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, 2002
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.
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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 July 31, 2002.
HMG/COURTLAND PROPERTIES, INC.
Index
PAGE
NUMBER
PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
June 30, 2002 (Unaudited) and December 31, 2001..............................................1
Condensed Consolidated Statements of Operations for the
Three and Six Months Ended June 30, 2002 and 2001 (Unaudited)................................2
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 2002 and 2001 (Unaudited)..........................................3
Notes to Condensed Consolidated Financial Statements (Unaudited).............................4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................................7
PART II. Other Information
Item 1. Legal Proceedings . . . ..........................................................11
Item 6. Reports on Form 8-K...............................................................11
Signatures...............................................................................................12
Certification Pursuant to 18 U.S.C. Section 1350.........................................................13
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 Part I Financial Information
Item I Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, December 31,
2002 2001
---- ----
ASSETS
Investment properties, net of accumulated depreciation:
Commercial and industrial $2,800,322 $2,872,783
Hotel and club facility 4,808,255 5,008,652
Yacht slips 550,900 673,722
Land held for development 1,854,318 1,864,558
------------------------ -------------------------
Total investment properties, net 10,013,795 10,419,715
Cash and cash equivalents 2,656,072 2,598,536
Investments in marketable securities 3,344,459 4,605,085
Other investments 6,564,932 6,097,144
Investment in affiliate 2,863,454 2,851,129
Cash restricted pending delivery of securities 163,091 430,131
Loans, notes and other receivables 1,254,921 1,288,124
Notes and advances due from related parties 1,199,723 945,872
Deferred taxes 372,000 139,000
Other assets 205,244 253,891
------------------------ -------------------------
TOTAL ASSETS $28,637,691 $29,628,627
======================== =========================
LIABILITIES
Mortgages and notes payable $8,646,905 $8,869,887
Accounts payable and accrued expenses 230,519 220,019
Sales of securities pending delivery 118,621 183,340
Income taxes payable 144,174 219,174
Other liabilities 232,665 382,325
------------------------ -------------------------
TOTAL LIABILITIES 9,372,884 9,874,745
Minority interests 401,498 411,692
------------------------ -------------------------
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 38,905,406 38,534,768
Undistributed losses from operations (45,981,840) (45,132,321)
------------------------ -------------------------
20,811,173 21,290,054
Less: Treasury stock, at cost (226,500 shares) (1,659,114) (1,659,114)
Notes receivable from exercise of stock options (288,750) (288,750)
------------------------ -------------------------
TOTAL STOCKHOLDERS' EQUITY 18,863,309 19,342,190
------------------------ -------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $28,637,691 $29,628,627
======================== =========================
See notes to condensed consolidated financial statements (unaudited)
(1)
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
REVENUES Three months ended June 30, Six months ended June 30,
2002 2001 2002 2001
---- ---- ---- ----
Real estate rentals and related revenue $410,311 $370,787 $814,816 $708,589
Marina revenues 113,410 117,927 241,550 250,732
Net (loss) gain from investments in marketable securities (558,614) (53,539) (755,175) 234,646
Net (loss) gain from other investments (69,611) (5,214) (38,114) 144,300
Interest and dividend income 72,216 130,900 150,790 230,657
---------------------------- ------------------------------
Total Revenues (32,288) 560,861 413,867 1,568,924
EXPENSES
Other operating expenses:
Rental and other properties 143,732 130,238 292,097 261,204
Marina expenses 82,606 109,352 172,711 219,989
Depreciation and amortization 151,823 146,498 303,698 295,416
Advisor's base fee 165,000 165,000 330,000 330,000
General and administrative 52,404 46,033 120,759 104,314
Professional fees and expenses 38,370 81,446 79,077 116,411
Directors' fees and expenses 12,465 17,421 31,188 30,813
