first fiscal year
or interim period beginning after June 15, 2003 to the end of the first interim
or annual period ending after December 15, 2003. This deferral applies only if
1) the variable interest entity was created before February 1, 2003 and 2) the
public entity has not issued financial statements reporting that variable
interest entity in accordance with FIN 46, other than disclosures required by
paragraph 26 of FIN 46. The adoption of FIN 46 did not have a material impact on
the Company's financial position, liquidity or results of operations.
3. GAIN ON SALES OF PROPERTIES
-------------------------------
In April 2004 the Company sold its shopping center near Jacksonville, Florida
for approximately $3.9 million and recognized a net gain on the sale of $1.8
million.
In March 2004 Grove Isle Yacht Club Associates (GIYCA) sold one yacht slip
located in Miami, Florida resulting in a net gain to the Company of
approximately $48,000.
(5)
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 and six
months ended June 30, 2004 and 2003 is summarized below:
Three months ended June 30, Six months ended June 30,
---------------------------------------------------------------------------------------- -----------------------------
Description 2004 2003 2004 2003
------------------------------------------------------------------------- -------------- --------------- -------------
Net realized loss from sales of securities ($5,000) ($40,000) ($13,000) ($75,000)
Unrealized net (loss) gain in trading securities (244,000) 373,000 (122,000) 414,000
Net change in sales of securities pending delivery --- (9,000) --- (39,000)
---------------- -------------- --------------- -------------
Total net (loss) gain from investments in marketable ($249,000) $324,000 ($135,000) $300,000
securities ================ ============== =============== =============
For the three and six months ended June 30, 2004 net realized loss from sales of
marketable securities of approximately $5,000 and $13,000 consisted of
approximately $10,000 of gross losses net of $5,000 of gross gains for the three
month period and approximately $89,000 of gross losses net of $76,000 of gross
gains for the six month period. For the three and six months ended June 30, 2003
net realized loss from sales of marketable securities of approximately $40,000
and $75,000 consisted of approximately $155,000 of gross losses net of $115,000
of gross gains for the three month period and approximately $204,000 of gross
losses net of $129,000 of gross gains for the six month period.
Net change in sales of securities pending delivery in 2003 represents the
changes in the market value of those securities and the delivery of securities
to realize gain or loss from these transactions. Such amounts in 2004 were
insignificant.
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.
(6)
HMG/COURTLAND PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
5. OTHER INVESTMENTS
----------------------
As of June 30, 2004, the Company has committed to invest approximately $10.6
million in other investments primarily in private capital funds, of which
approximately $9.3 million has been funded. The carrying value of other
investments (which reflects distributions and valuation adjustments) is
approximately $5.2 million. During the six months ended June 30, 2004 the
Company has made contributions of approximately $939,000 and has received
distributions of approximately $870,000 from these investments. The
contributions include $575,000 made to two new investments during the three
months ended June 30, 2004. The distributions in 2004 primarily consisted of
return of capital distribution in the amount of $535,000 from an investment in a
partnership which sold and recapitalized several of its operating businesses and
distributed the proceeds to its partners.
Net (loss) gain from other investments for the three and six months ended June
30, 2004 and 2003, is summarized below:
Three months ended June 30, Six months ended June 30,
---------------------------------------- ----------------------------------------
Description 2004 2003 2004 2003
------------- ------------------- -------------------- ------------------- --------------------
Partnership owning diversified operating
companies $140,000 -- $140,000 --
Technology-related venture fund -- -- (104,000) --
Real estate development and operation 2,000 79,000 40,000 137,000
Income from investment in 49% owned
affiliate (T.G.I.F. Texas, Inc.) 13,000 2,000 34,000 15,000
Others, net (3,000) (3,000) (6,000) (6,000)
------------------- -------------------- ------------------- --------------------
Total net gain (loss) from other $152,000 $78,000 $104,000 $146,000
investments =================== ==================== =================== ====================
In May 2004, the Company received a distribution approximately $271,000 from an
investment in a partnership which recapitalized one of its operating companies.
The excess of the distribution over the carrying value of the investment
resulted in a capital gain of $140,000.
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. MORTGAGES AND NOTES PAYABLE
-------------------------------
Included in mortgages and notes payable as of June 30, 2004 and December 31,
2003 is approximately $3.7 million of notes payable to a 49%-owned affiliate,
T.G.I.F. Texas, Inc., as previously disclosed.
