UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the Quarterly period ended
March 31, 2012
OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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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)
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Delaware
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59-1914299
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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1870 S. Bayshore Drive, Coconut Grove, Florida
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33133
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(Address of principal executive offices)
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(Zip Code)
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305-854-6803
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(Registrant’s telephone number, including area code)
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Not Applicable
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(Former name, former address and former fiscal
year, if changed since last report)
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Indicate
by check mark 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
o
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes
x
No
o
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.
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Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
x
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(Do not check if a smaller reporting company)
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the exchange Act).
Yes
o
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. 1,010,426
Common shares were outstanding as of May 15, 2012.
HMG/COURTLAND PROPERTIES, INC.
Index
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.
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HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEETS
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March 31,
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December 31,
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2012
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2011
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(UNAUDITED)
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ASSETS
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Investment properties, net of accumulated depreciation:
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Commercial properties
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$
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6,979,897
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$
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7,057,005
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Hotel, club and spa facility
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3,394,318
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3,447,870
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Marina properties
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1,893,482
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1,893,452
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Land held for development
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27,689
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27,689
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Total investment properties, net
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12,295,386
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12,426,016
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Cash and cash equivalents
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2,920,962
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2,366,363
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Investments in marketable securities
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1,910,947
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2,019,476
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Other investments
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3,675,345
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3,745,327
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Investment in affiliate
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2,704,070
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2,686,887
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Loans, notes and other receivables
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674,169
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683,998
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Notes and advances due from related parties
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700,772
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696,909
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Deferred taxes
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636,000
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632,000
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Goodwill
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5,628,627
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5,628,627
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Other assets
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559,262
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710,227
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TOTAL ASSETS
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$
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31,705,540
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$
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31,595,830
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LIABILITIES
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Mortgages and notes payable
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$
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14,417,903
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$
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14,531,833
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Accounts payable, accrued expenses and other liabilities
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774,860
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740,618
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Interest rate swap contract payable
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1,837,000
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1,975,000
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TOTAL LIABILITIES
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17,029,763
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17,247,451
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STOCKHOLDERS’ EQUITY
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Excess common stock, $1 par value; 100,000 shares authorized: no shares issued
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—
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—
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Common stock, $1 par value; 1,200,000 shares authorized and 1,023,955 issued
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1,023,955
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1,023,955
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Additional paid-in capital
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24,370,584
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24,366,099
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Less: Treasury stock at cost (13,529 shares as of March 31, 2012 and December 31, 2011)
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(60,388
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(60,388
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Undistributed gains from sales of properties, net of losses
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41,572,120
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41,572,120
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Undistributed losses from operations
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(54,315,307
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(54,383,928
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Accumulated other comprehensive loss
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(918,500
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(987,500
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Total stockholders’ equity
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11,672,464
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11,530,358
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Non controlling interest
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3,003,313
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2,818,021
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TOTAL EQUITY
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14,675,777
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14,348,379
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
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$
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31,705,540
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$
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31,595,830
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See notes to the condensed
consolidated financial statements
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HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
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For the three months ended
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March 31,
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2012
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2011
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REVENUES
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Real estate rentals and related revenue
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$
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475,188
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$
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463,352
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Food & beverage sales
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1,745,992
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1,688,016
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Marina revenues
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412,371
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412,899
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Spa revenues
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121,023
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112,119
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Total revenues
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2,754,574
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2,676,386
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EXPENSES
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Operating expenses:
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Rental and other properties
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115,219
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182,003
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Food and beverage cost of sales
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519,454
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473,688
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Food and beverage labor and related costs
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366,054
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345,502
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Food and beverage other operating costs
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521,178
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537,860
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Marina expenses
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213,288
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218,781
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Spa expenses
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124,530
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102,820
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Depreciation and amortization
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223,491
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381,294
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Adviser’s base fee
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255,000
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255,000
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General and administrative
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90,779
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94,043
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Professional fees and expenses
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45,672
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87,126
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Directors’ fees and expenses
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24,750
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24,000
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Total operating expenses
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2,499,415
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2,702,117
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Interest expense
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220,501
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252,189
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Total expenses
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2,719,916
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2,954,306
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Income (loss) before other income (loss) and income taxes
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34,658
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(277,920
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Net realized and unrealized gains from investments in marketable securities
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92,142
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62,478
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Net income from other investments
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47,548
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9,334