---------------------------- ------------------------------
Total operating expenses 646,400 695,988 1,329,530 1,358,147
Interest expense 134,897 188,246 271,963 387,870
Minority partners' interests in operating (loss) gains of
consolidated entities (19,121) (10,592) (31,857) 2,892
---------------------------- ------------------------------
Total expenses 762,176 873,642 1,569,636 1,748,909
---------------------------- ------------------------------
(Loss) income before sales of properties and income taxes (794,464) (312,781) (1,155,769) (179,985)
Gain on sales of properties, net 362,943 528,959 370,638 1,814,469
---------------------------- ------------------------------
(Loss) income before income taxes (431,521) 216,178 (785,131) 1,634,484
(Benefit from) provision for income taxes (131,000) 138,000 (306,250) 720,000
---------------------------- ------------------------------
Net (loss) income ($300,521) $78,178 ($478,881) $914,484
============================ ==============================
Net (Loss) Income Per Common Share:
Basic and diluted ($0.28) $0.07 ($0.44) $0.84
======= ===== ======= =====
Weighted average common shares outstanding 1,089,135 1,089,135 1,089,135 1,089,135
See notes to condensed consolidated financial statements (unaudited)
(2)
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six months ended
June 30,
2002 2001
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income ($478,881) $914,484
Adjustments to reconcile net (loss) income to net cash used in
operating activities:
Depreciation and amortization 303,698 295,416
Net loss (gain) from other investments 38,114 (144,300)
Gain on sales of properties, net (370,638) (1,814,469)
Net loss (gain) from marketable securities 755,175 (234,646)
Minority partners' interest in operating (losses) gains (31,857) 2,892
Changes in assets and liabilities:
Decrease in other assets and other receivables 59,660 68,404
Net proceeds from sales and redemptions of securities 1,804,557
Decrease in restricted cash 267,040 86,690
(Decrease) increase in sales of securities pending delivery (267,943) 130,026
Increased investments in marketable securities (1,095,883)
Increase (decrease) in accounts payable and accrued expenses 10,500 (265,389)
(Decrease) increase in current income taxes payable (75,000) 651,000
(Increase) decrease in deferred taxes (233,000) 69,000
(Decrease) increase in other liabilities (149,660) 428,690
----------------- ------------------
Total adjustments 1,014,763 (726,686)
----------------- ------------------
Net cash provided by operating activities 535,882 187,798
----------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Aquisitions and improvements of properties (98,605)
Net proceeds from disposals of properties 532,499 2,989,856
(Increase) decrease in notes and advances from related parties (253,851) 81,421
Increase in mortgage loans and notes receivables (323,207)
Decrease in mortgage loans and notes receivables 14,658 66,098
Distributions from other investments 81,024 165,939
Contributions to other investments (599,251) (669,000)
Net proceeds from sales and redemptions of securities 2,166,385
Increased investments in marketable securities (1,777,105)
----------------- ------------------
Net cash (used in) provided by investing activities (224,921) 2,601,782
----------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of mortgages and notes payables (222,982) (622,398)
Net distributions to minority partners (30,443) (480,943)
----------------- ------------------
Net cash used in financing activities (253,425) (1,103,341)
----------------- ------------------
Net increase in cash and cash equivalents 57,536 1,686,239
Cash and cash equivalents at beginning of the period 2,598,536 1,923,947
----------------- ------------------
Cash and cash equivalents at end of the period $2,656,072 $3,610,186
================= ==================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $170,000 $317,000
================= ==================
Cash paid during the period for income taxes $1,000 ---
================= ==================
See notes to condensed consolidated financial statements (unaudited)
(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, 2001. The balance sheet as of December 31, 2001 was
derived from audited financial statements as of that date. The results of
operations for the six months ended June 30, 2002 are not necessarily indicative
of the results to be expected for the full year. Certain balances have been
reclassified to conform with the current period presentation.
