UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(Mark
One)
[X]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF
1934
|
For the
Quarterly period ended
June
30, 2008
OR
[X]
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the transition period from
to
Commission
file number
1-7865
HMG/COURTLAND PROPERTIES,
INC.
(Exact
name of small business issuer as specified in its charter)
Delaware
|
59
-1914299
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
|
|
|
|
1870
S. Bayshore Drive,
|
Coconut
Grove,
|
Florida
|
33133
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
305-854-6803
|
(Registrant's
telephone number, including area
code)
|
Not
Applicable
(Former
name, former address and former fiscal year, if changed since last
report)
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
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes [ ] No [
X]
APPLICABLE
ONLY TO CORPORATE ISSUERS:
State the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date.
1,023,955
Common shares were outstanding as of July 31, 2008.
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated
filer [
] Accelerated filer
[
] Non-accelerated
filer [
]
Smaller reporting company [ X
]
(Do not check if a smaller reporting company)
HMG/COURTLAND
PROPERTIES, INC.
Index
PAGE
NUMBER
PART
I.
Financial
Information
Item 1.
Financial
Statements
|
|
|
|
Condensed
Consolidated Balance Sheets as of
|
|
June
30, 2008 (Unaudited) and December 31, 2007
|
|
|
|
Condensed
Consolidated Statements of Comprehensive Income for the
|
|
Three
and Six Months Ended June 30, 2008 and 2007 (Unaudited)
|
|
|
|
Condensed
Consolidated Statements of Cash Flows for the
|
|
Six
Months Ended June 30, 2008 and 2007 (Unaudited)
|
|
|
|
Notes
to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
Item
2
.
Management's Discussion and Analysis of
Financial
|
|
Condition
and Results of Operations
|
|
|
|
Item
3
.
Quantitative and Qualitative Disclosures About
Market Risks
|
|
|
|
Item
4T
.
Controls and
Procedures
|
|
|
|
PART
II. Other Information
|
|
Item
1
.
Legal Proceedings
|
|
Item
2
.
Unregistered Sales of Equity
Securities and Use of Proceeds
|
|
Item
3
.
Defaults Upon Senior
Securities
|
|
Item
4
.
Submission of Matters to a Vote
of Security Holders
|
|
Item
5
.
Other Information
|
|
Item
6
.
Exhibits
|
|
Signatures
|
|
Cautionary
Statement
. This Form 10-Q contains certain statements relating
to future results of the Company that are considered "forward-looking
statements" within the meaning of the Private Litigation Reform Act of
1995. Actual results may differ materially from those expressed or
implied as a result of certain risks and uncertainties, including, but not
limited to, changes in political and economic conditions; interest rate
fluctuation; competitive pricing pressures within the Company's market; equity
and fixed income market fluctuation; technological change; changes in law;
changes in fiscal, monetary, regulatory and tax policies; monetary fluctuations
as well as other risks and uncertainties detailed elsewhere in this Form 10-Q or
from time-to-time in the filings of the Company with the Securities and Exchange
Commission. Such forward-looking statements speak only as of the date
on which such statements are made, and the Company undertakes no obligation to
update any forward-looking statement to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of
unanticipated events.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2008
|
|
|
2007
|
|
ASSETS
|
|
(UNAUDITED)
|
|
|
|
|
Investment
properties, net of accumulated depreciation:
|
|
|
|
|
|
|
Commercial
properties
|
|
$
|
8,131,916
|
|
|
$
|
7,604,490
|
|
Commercial
properties- construction in progress
|
|
|
21,543
|
|
|
|
320,617
|
|
Hotel,
club and spa facility
|
|
|
4,606,931
|
|
|
|
4,885,328
|
|
Marina
properties
|
|
|
2,659,290
|
|
|
|
2,793,155
|
|
Land
held for development
|
|
|
27,689
|
|
|
|
27,689
|
|
Total
investment properties, net
|
|
|
15,447,369
|
|
|
|
15,631,279
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
3,170,490
|
|
|
|
2,599,734
|
|
Cash
and cash equivalents-restricted
|
|
|
2,004,834
|
|
|
|
-
|
|
Investments
in marketable securities
|
|
|
3,583,041
|
|
|
|
4,818,330
|
|
Other
investments
|
|
|
4,853,536
|
|
|
|
4,623,801
|
|
Investment
in affiliate
|
|
|
3,166,843
|
|
|
|
3,132,117
|
|
Loans,
notes and other receivables
|
|
|
864,072
|
|
|
|
1,218,559
|
|
Notes
and advances due from related parties
|
|
|
707,334
|
|
|
|
700,238
|
|
Deferred
taxes
|
|
|
191,000
|
|
|
|
233,000
|
|
Goodwill
|
|
|
7,728,627
|
|
|
|
7,728,627
|
|
Other
assets
|
|
|
634,534
|
|
|
|
727,534
|
|
TOTAL
ASSETS
|
|
$
|
42,351,680
|
|
|
$
|
41,413,219
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Mortgages
and notes payable
|
|
$
|
19,645,079
|
|
|
$
|
19,981,734
|
|
Accounts
payable and accrued expenses
|
|
|
1,989,831
|
|
|
|
1,613,734
|
|
Interest
rate swap contract payable
|
|
|
555,000
|
|
|
|
525,000
|
|
TOTAL
LIABILITIES
|
|
|
22,189,910
|
|
|
|
22,120,468
|
|
|
|
|
|
|
|
|
|
|
Minority
interests
|
|
|
4,203,877
|
|
|
|
3,052,540
|
|
|
|
|
|
|
|
|
|
|
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;
|
|
|
|
|
|
|
|
|
1,317,535
shares issued as of June 30, 2008 and
|
|
|
|
|
|
|
|
|
December
31, 2007
|
|
|
1,317,535
|
|
|
|
1,317,535
|
|
Additional
paid-in capital
|
|
|
26,585,595
|
|
|
|
26,585,595
|
|
Undistributed
gains from sales of properties, net of losses
|
|
|
41,572,120
|
|
|
|
41,572,120
|
|
Undistributed