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Realized loss on interest rate swap agreement
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—
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(198,400
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)
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Other than temporary impairment losses from other investments
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(27,666
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—
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Interest, dividend and other income
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34,227
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95,887
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Total other income (loss)
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146,251
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(30,701
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Income (loss) before income taxes
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180,909
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(308,621
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)
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(Benefit from) provision for income taxes
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(4,000
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)
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9,000
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Net income (loss)
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184,909
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(317,621
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)
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Less: Net (income) loss attributable to noncontrolling interest in consolidated entities
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(116,288
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)
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111,009
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Net income (loss) attributable to the Company
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$
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68,621
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$
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(206,612
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)
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Other comprehensive income:
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Unrealized gain on interest rate swap agreement
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$
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69,000
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$
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130,500
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Total other comprehensive income
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69,000
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130,500
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Comprehensive income (loss)
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$
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137,621
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$
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(76,112
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)
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Net income (loss) Per Common Share:
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Basic and diluted
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$
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0.07
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$
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(0.20
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)
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Weighted average common shares outstanding-Basic and diluted
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1,010,426
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1,010,426
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See notes to the condensed
consolidated financial statements
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HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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For the three months ended
March 31,
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2012
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2011
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net income (loss) attributable to the Company
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$
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68,621
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$
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(206,612
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)
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Adjustments to reconcile net income (loss) attributable to the Company to net cash provided by operating activities:
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Depreciation and amortization
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223,491
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381,294
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Non-employee stock compensation expense
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4,485
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—
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Net income from other investments, excluding impairment losses
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(28,529
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)
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(9,334
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)
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Other than temporary impairment losses from other investments
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27,666
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Net gain from investments in marketable securities
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(92,142
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)
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(62,478
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)
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Realized loss on interest rate swap agreement
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—
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198,400
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Net income (loss) attributable to non controlling interest
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116,288
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(111,009
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)
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Deferred income tax (benefit) expense
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(4,000
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)
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9,000
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Changes in assets and liabilities:
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Other assets and other receivables
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146,589
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89,850
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Accounts payable, accrued expenses and other liabilities
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34,245
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20,315
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Total adjustments
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428,093
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516,038
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Net cash provided by operating activities
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496,714
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309,426
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CASH FLOWS FROM INVESTING ACTIVITIES:
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Purchases and improvements of properties
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(82,518
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)
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(100,134
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)
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Distributions from other investments
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107,058
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29,798
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Contributions to other investments
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(73,190
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)
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(55,125
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)
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Net proceeds from sales and redemptions of securities
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446,698
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590,147
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Purchase of marketable securities
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(226,233
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)
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(164,860
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)
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Net cash provided by investing activities
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171,815
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|
|
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299,826
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CASH FLOWS FROM FINANCING ACTIVITIES:
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|
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Repayment of mortgages and notes payables
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(113,930
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)
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(1,841,418
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)
|
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Partial settlement of interest rate swap contract
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|
|
—
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|
|
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(198,400
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)
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Withdrawals from restricted cash
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|
|
—
|
|
|
|
2,379,947
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Distributions to minority partners
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|
|
—
|
|
|
|
(51,181
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)
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|
Net cash (used in) provided by financing activities
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|
|
(113,930
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)
|
|
|
288,948
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|
|
|
|
|
|
|
|
|
|
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Net increase in cash and cash equivalents
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|
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554,599
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|
|
|
898,200
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|
|
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|
|
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Cash and cash equivalents at beginning of the period
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2,366,363
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|
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3,618,200
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|
|
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|
|
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Cash and cash equivalents at end of the period
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$
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2,920,962
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$
|
4,516,400
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|
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
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Cash paid during the period for interest
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|
$
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221,000
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|
$
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252,000
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Cash paid during the period for income taxes
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|
$
|
—
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|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
See notes to the condensed
consolidated financial statements
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
1.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In
the opinion of the Company, the accompanying unaudited condensed consolidated financial statements prepared in accordance with
instructions for Form 10-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 consolidated
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, 2011. The balance sheet as of December 31, 2011 was derived from audited
consolidated financial statements as of that date. The results of operations for the three months ended March 31, 2012 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
September 2011, the FASB issued ASU 2011-08, Intangibles — Goodwill and Other (Topic 350): Testing Goodwill for Impairment,
which gives entities testing goodwill for impairment the option of performing a qualitative assessment before calculating the
fair value of a reporting unit in step 1 of the goodwill impairment test. If entities determine, on the basis of qualitative factors,
that the fair value of a reporting unit is more likely than not less than the carrying amount, the two-step impairment test would
be required. Otherwise, further testing would not be needed. The amended guidance is effective for annual and interim goodwill
impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. The Company has
adopted this pronouncement and it did not have a material impact on its consolidated financial statements.