2. RECENT ACCOUNTING PRONOUNCEMENTS.
In July, 2001, the Financial Accounting Standard Board issued
Statements on Financial Accounting Standards (SFAS) No. 141 (Business
Combinations) and 142 (Goodwill and Other Intangible Assets). SFAS No. 141 among
other things eliminates the use of the pooling of interest method of accounting
for business combination. Under the provision of SFAS No. 142, goodwill will no
longer be amortized, but will be subject to a periodic test for impairment based
upon fair value. SFAS No. 141 is effective for all business combinations
initiated after June 30, 2001. SFAS No. 142 must be adopted in the first quarter
of fiscal years beginning after December 15, 2001. The adoption of these
statements did not have a material impact on the Company's financial statements.
In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. This Statement addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
This Statement supersedes FASB Statement No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, and the
accounting and reporting provisions of APB Opinion No. 30, Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions, for the disposal of a segment of
a business (as previously defined in that Opinion). This Statement also amends
ARB No. 51, Consolidated Financial Statements, to eliminate the exception to
consolidation for a subsidiary for which control is likely to be temporary. The
provisions of this Statement were effective for financial statements issued for
fiscal years beginning after December 15, 2001, and interim periods within those
fiscal years, with early application encouraged. The provisions of this
Statement generally are to be applied prospectively. The adoption of SFAS No.
144 did not have a material impact on the Company's financial statements.
(4)
HMG/COURTLAND PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
3. GAIN ON SALES OF PROPERTIES
For the three months ended June 30, 2002 Grove Isle Yacht Club
Associates (GIYCA) sold 3 yacht slips located in Miami, Florida resulting in a
net gain to the Company of approximately $77,000. For the six months ended June
30, 2002 GIYCA has sold 4 yacht slips resulting in a net gain to the Company of
approximately $85,000.
In May 2002, HMG Fieber Associates sold its property located in
Watertown, New York, resulting in a net gain to the Company of approximately
$57,000.
In April 2002, Courtland Investments sold approximately 50 acres of
vacant land located in Middleborough, Massachusetts, resulting in a net gain to
the Company of approximately $229,000.
4. INVESTMENTS IN MARKETABLE SECURITIES
Investments in marketable securities consist primarily of large
capital corporate equity and debt securities in varying industries 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. Effective in December 2001, management determined that the classification
of its entire marketable securities portfolio as trading (versus available for
sale, as defined by accounting principles generally accepted in the United
States of America) would be more consistent with the Company's overall current
investment objectives and activities. As a result, beginning December 31, 2001,
all unrealized gains and losses on the Company's marketable securities portfolio
were recorded in the statement of operations. As of June 30, 2001, gross
unrealized gains and losses on available for sale securities were approximately
$677,000 and $1,165,000, respectively, and a net unrealized loss of
approximately $488,000 was recorded in accumulated comprehensive income in
stockholders' equity.
Net (loss) gain from investments in marketable securities for the
three and six months ended June 30, 2002 and 2001 is summarized below:
Three Months Ended June 30, Six Months Ended June 30,
---------------------------------------------------------------------------------------------------------------
Description 2002 2001 2002 2001
---------------------------------------------------------------------------------------------------------------
Net realized gain from sales of
securities $159,479 $51,353 $100,387 $1,068,561
Unrealized net loss in trading
securities (515,860) -- (652,338) --
Net change in sales of securities
pending delivery (202,233) (104,892) (203,224) (833,915)
--------------------------------------------------------------------------
Total net (loss) gain ($558,614) ($53,539) ($755,175) $234,646
==========================================================================
For the three months ended June 30, 2002 net realized gain from
sales of marketable securities of approximately $159,000 consisted of
approximately $338,000 of gross gains net of $179,000 of gross losses. For the
six months ended June 30, 2002 net realized gain from sales of marketable
securities of approximately $100,000 consisted of approximately $501,000 of
gross gains net of $401,000 of gross losses.
(5)
HMG/COURTLAND PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Unaudited)
The net change in unrealized loss of marketable securities for the
three and six months ended June 30, 2002 was an additional net loss of
approximately $515,000 and $652,000, respectively.