losses from operations
|
|
|
(50,674,023
|
)
|
|
|
(50,406,705
|
)
|
Accumulated
other comprehensive loss
|
|
|
(277,500
|
)
|
|
|
(262,500
|
)
|
|
|
|
18,523,727
|
|
|
|
18,806,045
|
|
Less: Treasury
stock, at cost (293,580 shares as of
|
|
|
|
|
|
|
|
|
June
30, 2008 and December 31, 2007)
|
|
|
(2,565,834
|
)
|
|
|
(2,565,834
|
)
|
TOTAL
STOCKHOLDERS' EQUITY
|
|
|
15,957,893
|
|
|
|
16,240,211
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$
|
42,351,680
|
|
|
$
|
41,413,219
|
|
|
|
|
|
|
|
|
|
|
See
notes to the condensed consolidated financial statements
|
|
|
|
|
|
|
|
|
HMG/COURTLAND
PROPERTIES, INC AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
months ended
June
30,
|
|
|
Six
months ended
June
30,
|
|
REVENUES
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Real
estate rentals and related revenue
|
|
$
|
404,143
|
|
|
$
|
385,095
|
|
|
$
|
805,880
|
|
|
$
|
770,323
|
|
Food
& beverage sales
|
|
|
1,940,429
|
|
|
|
1,645,416
|
|
|
|
3,855,815
|
|
|
|
3,427,978
|
|
Marina
revenues
|
|
|
427,371
|
|
|
|
437,451
|
|
|
|
880,013
|
|
|
|
882,639
|
|
Spa
revenues
|
|
|
200,858
|
|
|
|
167,742
|
|
|
|
424,072
|
|
|
|
378,836
|
|
Total
revenues
|
|
|
2,972,801
|
|
|
|
2,635,704
|
|
|
|
5,965,780
|
|
|
|
5,459,776
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
and other properties
|
|
|
136,458
|
|
|
|
145,459
|
|
|
|
269,576
|
|
|
|
281,815
|
|
Food
and beverage cost of sales
|
|
|
506,716
|
|
|
|
440,370
|
|
|
|
1,020,362
|
|
|
|
913,027
|
|
Food
and beverage labor and related costs
|
|
|
396,866
|
|
|
|
384,037
|
|
|
|
807,091
|
|
|
|
729,084
|
|
Food
and beverage other operating costs
|
|
|
592,227
|
|
|
|
655,795
|
|
|
|
1,129,700
|
|
|
|
1,238,422
|
|
Marina
expenses
|
|
|
253,426
|
|
|
|
296,261
|
|
|
|
489,684
|
|
|
|
546,952
|
|
Spa
expenses
|
|
|
188,016
|
|
|
|
205,942
|
|
|
|
367,963
|
|
|
|
418,285
|
|
Depreciation
and amortization
|
|
|
339,253
|
|
|
|
351,243
|
|
|
|
674,148
|
|
|
|
662,801
|
|
Adviser's
base fee
|
|
|
255,000
|
|
|
|
225,000
|
|
|
|
510,000
|
|
|
|
450,000
|
|
General
and administrative
|
|
|
82,522
|
|
|
|
75,510
|
|
|
|
161,227
|
|
|
|
171,143
|
|
Professional
fees and expenses
|
|
|
66,600
|
|
|
|
96,041
|
|
|
|
129,145
|
|
|
|
177,982
|
|
Directors'
fees and expenses
|
|
|
24,279
|
|
|
|
19,050
|
|
|
|
53,029
|
|
|
|
40,463
|
|
Total
operating expenses
|
|
|
2,841,363
|
|
|
|
2,894,708
|
|
|
|
5,611,925
|
|
|
|
5,629,974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
333,676
|
|
|
|
406,437
|
|
|
|
689,104
|
|
|
|
808,765
|
|
Minority
partners' interests in operating income of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
consolidated
entities
|
|
|
74,582
|
|
|
|
(125,171
|
)
|
|
|
170,042
|
|
|
|
(87,738
|
)
|
Total
expenses
|
|
|
3,249,621
|
|
|
|
3,175,974
|
|
|
|
6,471,071
|
|
|
|
6,351,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before other income and income taxes
|
|
|
(276,820
|
)
|
|
|
(540,270
|
)
|
|
|
(505,291
|
)
|
|
|
(891,225
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) gain from investments in marketable securities
|
|
|
(26,776
|
)
|
|
|
124,004
|
|
|
|
(214,650
|
)
|
|
|
250,405
|
|
Net
income from other investments
|
|
|
126,238
|
|
|
|
364,782
|
|
|
|
158,031
|
|
|
|
741,875
|
|
Interest,
dividend and other income
|
|
|
247,661
|
|
|
|
103,603
|
|
|
|
336,592
|
|
|
|
244,095
|
|
Total
other income
|
|
|
347,123
|
|
|
|
592,389
|
|
|
|
279,973
|
|
|
|
1,236,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) before income taxes
|
|
|
70,303
|
|
|
|
52,119
|
|
|
|
(225,318
|
)
|
|
|
345,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
83,000
|
|
|
|
56,000
|
|
|
|
42,000
|
|
|
|
127,000
|
|
Net
(loss) income
|
|
$
|
(12,697
|
)
|
|
$
|
(3,881
|
)
|
|
$
|
(267,318
|
)
|
|
$
|
218,150
|
|
Other comprehensive
(loss) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
loss on interest rate swap agreement
|
|
$
|
(15,000
|
)
|
|
$
|
297,000
|
|
|
$
|
(277,500
|
)
|
|
$
|
171,000
|
|
Total
other comprehensive loss
|
|
|
(15,000
|
)
|
|
|
297,000
|
|
|
|
(277,500
|
)
|
|
|
171,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
(loss) income
|
|
$
|
(27,697
|
)
|
|
$
|
293,119
|
|
|
$
|
(544,818
|
)
|
|
$
|
389,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Loss) Income Per
Common Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
(.01
|
)
|
|
$
|
.00
|
|
|
$
|
(.26
|
)
|
|
$
|
.21
|
|
Weighted
average common shares outstanding-basic
|
|
|
1,023,955
|
|
|
|
1,023,955
|
|
|
|
1,023,955
|
|
|
|
1,023,955
|
|
Weighted
average common shares outstanding-diluted
|
|
|
1,023,955
|
|
|
|
1,023,955
|
|
|
|
1,023,955
|
|
|
|
1,056,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
notes to the condensed consolidated financial statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HMG/COURTLAND
PROPERTIES, INC. AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six
months ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net
(loss) income
|
|
$
|
(267,318
|
)
|
|
$
|
218,150
|
|
Adjustments
to reconcile net (loss) income to net cash provided by
|
|
|
|
|
|
|
|
|
operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
674,148
|
|
|
|
662,801
|
|
Net
income from other investments
|
|
|
(158,031
|
)
|
|
|
(741,875
|
)
|
Net
loss (gain) from investments in marketable securities
|
|
|
214,650
|
|
|
|
(250,405
|
)
|
Minority
partners' interest in operating income
|
|
|
170,042
|
|
|
|
(87,738
|
)
|
Deferred
income tax expense
|
|
|
42,000
|
|
|
|
127,000