In
June 2011, the FASB issued new guidance that gives an entity the option to present the total of comprehensive income, the components
of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income
or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income
along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and
a total for comprehensive income. The entity is also required to present on the face of the financial statements reclassification
adjustments for items that are reclassified from other comprehensive income to net income in the statements(s) where the components
of net income and the components of other comprehensive income are presented. The guidance is to be applied retrospectively, for
fiscal periods and interim periods within those years, beginning after December 15, 2011 and early adoption is permitted. In December
2011, the FASB issued new guidance deferring the changes in the June 2011 relating to presentation of classification adjustments.
The Company’s adoption of the new guidance, other than that related to presentation of reclassification adjustments, as
of January 1, 2012 pertained to disclosure and presentation only and did not have a material impact on its consolidated financial
position, results of operations and cash flows.
In
May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement
and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (IFRS). This ASU was issued to provide
largely identical guidance about fair value measurement and disclosure requirements for entities that disclose the fair value
of an asset, a liability, or an instrument classified in shareholders’ equity in their consolidated financial statements
as that provided in the International Accounting Standards Board’s new IFRS 13, Fair Value Measurement. This ASU does not
extend the use of fair value but, rather, provides guidance about how fair value should be applied where it already is required
or permitted under GAAP. This guidance is to be applied prospectively for interim and annual periods beginning after December
15, 2011. Early adoption is not permitted. In the period of adoption, a reporting entity will be required to disclose a change,
if any, in valuation technique and related inputs that results from applying the ASU to quantify the total effect, if practicable.
The Company has adopted this pronouncement and it did not have a material impact on its consolidated financial statements.
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 statements of income for Landing and Rawbar for the three months ended March 31, 2012 and 2011 are presented below (Note:
the Company’s ownership percentage in these operations is 50%):
Summarized Combined statements of income
Bayshore Landing, LLC and
Bayshore Rawbar, LLC
|
|
For the three months ended
March 31, 2012
|
|
For the three months ended
March 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Food and Beverage Sales
|
|
$
|
1,746,000
|
|
|
$
|
1,688,000
|
|
|
Marina dockage and related
|
|
|
273,000
|
|
|
|
286,000
|
|
|
Retail/mall rental and related
|
|
|
148,000
|
|
|
|
147,000
|
|
|
Total Revenues
|
|
|
2,167,000
|
|
|
|
2,121,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Cost of food and beverage sold
|
|
|
519,000
|
|
|
|
474,000
|
|
|
Labor and related costs
|
|
|
317,000
|
|
|
|
298,000
|
|
|
Entertainers
|
|
|
49,000
|
|
|
|
48,000
|
|
|
Other food and beverage related costs
|
|
|
141,000
|
|
|
|
157,000
|
|
|
Other operating costs
|
|
|
49,000
|
|
|
|
42,000
|
|
|
Repairs and maintenance
|
|
|
77,000
|
|
|
|
106,000
|
|
|
Insurance
|
|
|
133,000
|
|
|
|
124,000
|
|
|
Management fees
|
|
|
57,000
|
|
|
|
84,000
|
|
|
Utilities
|
|
|
53,000
|
|
|
|
54,000
|
|
|
Ground rent
|
|
|
178,000
|
|
|
|
222,000
|
|
|
Interest
|
|
|
163,000
|
|
|
|
201,000
|
|
|
Depreciation and amortization
|
|
|
166,000
|
|
|
|
315,000
|
|
|
Realized loss on interest rate swap
|
|
|
—
|
|
|
|
198,000
|
|
|
Total Expenses
|
|
|
1,902,000
|
|
|
|
2,323,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
265,000
|
|
|
($
|
202,000
|
)
|
4.