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.
5. OTHER INVESTMENTS
As of June 30, 2002, the Company has committed to invest
approximately $11 million in other investments primarily in private capital
funds, of which approximately $9.1 million has been funded. The carrying value
of other investments is approximately $6.6 million.
During the three months ended June 30, 2002 the Company took an
additional write down on one of its venture capital funds of approximately
$63,000. The fund written down was focused on internet related businesses and
had been substantially written down as of December 31, 2001. This further write
down brings the carrying value of this fund to $25,000, its estimated net
realizable value. No further valuation adjustments were considered necessary for
the six months ended June 30, 2002.
As a further diversification of the Company's investments in
private capital funds, during the three months ended March 31, 2002, $800,000
was committed to purchase limited partnership interests in two private capital
funds. Both funds seek to maximize total return on capital through investments
in the debt securities of undervalued or financially troubled companies. Both
commitments (one for $500,000 and the other for $300,000) are in funds managed
by experienced general partners each with over $6 billion under management in
funds and accounts focused on investments in distressed companies and related
investment opportunities. The commitment of $300,000 will seek to deploy 50% of
its assets in Asian investments (primarily Japan and Korea).
6. ADVISORY AGREEMENT
On March 22, 2002, the Board of Directors approved, subject to
shareholder approval, the amendment and renewal of the Advisory Agreement
between the Company and the Advisor for a term commencing January 1, 2003, and
expiring December 31, 2003.
The sole amendment to the Advisory Agreement that is being proposed at
the Annual Meeting (to be held on September 20, 2002) is the increase in the
remuneration of the Advisor to increase the Advisor's current regular
compensation monthly fee from $55,000 to $75,000, or $660,000 to $900,000
annually. All other terms of the existing Advisory Agreement will remain the
same. The increase in remuneration of the Advisor is being proposed by the Board
after taking into account the increased costs of the Advisor in managing the
affairs of the Company, the economic factors impacting the real estate industry
and competitive conditions in today's market place. The amendment and renewal
was approved unanimously by the Directors unaffiliated with the Advisor.
(6)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
The Company reported a net loss of approximately $300,000 (or $.28 per
share) and $479,000 (or $.44 per share) for the three and six months ended June
30, 2002, respectively. This is as compared with net income of approximately
$78,000 (or $.07 per share) and $914,000 (or $.84 per share) for the three and
six months ended June 30, 2001, respectively. Total revenues for the three and
six months ended June 30, 2002, as compared with the same periods in 2001,
decreased by approximately $593,000 (or 106%) and $1.2 million (or 74%),
respectively. Total expenses for the three and six months ended June 30, 2002,
as compared with the same periods in 2001, decreased by approximately $111,000
(or 13%) and $179,000 (or 10%), respectively. Gain on sales of properties for
the three and six months ended June 30, 2002 was approximately $363,000 and
$371,000, respectively. This is as compared with gains of $529,000 and $1.8
million for the three and six months ended June 30, 2001, respectively.
REVENUES
Rentals and related revenues for the three and six months ended June
30, 2002 were approximately $410,000 and $815,000, respectively. This is as
compared with approximately $371,000 and $709,000 for the same comparable
periods in 2001, respectively. These increases of approximately $39,000 (or 11%)
and $106,000 (or 15%) for the three and six-month comparable periods was due to
increased rent from the Company's Grove Isle hotel property in accordance with
changes in the Consumer Price Index and increased rent from the Company's
Fashion Square shopping center due to an additional tenant added in the fourth
quarter of 2001.
Net loss from investments in marketable securities for the three and
six months ended June 30, 2002 was approximately $559,000 and $755,000,
respectively. This is as compared with a net loss of approximately $54,000 for
the same comparable three month period in 2002 and a net gain of approximately
$235,000 for the same comparable six month period in 2002. See discussion in
Note 4 to Condensed Consolidated Financial Statements.