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
Other
assets and other receivables
|
|
|
26,392
|
|
|
|
160,407
|
|
Accounts
payable and accrued expenses
|
|
|
372,387
|
|
|
|
(398,015
|
)
|
Total
adjustments
|
|
|
1,341,588
|
|
|
|
(527,825
|
)
|
Net
cash provided (used in) by operating activities
|
|
|
1,074,270
|
|
|
|
(309,675
|
)
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchases
and improvements of properties
|
|
|
(476,162
|
)
|
|
|
(520,539
|
)
|
Increase
in notes and advances from related parties
|
|
|
(7,096
|
)
|
|
|
(15,594
|
)
|
Additions
in mortgage loans and notes receivables
|
|
|
(100,000
|
)
|
|
|
(211,000
|
)
|
Collections
of mortgage loans and notes receivables
|
|
|
507,025
|
|
|
|
1,103,000
|
|
Distributions
from other investments
|
|
|
252,235
|
|
|
|
801,602
|
|
Contributions
to other investments
|
|
|
(485,298
|
)
|
|
|
(739,667
|
)
|
Net
proceeds from sales and redemptions of securities
|
|
|
2,263,907
|
|
|
|
2,931,171
|
|
Increase
in investments in marketable securities
|
|
|
(1,116,636
|
)
|
|
|
(684,794
|
)
|
Net
cash provided by investing activities
|
|
|
837,975
|
|
|
|
2,664,179
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Repayment
of mortgages and notes payables
|
|
|
(336,655
|
)
|
|
|
(329,393
|
)
|
Cash
deposited (restricted) to meet bank loan debt covenant
|
|
|
(2,004,834
|
)
|
|
|
-
|
|
Contributions
from minority partners
|
|
|
1,000,000
|
|
|
|
279,850
|
|
Net
cash used in financing activities
|
|
|
(1,341,489
|
)
|
|
|
(49,543
|
)
|
|
|
|
|
|
|
|
|
|
Net
increase in cash and cash equivalents
|
|
|
570,756
|
|
|
|
2,304,961
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at beginning of the period
|
|
|
2,599,734
|
|
|
|
2,412,871
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at end of the period
|
|
$
|
3,170,490
|
|
|
$
|
4,717,832
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
Cash
paid during the period for interest
|
|
$
|
689,000
|
|
|
$
|
809,000
|
|
Cash
paid during the period for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
See
notes to the condensed consolidated financial statements
|
|
|
|
|
|
|
|
|
HMG/COURTLAND
PROPERTIES, INC.
(Unaudited)
1
.
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
In the
opinion of the Company, the accompanying unaudited condensed consolidated
financial statements prepared in accordance with instructions for Form 10-Q,
include all adjustments (consisting only of normal recurring accruals) which are
necessary for a fair presentation of the results for the periods
presented. Certain information and footnote disclosures normally
included in the financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the Company's
Annual Report for the year ended December 31, 2007. The balance sheet
as of December 31, 2007 was derived from audited financial statements as of that
date. The results of operations for the three and six months ended June 30, 2008
are not necessarily indicative of the results to be expected for the full
year.
The
condensed consolidated financial statements include the accounts of
HMG/Courtland Properties, Inc. (the "Company") and entities in which the Company
owns a majority voting interest or controlling financial interest. All material
transactions and balances with consolidated and unconsolidated entities have
been eliminated in consolidation or as required under the equity
method.
2.
RECENT
ACCOUNTING PRONOUNCEMENTS
In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles.” SFAS No. 162 identifies the sources of accounting
principles and provides entities with a framework for selecting the principles
used in preparation of financial statements that are presented in conformity
with GAAP. The current GAAP hierarchy has been criticized because it is directed
to the auditor rather than the entity, it is complex, and it ranks FASB
Statements of Financial Accounting Concepts, which are subject to the same level
of due process as FASB Statements of Financial Accounting Standards, below
industry practices that are widely recognized as generally accepted but that are
not subject to due process. The Board believes the GAAP hierarchy should be
directed to entities because it is the entity (not its auditors) that is
responsible for selecting accounting principles for financial statements that
are presented in conformity with GAAP. The adoption of FASB 162 is not expected
to have a material impact on the Company’s consolidated financial position and
results of operations.
In May
2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee
Insurance Contracts-an interpretation of FASB Statement No. 60.” Diversity
exists in practice in accounting for financial guarantee insurance contracts by
insurance enterprises under FASB Statement No. 60, Accounting and Reporting by
Insurance Enterprises. This results in inconsistencies in the recognition and
measurement of claim liabilities. This Statement requires that an insurance
enterprise recognize a claim liability prior to an event of default (insured
event) when there is evidence that credit deterioration has occurred in an
insured financial obligation. This Statement requires expanded disclosures about
financial guarantee insurance contracts. The accounting and disclosure
requirements of the Statement will improve the quality of information provided
to users of financial statements. The adoption of FASB 163 is not expected to
have a material impact on the Company’s consolidated financial position and
results of operations.