INVESTMENTS IN MARKETABLE SECURITIES
Investments
in marketable securities consist primarily of large capital corporate equity and debt securities in varying industries or issued
by government agencies with readily determinable fair values. These securities are stated at market value, as determined by the
most recent traded price of each security at the balance sheet date. Consistent with the Company’s overall current investment
objectives and activities its entire marketable securities portfolio is classified as trading.
Net
realized and unrealized gain (loss) from investments in marketable securities for the three months ended March 31, 2012 and 2011
is summarized below:
|
|
|
Three Months Ended March 31,
|
|
Description
|
|
2012
|
|
2011
|
|
Net realized gain from sales of securities
|
|
$
|
49,000
|
|
|
$
|
79,000
|
|
|
Unrealized net gain (loss) in trading securities
|
|
|
43,000
|
|
|
|
(17,000
|
)
|
|
Total net gain from investments in marketable securities
|
|
$
|
92,000
|
|
|
$
|
62,000
|
|
For
the three months ended March 31, 2012 net realized gain from sales of marketable securities of approximately $49,000 consisted
of approximately $65,000 of gross gains net of $16,000 of gross losses. For the three months ended March 31, 2011 net realized
gain from sales of marketable securities of approximately $79,000 consisted of approximately $94,000 of gross gains net of $15,000
of gross losses.
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 March 31, 2012, the Company’s portfolio of other investments had an aggregate carrying value of approximately $3.7 million.
As of March 31, 2012, the Company has committed to fund approximately $966,000 as required by agreements with the investees. The
carrying value of these investments is equal to contributions less distributions and loss valuation adjustments. During the three
months ended March 31, 2012, the Company contributed an additional $23,000 toward fulfilling capital commitments on existing investments,
plus a new investment in a medical technology related company for $51,000 which was fully funded in January 2012. Cash distributions
received from other investments for the three months ended March 31, 2012 totaled approximately $107,000 from one investment in
a privately owned partnership owning diversified operating companies.
Net income from other investments
for the three months ended March 31, 2012 and 2011, is summarized below:
|
|
|
|
2012
|
|
|
|
2011
|
|
|
Partnership owning diversified businesses
|
|
$
|
31,000
|
|
|
$
|
—
|
|
|
Venture capital fund – technology
|
|
|
—
|
|
|
|
—
|
|
|
Income from investment in 49% owned affiliate (T.G.I.F. Texas, Inc.)