(7)
7. BASIC AND DILUTED EARNINGS PER SHARE
-----------------------------------------
Basic and diluted earnings per share for the three and six months ended June 30,
2004 and 2003 are computed as follows:
For the three months ended For the six months ended
June 30, June 30,
2004 2003 2004 2003
---- ---- ---- ----
Basic:
------
Net Income (loss) $1,342,263 $40,967 $1,179,791 ($155,522)
Weighted average shares outstanding 1,089,135 1,089,135 1,089,135 1,089,135
-------------------------------------------------------------
Basic earnings (loss) per share $1.23 $0.04 $1.08 ($0.14)
=============================================================
Diluted:
--------
Net Income (loss) $1,342,263 $40,967 $1,179,791 ($155,522)
Weighted average shares outstanding 1,089,135 1,089,135 1,089,135 1,089,135
Plus incremental shares from assumed conversion: Stock
options 14,136 9,018 14,565 --
-------------------------------------------------------------
Diluted weighted average common shares 1,103,271 1,098,153 1,103,700 1,089,135
-------------------------------------------------------------
Diluted earnings (loss) per share $1.22 $0.04 $1.07 ($0.14)
=============================================================
(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 $1.3 million (or $1.23 per
basic share and $1.22 per diluted share) and $1.2 million (or $1.08 per basic
share and $1.07 per diluted share) for the three and six months ended June 30,
2004, respectively. This is as compared with net income of approximately $41,000
(or $.04 per basic and diluted share) for the three months ended March 31, 2003
and a net loss of approximately $155,000 (or $.14 per basic and diluted share)
for the six months ended June 30, 2003. Total revenues for the three and six
months ended June 30, 2004 as compared with the same periods in 2003, decreased
by approximately $498,000 or 50% and $450,000 or 28%, respectively. Total
expenses for the three and six months ended June 30, 2004, as compared with the
same periods in 2003, decreased by approximately $51,000 or 6% and $84,000 or
5%, respectively. Gain on sales of properties for the three and six months ended
June 30, 2004 was approximately $1.8 million as compared with gains of
approximately $39,000 and $78,000 for the three and six months ended June 30,
2003.
REVENUES
Rentals and related revenues for the three and six months ended June 30, 2004 as
compared with the same comparable periods in 2003 decrease by $36,000 (9%) and
$19,000 (2%), respectively. The decrease for the three month comparable periods
was primarily due to the sale in April 2004 of the shopping center located near
Jacksonville, Florida.
Net loss from investments in marketable securities for the three and six months
ended June 30, 2004 was approximately $249,000 and $135,000, respectively. This
is as compared with net gain from investments in marketable securities of
approximately $325,000 and $300,000, respectively, for the same comparable
periods in 2003. For further details refer to Note 4 to Condensed Consolidated
Financial Statements (unaudited).
Net gain from other investments for the three and six months ended June 30, 2004
was approximately $152,000 and $104,000, respectively. This is as compared with
a net gain of approximately $78,000 and $146,000, respectively, for the same
comparable periods in 2003. For further details refer to Note 5 to Condensed
Consolidated Financial Statements (unaudited).
Interest and dividend income for the three and six months ended June 30, 2004
was approximately $106,000 and $185,000, respectively. This is as compared with
approximately $67,000 and $130,000, respectively, for the same comparable
periods in 2003. The increases from last year of $39,000 (or 58%) for the three
month periods and $55,000 (or 42%) for the six month periods was primarily due
to an increase in investments bonds and other fixed income securities.
EXPENSES
Expenses for rental and other properties for the six months ended June 30, 2004
decreased by approximately $27,000 (or 10%) as compared to that for the six
months ended June 30, 2003. This was primarily the result of decreased operating
expenses of approximately $39,000 relating to the sale of the shopping center in
April 2004. This decrease was partially offset by increased insurance costs at
the Grove Isle property.
(9)
Management's Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
Marina expenses for the three and six months ended June 30, 2004 increased by
approximately $9,000 (or 11%) and $27,000 (or 15%), respectively, as compared
with the same comparable periods in 2003. This was primarily due to increased
insurance expense as a result of the reinstatement of windstorm coverage at the
Grove Isle Marina in 2004 and increased payroll and related expenses.
Professional fees expense for the three and six months ended June 30, 2004
decreased by approximately $24,000 (or 37%) and $40,000 (or 37%), respectively,
as compared with the same comparable periods in 2003. This decrease was
primarily the result of a reduction in the Company legal expenses.
Interest expense for the three and six months ended June 30, 2004 decreased by
approximately $8,000 (or 6%) and $22,000 (or 9%), respectively, as compared with
the same comparable periods in 2003. This decrease was primarily as the result
of an 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 2004 primarily consist of maturities of
debt obligations of approximately $3.8 million and commitments to fund private
capital investments of approximately $1.3 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
2004 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 six months ended June 30, 2004, net cash used in operating activities
was approximately $2 million. Included in this amount is an increase in
investments of marketable securities of approximately $3.3 million less proceeds
from sales of marketable securities of approximately $1.4 million.
For the six months ended June 30, 2004, net cash provided by investing
activities was approximately $3.7 million. This was comprised primarily of
proceeds from the sales of properties of approximately $3.4 million.
For the six months ended June 30, 2004, net cash used in financing activities
was approximately $749,000 primarily consisting of repayments of mortgages and
notes payable.
(10)
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.
------- -----------------
Item 2. Changes in Securities and Small Business Issuers Purchase of Equity
------- -------------------------------------------------------------------
Securities: None.
----------
Item 3. Defaults Upon Senior Securities: None.
------- -------------------------------
Item 4. Submission of Matters to a Vote of Security Holders: None.
------- ---------------------------------------------------
Item 5. Other Information: None.
------- -----------------
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 June 30, 2004:
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HMG/COURTLAND PROPERTIES, INC.
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Dated: July 30, 2004 -----------------------------------
/s/Lawrence Rothstein
President, Treasurer and Secretary
Principal Financial Officer
Dated: July 30, 2004 -----------------------------------
/s/Carlos Camarotti
Vice President - Finance and Controller
Principal Accounting Officer
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