HMG/COURTLAND PROPERTIES,
INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
In May,
2008 the FASB issued FASB Staff Position (FSP) APB 14-1, “
Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement).
” APB 14-1 requires the issuer to separately account for the
liability and equity components of convertible debt instruments in a manner that
reflects the issuer’s nonconvertible debt borrowing rate. The guidance will
result in companies recognizing higher interest expense in the statement of
operations due to amortization of the discount that results from separating the
liability and equity components. APB 14-1 will be effective for financial
statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years. The Company is currently evaluating
the impact of adopting APB 14-1 on its consolidated financial
statements.
In April
2008, the FASB issued FSP 142-3, “Determination of the Useful Life of Intangible
Assets”, (FSP 142-3). FSP 142-3 amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible
Assets”. FSP 142-3 is effective for fiscal years beginning after December 15,
2008. The Company is currently assessing the impact of FSP 142-3 on its
consolidated financial position and results of operations.
In March
2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities" ("SFAS No. 161"). SFAS No. 161
amends and expands the disclosure requirement for FASB Statement No. 133,
"Derivative Instruments and Hedging Activities" ("SFAS No. 133"). It
requires enhanced disclosure about (i) how and why an entity uses
derivative instruments, (ii) how derivative instruments and related hedged
items are accounted for under SFAS No. 133 and its related interpretations,
and (iii) how derivative instruments and related hedged items affect an
entity’s financial position, financial performance, and cash flows. SFAS
No. 161 is effective for the Company as of January 1,
2009.
In
December 2007, the FASB issued Statement of Financial Accounting Standards
No. 141R (revised 2007), “Business Combinations” (“SFAS 141R”). SFAS 141R
replaces SFAS 141 and establishes principles and requirements for how an
acquirer recognizes and measures in its financial statements the identifiable
assets acquired, including goodwill, the liabilities assumed and any
non-controlling interest in the acquiree. SFAS 141R also establishes disclosure
requirements to enable users of the financial statements to evaluate the nature
and financial effects of the business combination. This statement is effective
for fiscal years beginning after December 15, 2008. We are currently
evaluating the impact the adoption of SFAS 141R will have on our consolidated
financial position and consolidated results of operations.
In
December 2007, the FASB issued Statement of Financial Accounting Standards
No. 160, “Noncontrolling Interests in Consolidated Financial Statements”
(“SFAS 160”). SFAS 160 establishes accounting and reporting standards for
ownership interests in subsidiaries held by parties other than the parent, the
amount of consolidated net income attributable to the parent and to the
noncontrolling interest, changes in a parent’s ownership interest and the
valuation of retained noncontrolling equity investments when a subsidiary is
deconsolidated. SFAS 160 also establishes reporting requirements that provide
sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the noncontrolling owners. This
standard is effective for fiscal years beginning after December 15, 2008.
We are currently evaluating the impact the adoption of SFAS 160 will have on our
consolidated financial position and consolidated results of
operations.
HMG/COURTLAND
PROPERTIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities. SFAS No. 159 permits entities
to choose to measure eligible financial instruments at fair value. The
unrealized gains and losses on items for which the fair value option has been
elected should be reported in earnings. The decision to elect the fair value
options is determined on an instrument by instrument basis, it should be applied
to an entire instrument, and it is irrevocable. Assets and liabilities measured
at fair value pursuant to the fair value option should be reported separately in
the balance sheet from those instruments measured using another measurement
attribute. SFAS No. 159 is effective as of the beginning of the first
fiscal year that begins after November 15, 2007. The adoption of this
standard in 2008 has not had a material impact on the Company's consolidated
financial statements.
Recently adopted accounting
principles
In
September 2006, the FASB issued SFAS No. 157, ‘‘Fair Value
Measurements’’. This statement clarifies the definition of fair value of assets
and liabilities, establishes a framework for measuring fair value of assets and
liabilities and expands the disclosures on fair value measurements. SFAS
No. 157 is effective for fiscal years beginning after November 15,
2007. However, the FASB deferred the effective date of SFAS No. 157 until the
fiscal years beginning after November 15, 2008 as it relates to the fair value
measurement requirements for non-financial assets and liabilities that are
initially measured at fair value, but not measured at fair value in subsequent
periods. These non-financial assets include goodwill and other indefinite-lived
intangible assets which are included within other assets. In accordance with
SFAS No. 157, the Company has adopted the provisions of SFAS No. 157 with
respect to financial assets and liabilities effective as of January 1, 2008
and its adoption did not have a material impact on its results of operations or
financial condition. The Company is assessing the impact of SFAS No. 157 for
non-financial assets and liabilities and expects that this adoption will not
have a material impact on its results of operations or financial
condition.
3.
RESULTS
OF OPERATIONS FOR MONTY’S RESTAURANT, MARINA AND OFFICE/RETAIL PROPERTY, COCONUT
GROVE, FLORIDA
The
Company, through two 50%-owned entities, Bayshore Landing, LLC (“Landing”) and
Bayshore Rawbar, LLC (“Rawbar”), (collectively, “Bayshore”) owns a restaurant,
office/retail and marina property located in Coconut Grove (Miami), Florida
known as Monty’s (the “Monty’s Property”).