|
|
|
17,000
|
|
|
|
9,000
|
|
|
Total net income from other investments
|
|
$
|
48,000
|
|
|
$
|
9,000
|
|
The following tables present
gross unrealized losses and fair values for those investments that were in an unrealized loss position as of March 31, 2012 and
December 31, 2011, aggregated by investment category and the length of time that investments have been in a continuous loss
position
|
|
|
As of March 31, 2012
|
|
|
|
Less than 12 Months
|
|
Greater than 12 Months
|
|
Total
|
|
Investment Description
|
|
Fair Value
|
|
Unrealized Loss
|
|
Fair Value
|
|
Unrealized Loss
|
|
Fair Value
|
|
Unrealized Loss
|
|
Partnerships owning investments in technology related industries
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
379,000
|
|
|
$
|
(54,000
|
)
|
|
$
|
379,000
|
|
|
$
|
(54,000
|
)
|
|
Partnerships owning diversified businesses
|
|
|
—
|
|
|
|
—
|
|
|
|
231,000
|
|
|
|
(58,000
|
)
|
|
|
231,000
|
|
|
|
(58,000
|
)
|
|
Partnerships owning real estate and related investments
|
|
|
—
|
|
|
|
—
|
|
|
|
257,000
|
|
|
|
(35,000
|
)
|
|
|
257,000
|
|
|
|
(35,000
|
)
|
|
Total
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
867,000
|
|
|
$
|
(147,000
|
)
|
|
$
|
867,000
|
|
|
$
|
(147,000
|
)
|
|
|
|
As of December 31, 2011
|
|
|
|
Less than 12
Months
|
|
Greater than 12
Months
|
|
Total
|
|
Investment Description
|
|
Fair Value
|
|
Unrealized Loss
|
|
Fair Value
|
|
Unrealized Loss
|
|
Fair Value
|
|
Unrealized Loss
|
|
Partnerships owning investments in technology related industries
|
|
$
|
327,000
|
|
|
$
|
(20,000
|
)
|
|
$
|
47,000
|
|
|
$
|
(39,000
|
)
|
|
$
|
374,000
|
|
|
$
|
(59,000
|
)
|
|
Partnerships owning diversified businesses
|
|
|
—
|
|
|
|
—
|
|
|
|
228,000
|
|
|
|
(61,000
|
)
|
|
|
228,000
|
|
|
|
(61,000
|
)
|
|
Partnerships owning real estate and related investments
|
|
|
—
|
|
|
|
—
|
|
|
|
256,000
|
|
|
|
(56,000
|
)
|
|
|
256,000
|
|
|
|
(56,000
|
)
|
|
Total
|
|
$
|
327,000
|
|
|
$
|
(20,000
|
)
|
|
$
|
531,000
|
|
|
$
|
(156,000
|
)
|
|
$
|
858,000
|
|
|
$
|
(176,000
|
)
|
When
evaluating the investments for other-than-temporary impairment, the Company reviews factors such as the length of time and extent
to which fair value has been below cost basis, the financial condition of the issuer and any changes thereto, and the Company’s
intent to sell, or whether it is more likely than not it will be required to sell, the investment before recovery of the investment’s
amortized cost basis.
In
accordance with ASC Topic 320-10-65, Recognition and Presentation of Other-Than-Temporary Impairments as of March 31, 2012 the
Company recorded a loss of approximately $28,000 from an investment in a partnership which operates and leases executive suites
in Miami, Florida. The Company has funded $120,000 to date in this investment and the losses incurred were associated with the
initial start up of the venture in 2010.There were no OTTI impairment valuation adjustments for the three months ended March 31,
2011.
6.
INTEREST RATE SWAP CONTRACT
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 2.45% plus the one-month LIBOR Rate times the same notional amount. The Company designated this interest rate swap contract
as a cash flow hedge.
As
of March 31, 2012 the fair value of this hedge was an unrealized loss of approximately $1,837,000, as compared with an unrealized
loss of $1,975,000 as of December 31, 2011 which resulted in an unrealized gain of $138,000 (or $69,000, net of noncontrolling
interest) for the three months ended March 31, 2012. This amount has been recorded as other comprehensive income and will be reclassified
to interest expense over the life of the contract.