Net loss from other investments for the three and six months ended
June 30, 2002 was approximately $70,000 and $38,000, respectively. This is as
compared with a net loss of approximately $5,000 for the same three-month
comparable period in 2001 and a net gain of approximately $144,000 for the same
six-month comparable period in 2001. The decrease of approximately $65,000 for
the three-month comparable periods was primarily attributable to a valuation
write-down of a venture capital fund as discussed in Note 5 to Condensed
Consolidated Financial Statements. The decrease of approximately $182,000 for
the six-month comparable periods was the result of non-recurring gains due to
distributions from investments in the second quarter of 2001.
Interest and dividend income for the three and six months ended June
30, 2002 was approximately $72,000 and $151,000, respectively. This is as
compared with approximately $131,000 and $231,000 for the same comparable
periods in 2001, respectively. These decreases of approximately $59,000 (or 45%)
and $80,000 (or 35%) for the three and six month comparable periods,
respectively, were primarily attributable to decreased dividend income from
investments in marketable securities.
(7)
Management's Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
EXPENSES
Rental and other properties expenses for the three and six months
ended June 30, 2002 were approximately $144,000 and $292,000, respectively. This
is as compared with approximately $130,000 and $261,000 for the same comparable
periods in 2001. These increases of approximately $14,000 (or 11%) and $31,000
(or 12%) for the three and six-month comparable periods, respectively, were
primarily the result of increased insurance expense at the Grove Isle hotel
property of approximately $30,000 partially offset by lower operating costs at
HMG Fieber properties. The property insurance at the Grove Isle hotel property
is paid by the tenant and accordingly a corresponding insurance revenue amount
is included in rental and related revenues. Changes in insurance costs for this
property do not impact the Company's net income.
Marina expenses for the three and six months ended June 30, 2002 were
approximately $83,000 and $173,000, respectively. This is as compared with
approximately $109,000 and $220,000 for the same periods in 2001. These
decreases of approximately $26,000 (or 24%) and $47,000 (or 21%) for the three
and six-month comparable periods in 2001, respectively, were primarily
attributable to lower insurance costs as a result of the elimination of
windstorm coverage for the marina slips in 2002. The Company believes that in
light of the increased cost of this insurance (approximately 100% from 2001) and
the large deductibles now required, it is more effective to self insure the
marina slips for this particular peril, other coverage is still maintained on
this property.
Professional fees and expenses for the three and six months ended June
30, 2002 were approximately $38,000 and $79,000, respectively. This is as
compared with approximately $81,000 and $116,000 for the same periods in 2001.
These decreases of approximately $43,000 (or 53%) and $37,000 (or 32%) for the
three and six-month comparable periods in 2001, respectively, were primarily
attributable to lower legal fees relating to the Company's proxy filing.
Interest expense for the three and six months ended June 30, 2002 was
approximately $135,000 and $272,000, respectively. This is as compared with
approximately $188,000 and $388,000, respectively, for the same comparable
periods in 2001. These decreases of approximately $53,000 (or 28%) and $116,000
(or 30%) for the three and six-month comparable periods, respectively, were
primarily attributable to decreased interest rates on bank loans and on amounts
due to affiliate (T.G.I.F. Texas, Inc.).
Benefit from income taxes for the three and six months ended June 30,
2002 was approximately $131,000 and $306,000, respectively, consisting of
$145,000 of deferred benefit net of $14,000 of current provision for the three
months ended June 30, 2002 and $233,000 of deferred benefit and $73,000 of
current benefit for the six months ended June 30, 2002. The increase in benefits
from the prior year provisions is due primarily to non recurring gain on sales
of properties in 2001.