Summarized
combined statement of income for Landing and Rawbar for the three and six months
ended June 30, 2008 and 2007 is presented below (Note: the Company’s ownership
percentage in these operations is 50%):
HMG/COURTLAND
PROPERTIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
Summarized
Combined statements of income
Bayshore
Landing, LLC and
Bayshore
Rawbar, LLC
|
|
For
the three months ended
June
30, 2008
|
For
the three
months ended
June
30, 2007
|
For
the six
months ended
June
30, 2008
|
For
the six
months ended
June
30, 2007
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
Food
and Beverage Sales
|
|
$1,941,000
|
$1,645,000
|
$3,856,000
|
$3,428,000
|
Marina
dockage and related
|
|
307,000
|
315,000
|
639,000
|
648,000
|
Retail/mall
rental and related
|
|
104,000
|
92,000
|
206,000
|
185,000
|
Total
Revenues
|
|
2,352,000
|
2,052,000
|
4,701,000
|
4,261,000
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
Cost
of food and beverage sold
|
|
506,000
|
440,000
|
1,020,000
|
913,000
|
Labor
and related costs
|
|
341,000
|
335,000
|
696,000
|
626,000
|
Entertainers
|
|
56,000
|
49,000
|
111,000
|
103,000
|
Other
food and beverage related costs
|
|
138,000
|
134,000
|
305,000
|
280,000
|
Other
operating costs
|
|
25,000
|
58,000
|
69,000
|
145,000
|
Repairs
and maintenance
|
|
112,000
|
106,000
|
202,000
|
202,000
|
Insurance
|
|
152,000
|
164,000
|
306,000
|
330,000
|
Management
fees
|
|
77,000
|
169,000
|
138,000
|
270,000
|
Utilities
|
|
78,000
|
73,000
|
148,000
|
150,000
|
Ground
rent
|
|
264,000
|
249,000
|
468,000
|
447,000
|
Interest
|
|
236,000
|
246,000
|
472,000
|
490,000
|
Depreciation
|
|
192,000
|
199,000
|
380,000
|
356,000
|
Total
Expenses
|
|
2,177,000
|
2,222,000
|
4,315,000
|
4,312,000
|
|
|
|
|
|
|
Net
Income (loss) before minority interest
|
|
$175,000
|
($170,000)
|
$386,000
|
($51,000)
|
For the
three and six months ended June 30, 2008 Landing and Rawbar combined operations
reported income of $175,000 and $386,000, respectively. This is as
compared to reported losses of $170,000 and $51,000 during the same comparable
periods in 2007, respectively. The primary reasons for the improved results are
increased food and beverage revenues and decreased management
fees. Restaurant sales increased by 18% and 12% for the three and six
month periods ended June 30, 2008, as compared to the same periods in 2007,
respectively. Management fees decreased primarily due to a non-recurring
$100,000 payment to the former manager for termination of the management
services portion of the contract in April 2007.
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
(loss) gain from investments in marketable securities for the three and six
months ended June 30, 2008 and 2007 is summarized below:
|
Three
months ended
June
30,
|
Six
months ended
June
30,
|
Description
|
2008
|
2007
|
2008
|
2007
|
Net
realized (loss) gain from sales of securities
|
($63,000)
|
$140,000
|
($94,000)
|
$204,000
|
Unrealized
net gain (loss) in trading securities
|
36,000
|
(16,000)
|
(121,000)
|
46,000
|
Total
net (loss) gain from investments in marketable securities
|
($27,000)
|
$124,000
|
($215,000)
|
$250,000
|
For the
three and six months ended June 30, 2008 net realized loss gain from sales of
marketable securities of approximately $63,000 and $94,000, respectively,
consisted of approximately $154,000 of gross losses net of $91,000 of gross
gains for the three month period and $262,000 of gross losses net of $168,000 of
gross gains for the six month period.
For
the three and six months ended June 30, 2007 net realized gain from sales of
marketable securities of approximately $140,000 and $204,000, respectively,
consisted of approximately $296,000 of gross gains net of $156,000 of gross
losses for the three month period and $379,000 of gross gains and $175,000 of
gross losses for the six month period.
Investment
gains and losses on marketable securities may fluctuate significantly from
period to period in the future and could have a significant impact on the
Company's net earnings. However, the amount of investment gains or losses on
marketable securities for any given period has no predictive value and
variations in amount from period to period have no practical analytical
value.
5.
OTHER
INVESTMENTS
As of
June 30, 2008, the Company has committed to invest approximately $12.5 million
in other investments primarily in private capital funds, of which approximately
$11.2 million has been funded. The carrying value of other investments (which
reflects distributions and valuation adjustments) is approximately $4.9 million
as of June 30, 2008.
During
the six months ended June 30, 2008 the Company made follow-on contributions to
11 existing investments totaling approximately $485,000. During this
same period the Company received a total of approximately $252,000 in
distributions from 7 existing investments.
Net gain
from other investments for the three and six months ended June 30, 2008 and 2007
is summarized below:
HMG/COURTLAND
PROPERTIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
|
Three
months ended June 30,
|
Six
months ended June 30,
|
Description
|
2008
|
2007
|
2008
|
2007
|
Technology-related
venture fund
|
$22,000
|
--
|
$22,000
|
$48,000
|
Real
estate development and operation
|
--
|
$21,000
|
--
|
56,000
|
Partnership
owning diversified businesses & distressed debt
|
--
|
60,000
|
7,000
|
307,000
|
Income
from investment in 49% owned affiliate (T.G.I.F. Texas,
Inc.)
|
10,000
|
30,000
|
35,000
|
64,000
|
Others,
net
|
94,000
|
254,000
|
94,000
|
267,000
|
Total
net gain from other investments
|
$126,000
|
$365,000
|
$158,000
|
$742,000
|
In April
2008, the Company received approximately $149,000 of cash proceeds from the
redemption of a private equity fund resulting in a gain to the Company of
$94,000.
In April
2007, the Company received approximately $449,000 of cash and stock from an
investment in a privately-held bank which was purchased by a publicly-held
bank. The Company realized a gain of approximately $299,000 on this
transaction (included in table above under “Others, net”).
In
February 2007, the Company received cash distributions primarily consisting of a
$222,000 cash distribution from one investment in a partnership in which one of
its portfolio companies was recapitalized. This distribution exceeded the
carrying amount of the investment and accordingly was recognized as
income.
6.
DERIVATIVE FINANCIAL
INSTRUMENTS
The
Company is exposed to interest rate risk through its borrowing
activities. In order to minimize the effect of changes in interest
rates, the Company has entered into an interest rate swap contract under which
the Company agrees to pay an amount equal to a specified rate of 7.57% times a
notional principal approximating the outstanding loan balance, and to receive in
return an amount equal to the one month LIBOR rate plus 2.45% times the same
notional amount. The Company designated this interest rate swap
contract as a cash flow hedge. As of June 30, 2008 the fair value
(net of 50% minority interest) was an unrealized loss of $277,000 and as of
December 31, 2007 the fair value (net of 50% minority interest) of the cash flow
hedge was an unrealized loss of $262,000. These amounts have been
recorded as other comprehensive loss and will be reclassified to interest
expense over the life of the swap contract.