The
following tables present the required disclosures in accordance with ASC Topic 815-10:
Fair
Values of Derivative Instruments:
|
|
|
|
|
Liability Derivative
|
|
|
|
|
|
March 31, 2012
|
|
|
|
December 31, 2011
|
|
|
|
|
Balance
|
|
|
|
|
|
|
|
Balance
|
|
|
|
|
|
|
|
|
|
Sheet
|
|
|
|
Fair
|
|
|
|
Sheet
|
|
|
|
Fair
|
|
|
|
|
|
Location
|
|
|
|
Value
|
|
|
|
Location
|
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap contract
|
|
|
Liabilities
|
|
|
$
|
1,837,000
|
|
|
|
Liabilities
|
|
|
$
|
1,975,000
|
|
|
Total derivatives designated as hedging instruments under ASC Topic 815
|
|
|
|
|
|
$
|
1,837,000
|
|
|
|
|
|
|
$
|
1,975,000
|
|
The
Effect of Derivative Instruments on the Statements of Comprehensive Income
for the Three Months Ended March 31, 2012 and 2011:
|
|
|
Amount of Gain
|
|
|
|
|
Recognized in OCI on
|
|
|
|
|
Derivative
|
|
|
Derivatives in ASC Topic 815 Cash Flow Hedging Relationships
|
|
(Effective Portion)
|
|
|
|
|
For the three
|
|
|
For the three
|
|
|
|
|
Months ended
|
|
|
Months ended
|
|
|
|
|
March 31, 2012
|
|
|
March 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap contracts
|
|
$
|
69,000
|
|
|
130,500
|
|
|
Total
|
|
$
|
69,000
|
|
|
130,500
|
|
7.
FAIR VALUE OF FINANCIAL INSTRUMENTS
In
accordance with ASC Topic 820, the Company measures cash equivalents, marketable securities, other investments and interest rate
swap contract at fair value. Our cash equivalents, marketable securities and interest rate swap contract are classified within
Level 1 or Level 2. This is because our cash equivalents, marketable securities and interest rate swap are valued using quoted
market prices or alternative pricing sources and models utilizing market observable inputs. Our other investments are classified
within Level 3 because they are valued using valuation models which use some inputs that are unobservable and supported by little
or no market activity and are significant.
Assets
and liabilities measured at fair value on a recurring basis are summarized below:
|
|
|
Fair value measurement at reporting date using
|
|
|
|
|
Total
|
|
|
|
Quoted Prices in Active
|
|
|
|
Significant Other
|
|
|
|
Significant
|
|
|
|
|
|
March 31,
|
|
|
|
Markets for Identical Assets
|
|
|
|
Observable Inputs
|
|
|
|
Unobservable Inputs
|
|
|
Description
|
|
|
2012
|
|
|
|
(Level
1)
|
|
|
|
(Level
2)
|
|
|
|
(Level
3)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits
|
|
$
|
54,251
|
|
|
|
—
|
|
|
$
|
54,251
|
|
|
|
—
|
|
|
Money market mutual funds
|
|
|
1,546,291
|
|
|
$
|
1,546,291
|
|
|
|
—
|
|
|
|
—
|
|
|
Marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
|
|
903,118
|
|
|
|
—
|
|
|
|
903,118
|
|
|
|
—
|
|
|
Marketable equity securities
|
|
|
1,007,831
|
|
|
|
1,007,831
|
|
|
|
—
|
|
|
|
—
|
|
|
Total assets
|
|
$
|
3,511,491
|
|
|
$
|
2,554,122
|
|
|
$
|
957,369
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap contract
|
|
|
1,837,000
|
|
|
|
—
|
|
|
|
1,837,000
|
|
|
|
—
|
|
|
Total liabilities
|
|
$
|
1,837,000
|
|
|
|
—
|
|
|
$
|
1,837,000
|
|
|
|
—
|
|
|
|
|
Fair value measurement at reporting date using
|
|
|
|
|
Total
|
|
|
|
Quoted Prices in Active
|
|
|
|
Significant Other
|
|
|
|
Significant
|
|
|
|
|
|
December 31,
|
|
|
|
Markets for Identical Assets
|
|
|
|
Observable Inputs
|
|
|
|
Unobservable Inputs
|
|
|
Description
|
|
|
2011
|
|
|
|
(Level
1)
|
|
|
|
(Level
2)
|
|
|
|
(Level
3)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits
|
|