(8)
Management's Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
EFFECT OF INFLATION:
Inflation affects the costs of operating and maintaining the Company's
investments and the availability and terms of financing. 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 2002 primarily consist of
maturities of debt obligations of approximately $3.7 million and commitments to
fund private capital investments of approximately $1.9 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 2002 is a note payable to the Company's 49% owned affiliate, T.G.I.F. Texas,
Inc. ("TGIF") of approximately $3.6 million. This amount is due on demand. The
obligation due to TGIF will be paid with funds available from distributions from
its investment in TGIF and from available cash.
MATERIAL COMPONENTS OF CASH FLOWS
For the six months ended June 30, 2002, net cash provided by operating
activities was approximately $536,000. Included in this amount are net proceeds
from sales of marketable securities of approximately $1.8 million less purchases
of marketable securities of approximately $1.1 million.
For the six months ended June 30, 2002, net cash used in investing
activities was approximately $225,000. This was comprised primarily of
contributions to other investments of approximately $599,000 and increased notes
and advances to related parties of approximately $254,000 less proceeds from
sales of properties of $532,000 and distributions from other investments of
approximately $81,000.
For the six months ended June 30, 2001, net cash used in financing
activities was approximately $253,000 consisting of repayments of mortgages and
notes payable of $223,000 and distributions to minority partners of $30,000.
RECENT ACCOUNTING PRONOUNCEMENTS.
In July, 2001, the Financial Accounting Standard Board issued
Statements on Financial Accounting Standards (SFAS) No. 141 (Business
Combination) and 142 (Goodwill and Other Intangible Assets). SFAS No. 141 among
other things eliminates the use of the pooling of interest method of accounting
for business combination. Under the provision of SFAS No. 142, goodwill will no
longer be amortized, but will be subject to a periodic test for impairment based
upon fair value. SFAS No. 141 is effective for all business combinations
initiated after June 30, 2001. SFAS No. 142 must be adopted in the first quarter
of fiscal years beginning after December 15, 2001. The adoption of these
statements did not have a material impact on the Company's financial statements.
(9)
Management's Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. This Statement addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. This Statement
supersedes FASB Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, and the accounting and
reporting provisions of APB Opinion No. 30, Reporting the Effects of Disposal of
a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions, for the disposal of a segment of a business (as
previously defined in that Opinion). This Statement also amends ARB No. 51,
Consolidated Financial Statements, to eliminate the exception to consolidation
for a subsidiary for which control is likely to be temporary. The provisions of
this Statement were effective for financial statements issued for fiscal years
beginning after December 15, 2001, and interim periods within those fiscal
years, with early application encouraged. The provisions of this Statement
generally are to be applied prospectively. The adoption of SFAS No. 144 did not
have a material impact on the Company's financial statements.
(10)
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
No items to report.
Item 6. Exhibits and Reports on Form 8-K
(a) There were no reports on Form 8-K filed for the quarter
ended June 30, 2002.
(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.
Dated: August 13, 2002 /s/ Lawrence Rothstein
Lawrence Rothstein
President, Treasurer and Secretary
Principal Financial Officer
Dated: August 13, 2002 /s/ Carlos Camarotti
Carlos Camarotti
Vice President - Finance and Controller
Principal Accounting Officer
(12)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of HMG/Courtland Properties, Inc. (the
"Company") on Form 10-QSB for the period ending June 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Maurice
Wiener, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C.
ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002,
that:
(1) The Report fully complies with the requirements of section 13 or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company for the periods indicated in the Report.
/s/ Maurice Wiener
------------------------------------
Maurice Wiener, Chief Executive Officer
HMG/Courtland Properties, Inc.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of HMG/Courtland Properties, Inc. (the
"Company") on Form 10-QSB for the period ending June 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I,
Lawrence Rothstein, Chief Financial Officer of the Company, certify, pursuant to
18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of
2002, that:
(1) The Report fully complies with the requirements of section 13 or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company for the periods indicated in the Report.
/s/ Lawrence Rothstein
------------------------------------
Lawrence Rothstein, Chief Financial Officer
HMG/Courtland Properties, Inc.
(13)