7.
MODIFICATION OF LOAN
PAYABLE TO BANK
As
previously reported, the loan secured by the Monty’s property includes certain
covenants including debt service coverage with which the Company was not in
compliance as of December 31, 2007. On March 13, 2008, the Company obtained
a notice of forbearance from the lender of the loan, in which the bank
agreed to not declare an event of default during the forbearance period (as
presently extended). The Company agreed to restructure the loan agreement by
providing a collateral pledge in satisfaction of the loan covenants and in April
2008 the Company deposited $2 million into a money market account held at that
bank. The amended loan documents are presently being
finalized.
HMG/COURTLAND
PROPERTIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
8.
SEGMENT
INFORMATION
The
Company has three reportable segments: Real estate rentals; Food and Beverage
sales; and Other investments and related income. The Real estate and
rentals segment primarily includes the leasing of its Grove Isle property,
marina dock rentals at both Monty’s and Grove Isle marinas, and the leasing of
office and retail space at its Monty’s property. The Food and
Beverage sales segment consists of the Monty’s restaurant
operation. Lastly, the Other investment and related income segment
includes all of the Company’s other investments, marketable securities, loans,
notes and other receivables and the Grove Isle spa operations which individually
do not meet the criteria as a reportable segment.
|
|
Three
months ended
|
Six
months ended
|
|
|
June
30,
|
June
30,
|
|
|
2008
|
2007
|
2008
|
2007
|
Net
Revenues:
|
|
|
|
|
|
Real
estate and marina rentals
|
|
$832,000
|
$823,000
|
$1,686,000
|
$1,653,000
|
Food
and beverage sales
|
|
1,940,000
|
1,645,000
|
3,856,000
|
3,428,000
|
Spa
revenues
|
201,000
|
168,000
|
424,000
|
379,000
|
Total
Net Revenues
|
|
$2,973,000
|
$2,636,000
|
$5,966,000
|
$5,460,000
|
|
|
|
|
|
|
Income
(loss) before income taxes:
|
|
|
|
|
|
Real
estate and marina rentals
|
|
$110,000
|
$40,000
|
$247,000
|
$145,000
|
Food
and beverage sales
|
|
88,000
|
(52,000)
|
182,000
|
11,000
|
Other
investments and related income
|
(128,000)
|
64,000
|
(654,000)
|
189,000
|
Total
income (loss) before income taxes
|
|
$70,000
|
$52,000
|
($225,000)
|
$345,000
|
HMG/COURTLAND
PROPERTIES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
9.
INCOME
TAXES
We
adopted the provisions of Financial Accounting Standards Board (“FASB”)
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes-an
interpretation of FASB Statement No. 109” (“FIN 48”), on January 1,
2007. FIN 48 clarifies the accounting for uncertainty in income taxes recognized
in an enterprise’s financial statements in accordance with FASB Statement 109,
“Accounting for Income Taxes”, and prescribes a recognition threshold and
measurement process for financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. FIN 48 also provides
guidance on derecognition, classification, interest and penalties, accounting in
interim periods, disclosure and transition.
Based on
our evaluation, we have concluded that there are no significant uncertain tax
positions requiring recognition in our financial statements. Our evaluation was
performed for the tax years ended December 31, 2004, 2005, 2006 and 2007,
the tax years which remain subject to examination by major tax jurisdictions as
of June 30, 2008.
We may
from time to time be assessed interest or penalties by major tax jurisdictions,
although any such assessments historically have been minimal and immaterial to
our financial results. In the event we have received an assessment for interest
and/or penalties, it has been classified in the financial statements as selling,
general and administrative expense.
Item
2.
Management's Discussion and Analysis
of
Financial
Condition and
Results of Operations
RESULTS OF
OPERATIONS
The
Company reported net losses of approximately $13,000 (or $.01 per share) and
approximately $267,000 (or $.26 per share) for the three and six months ended
June 30, 2008, respectively. This is as compared with a net loss of
approximately $4,000 (or $.003 per share) and net income of approximately
$218,000 (or $.21 per share) for the three and six months ended June 30, 2007,
respectively.
As
discussed below, total revenues for the three and six months ended June 30, 2008
as compared with the same periods in 2007, increased by approximately $337,000
(13%) and $506,000 (9%), respectively. Total expenses for the three
and six months ended June 30, 2008, as compared with the same periods in 2007,
increased by approximately $74,000 (2%) and $120,000 (2%),
respectively.
REVENUES
Rentals
and related revenues for the three and six months ended June 30, 2008 as
compared with the same periods in 2007 increased by $19,000 (5%) and $36,000
(5%). The increases were due to increased rental revenue from the Grove Isle
property as a result of inflation adjustments as provided in the lease and
increased rental revenue from the Monty’s retail space.
Restaurant
operations:
Summarized
statements of income for the Company’s Monty’s restaurant for the three and six
months ended June 30, 2008 and 2007 is presented below:
|
For
the three months
|
|
For
the six months
|
|
ended
June 30,
|
|
ended
June 30,
|
|
2008
|
2007
|
|
2008
|
2007
|
Revenues:
|
|
|
|
|
|
Food
and Beverage Sales
|
$1,941,000
|
$1,645,000
|
|
$3,856,000
|
$3,428,000
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
Cost
of food and beverage sold
|
506,000
|
440,000
|
|
1,020,000
|
913,000
|
Labor
and related costs
|
341,000
|
335,000
|
|
696,000
|
626,000
|
Entertainers
|
56,000
|
49,000
|
|
111,000
|
103,000
|
Other
food and beverage direct costs
|
79,000
|
64,000
|
|
149,000
|
125,000
|
Other
operating costs
|
93,000
|
82,000
|
|
156,000
|
155,000
|
Repairs
and maintenance
|
56,000
|
57,000
|
|
98,000
|
122,000
|
Insurance
|
76,000
|
85,000
|
|
155,000
|
172,000
|
Management
and accounting fees
|
22,000
|
151,000
|
|
57,000
|
232,000
|
Utilities
|
62,000
|
45,000
|
|
128,000
|
94,000
|
Rent
(as allocated)
|
205,000
|
176,000
|
|
387,000
|
343,000
|
Total
Expenses
|
1,496,000
|
1,484,000
|
|
2,957,000
|
2,885,000
|
|
|
|
|
|
|
Income
before depreciation and minority interest
|
$445,000
|
$161,000
|
|
$899,000
|
$543,000
|
Management's
Discussion and Analysis of Financial
Condition
and Results of Operations (continued)
The
following table summarizes the amounts on the table above as a percentage of
sales:
All
amounts as a percentage of sales
|
For
the three months
|
|
For
the six months
|
|
ended
June 30,
|
|
ended
June 30,
|
|
2008
|
2007
|
|
2008
|
2007
|
Revenues:
|
|
|
|
|
|
Food
and Beverage Sales
|
100%
|
100%
|
|
100%
|
100%
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
Cost
of food and beverage sold
|
26%
|
27%
|
|
27%
|
27%
|
Labor
and related costs
|
18%
|
20%
|
|
18%
|
18%
|
Entertainers
|
3%
|
3%
|
|
3%
|
3%
|
Other
food and beverage direct costs
|
4%
|
4%
|
|
4%
|
3%
|
Other
operating costs
|
5%
|
5%
|
|
4%
|
5%
|
Repairs
and maintenance
|
3%
|
3%
|
|
3%
|
3%
|
Insurance
|
4%
|
5%
|
|
4%
|
5%
|
Management
fees
|
1%
|
9%
|
|
1%
|
7%
|
Utilities
|
3%
|
3%
|
|
3%
|
3%
|
Rent
(as allocated)
|
10%
|
11%
|
|
10%
|
10%
|
Total
Expenses
|
77%
|
90%
|
|
77%
|
84%
|
|
|
|
|
|
|
Income
before depreciation and minority interest
|
23%
|
10%
|
|
23%
|
16%
|
For the
three and six months ended June 30, 2008 as compared with the same periods in
2007 restaurant sales increased by approximately $296,000 (or 18%) and $428,000
(or 12%), respectively. Comparing these same three and six month periods food
sales increased by $139,000 (or 14%) and $212,000 (or 10%) and beverage sales
increased by $156,000 (or 23%) and $216,000 (or 16%).
For the
three and six months ended June 30, 2008 labor and related costs as a percentage
of sales were 18% as compared to 20% and 18% for the three and six months ended
June 30, 2007, respectively. This is partially attributable to an
increase in less labor intensive beverage sales as a percentage of total sales
during the three months ended June 30, 2008.
Management's
Discussion and Analysis of Financial
Condition
and Results of Operations (continued)
Marina
operations:
Summarized
and combined statements of income for marina operations:
(The
Company owns 50% of the Monty’s marina and 95% of the Grove Isle
marina)
|
For
the three months
|
|
For
the six months
|
|
ended
June 30,
|
|
ended
June 30,
|
|
2008
|
2007
|
|
2008
|
2007
|
Marina
Revenues:
|
|
|
|
|
|
Monty's
dockage fees and related income
|
$307,000
|
$314,000
|
|
$639,000
|
$648,000
|
Grove
Isle marina slip owners dues and dockage fees
|
120,000
|
123,000
|
|
241,000
|
235,000
|
Total
marina revenues
|
427,000
|
437,000
|
|
880,000
|
883,000
|
|
|
|
|
|
|
Marina
Expenses:
|
|
|
|
|
|
Labor
and related costs
|
64,000
|
59,000
|
|
120,000
|
117,000
|
Insurance
|
49,000
|
50,000
|
|
97,000
|
100,000
|
Management
fees
|
19,000
|
19,000
|
|
39,000
|
36,000
|
Utilities,
net of tenant reimbursement
|
2,000
|
17,000
|
|
(6,000)
|
34,000
|
Rent
and bay bottom lease expense
|
59,000
|
60,000
|
|
122,000
|
122,000
|
Repairs
and maintenance
|
33,000
|
52,000
|
|
71,000
|
79,000
|
Other
|
27,000
|
39,000
|
|
47,000
|
59,000
|
Total
marina expenses
|
253,000
|
296,000
|
|
490,000
|
547,000
|
|
|
|
|
|
|
Income
before depreciation and minority interest
|
$174,000
|
$141,000
|
|
$390,000
|
$336,000
|
Marina
revenue for the three and six months ended June 30, 2008 as compared to the same
periods in 2007 remained consistent. Marina expenses for the three and six
months ended June 30, 2008 as compared to the same periods in 2007 decreased by
approximately $43,000 (or 14%) and $57,000 (or 10%) primarily due to decreased
utilities expenses as a result of increased electrical pass through charges to
marina tenants.
Management's
Discussion and Analysis of Financial
Condition
and Results of Operations (continued)
Spa
operations:
Below are
summarized statements of income for Grove Isle spa operations. The Company owns
50% of the Grove Isle Spa with the other 50% owned by an affiliate of the Noble
House Resorts, the tenant of the Grove Isle Resort:
Summarized
statements of income of spa operations
|
Three
months
ended
June 30,
2008
|
Three
months
ended
June 30,
2007
|
Six
months
ended
June 30,
2008
|
Six
months
ended
June 30,
2007
|
Revenues:
|
|
|
|
|
Services
provided
|
$188,000
|
$155,000
|
$397,000
|
$352,000
|
Membership
and other
|
13,000
|
13,000
|
27,000
|
27,000
|
Total
spa revenues
|
201,000
|
168,000
|
424,000
|
379,000
|
Expenses:
|
|
|
|
|
Cost
of sales (commissions and other)
|
54,000
|
39,000
|
116,000
|
102,000
|
Salaries,
wages and related
|
59,000
|
68,000
|
121,000
|
142,000
|
Other
operating expenses
|
54,000
|
71,000
|
88,000
|
122,000
|
Management
and administrative fees
|
13,000
|
9,000
|
23,000
|
25,000
|
Other
non-operating expenses
|
12,000
|
19,000
|
24,000
|
27,000
|
Total
Expenses
|
192,000
|
206,000
|
372,000
|
418,000
|
|
|
|
|
|
Income
(loss) before interest, depreciation and minority interest
|
$9,000
|
($38,000)
|
$52,000
|
($39,000)
|
Spa
revenues for the three and six months ended June 30, 2008 as compared with the
same periods in 2007 increased by $33,000 (or 20%) and $45,000 (or
12%). The spa is benefiting from increased occupancy and overall
improved operations at the Grove Isle resort during 2008.
Net (loss) gain from
investments in marketable securities:
Net loss
from investments in marketable securities for the three and six months ended
June 30 2008 was approximately $27,000 and $215,000, respectively, as compared
with a net gain from investments in marketable securities of approximately
$124,000 and $250,000 for the same comparable periods in 2007. For further
details refer to Note 4 to Condensed Consolidated Financial Statements
(unaudited).
Net income from other
investments:
Net
income from other investments for the three and six months ended June 30, 2008
was approximately $126,000 and $158,000, respectively, as compared with net
income of approximately $365,000 and $742,000 for the same comparable periods in
2007. The decrease in income was primarily from a non-recurring 2007 cash
distribution from an investment in a bank and in a partnership owning
diversified businesses. For further details refer to Note 5 to
Condensed Consolidated Financial Statements (unaudited).
Interest, dividend and other
income:
Interest
and dividend income for the three and six months ended June 30, 2008 was
approximately $248,000 and $336,000, respectively, as compared with
approximately $104,000 and $244,000, for the same periods in 2007. The increase
from last year in the three and six month periods of $144,000 (or 139%) and
$92,000 (or 38%), respectively was primarily the result of real estate
commission earned by Courtland Houston, Inc. of approximately $168,000 in June
2008.
Management's
Discussion and Analysis of Financial
Condition
and Results of Operations (continued)
EXPENSES
Expenses
for rental and other properties for the three and six months ended June 30, 2008
were consistent with that for the three and six months ended June 30,
2007.
For
comparisons of all food and beverage related expenses refer to Restaurant
Operations (above) summarized statement of income for Monty’s
restaurant.
For
comparisons of all marina related expenses refer to Marina Operations (above)
for summarized and combined statements of income for marina
operations.
For
comparisons of all spa related expenses refer to Spa Operations (above) for
summarized statements of income for spa operations.
Adviser’s
base fee for the three and six months ended June 30, 2008 as compared to the
same periods in 2007 increased by $30,000 (or 13%) and $60,000 (or
13%). This was the result of the amendment to the Advisory Agreement
effective January 1, 2008, as previously reported.
Professional
fees for the three and six months ended June 30, 2008 as compared to the same
periods in 2007 decreased by $29,000 (or 31%) and $48,000 (or
27%). This was due to non-recurring restaurant consulting fees of
approximately $28,000 paid in May 2007.
Interest
expense for the three and six months ended June 30, 2008 as compared to the same
periods in 2007 decreased by $73,000 (or 18%) and $120,000 (or
15%). This was primarily due to lower interest rates in 2008 versus
2007.
Minority
partner’s interest in operating (gains) losses for the three and six months
ended June 30, 2008 as compared to the same periods in 2007 increased by
$200,000 (or 160%) and $258,000 (or 294%). This was primarily the
result of increased operating gains from the Monty’s operations and from the
Grove Isle Spa operations.
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 2008 primarily consist of maturities of debt
obligations of approximately $4 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
2008 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. The obligation due to TGIF will be paid with funds available
from distributions from the Company’s investment in TGIF and from available
cash.
Management's
Discussion and Analysis of Financial
Condition
and Results of Operations (continued)
MATERIAL COMPONENTS OF CASH
FLOWS
For the
six months ended June 30, 2008, net cash provided by operating activities was
approximately $1.1 million. This was primarily due to improved cash from
operations.
For the
six months ended June 30, 2008, net cash provided by investing activities was
approximately $838,000. This consisted primarily of approximately $2.2 million
in net proceeds from sales of marketable securities and collections of notes
receivable of approximately $500,000, partially offset by increased investments
in marketable securities of $1.1 million, contributions to other investments of
$485,000 and improvements to the Monty’s property of approximately
$476,000.
For the
six months ended June 30, 2008, net cash used in financing activities was
approximately $1.3 million consisting of $2 million restricted cash relating to
the loan modification discussed in Note 7. $1 million of this restricted cash
was contributed by the Company 50% partner in the Monty’s
property. Repayments of loans accounted for the other $337,000 cash
used in financing activities.
Not
applicable
(a)
|
Evaluation
of Disclosure Controls and
Procedures.
|
Our Chief
Executive Officer and Chief Financial Officer, after evaluating the
effectiveness of our disclosure controls and procedures (as defined in the
Securities Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the
period covered by this Quarterly Report on Form 10-Q have concluded that, based
on such evaluation, our disclosure controls and procedures were 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 Securities Exchange Act of 1934, was made known to them by others
within those entities and reported within the time periods specified in the
SEC's rules and forms.
(b)
|
Changes
in Internal Control Over Financial
Reporting.
|
There
were no changes in the Company's internal controls over financial reporting
identified in connection with the evaluation of such internal control over
financial reporting that occurred during our last fiscal quarter which have
materially affected, or reasonably likely to materially affect, our internal
control over financial reporting
.
PART
II. OTHER INFORMATION
(a) Certifications
pursuant to 18 USC Section 1350-Sarbanes-Oxley Act of 2002.
Filed
herewith.
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: August
13, 2008
|
/s/
Lawrence Rothstein
|
|
President,
Treasurer and Secretary
|
|
Principal
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
Dated: August
13, 2008
|
/s/Carlos
Camarotti
|
|
Vice
President- Finance and Controller
|
|
Principal
Accounting Officer
|
(18)
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