$
|
54,104
|
|
|
|
—
|
|
|
$
|
54,104
|
|
|
|
—
|
|
|
Money market mutual funds
|
|
|
1,536,787
|
|
|
$
|
1,536,787
|
|
|
|
—
|
|
|
|
—
|
|
|
Marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
|
|
885,252
|
|
|
|
—
|
|
|
|
885,252
|
|
|
|
—
|
|
|
Marketable equity securities
|
|
|
1,134,225
|
|
|
|
1,134,225
|
|
|
|
—
|
|
|
|
—
|
|
|
Total assets
|
|
$
|
3,610,368
|
|
|
$
|
2,671,012
|
|
|
$
|
939,356
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap contract
|
|
|
1,975,000
|
|
|
|
—
|
|
|
|
1,975,000
|
|
|
|
—
|
|
|
Total liabilities
|
|
$
|
1,975,000
|
|
|
|
—
|
|
|
$
|
1,975,000
|
|
|
|
—
|
|
Assets and liabilities measured
at fair value on a nonrecurring basis are summarized below:
|
|
|
Fair value measurement at reporting date using
|
|
|
|
|
|
Total
March 31,
|
|
Quoted Prices in Active
Markets for Identical Assets
|
|
Significant Other
Observable Inputs
|
|
Significant
Unobservable Inputs
|
|
Total
gains (losses) for three months ended
|
|
Description
|
|
2012
|
|
(Level 1)
|
|
(Level 2) (a)
|
|
(Level 3) (b)
|
|
3/31/2012
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other investments by investment focus:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology & Communication
|
|
$
|
508,159
|
|
|
$
|
—
|
|
|
$
|
508,159
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Diversified businesses
|
|
|
1,411,411
|
|
|
|
—
|
|
|
|
1,411,411
|
|
|
|
—
|
|
|
|
—
|
|
|
Real estate and related
|
|
|
1,455,755
|
|
|
|
—
|
|
|
|
502,760
|
|
|
|
953,015
|
|
|
|
(27,666)
|
|
|
Other
|
|
|
300,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
300,000
|
|
|
|
—
|
|
|
|
|
$
|
3,675,345
|
|
|
$
|
—
|
|
|
$
|
2,422,330
|
|
|
$
|
1,253,015
|
|
|
$
|
(27,666)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill (Bay shore)
|
|
|
5,628,000
|
|
|
|
|
|
|
|
|
|
|
|
5,628,000
|
|
|
|
|
|
|
Total assets
|
|
$
|
9,303,345
|
|
|
$
|
—
|
|
|
$
|
2,422,330
|
|
|
$
|
6,881,015
|
|
|
$
|
(27,666)
|
|
|
|
|
Fair value measurement at reporting date using
|
|
|
|
|
|
Total
December 31,
|
|
Quoted Prices in Active
Markets for Identical Assets
|
|
Significant Other
Observable Inputs
|
|
Significant
Unobservable Inputs
|
|
Total
losses for year ended
|
|
Description
|
|
2011
|
|
(Level 1)
|
|
(Level 2) (a)
|
|
(Level 3) (b)
|
|
12/31/2011
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Other investments by investment focus:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology & Communication
|
|
$
|
477,646
|
|
|
$
|
—
|
|
|
$
|
477,646
|
|
|
$
|
—
|
|
|
$
|
(2,437
|
)
|
|
Diversified businesses
|
|
|
1,444,521
|
|
|
|
—
|
|
|
|
1,444,521
|
|
|
|
—
|
|
|
|
—
|
|
|
Real estate and related
|
|
|
1,523,159
|
|
|
|
—
|
|
|
|
542,478
|
|
|
|
980,681
|
|
|
|
(84,270
|
)
|
|
Other
|
|
|
300,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
300,000
|
|
|
|
—
|
|
|
|
|
$
|
3,745,326
|
|
|
$
|
—
|
|
|
$
|
2,464,645
|
|
|
$
|
1,280,681
|
|
|
$
|
(86,707
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill (Bayshore)
|
|
|
5,628,000
|
|
|
|
|
|
|
|
|
|
|
|
5,628,000
|
|
|
|
—
|
|
|
Total assets
|
|
$
|
9,373,326
|
|
|
$
|
—
|
|
|
$
|
2,464,645
|
|
|
$
|
6,908,681
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Other investments measured at fair value on a non-recurring basis include investments in certain
entities that calculate net asset value per share (or its equivalent such as member units or an ownership interest in partners’
capital to which a proportionate share of net assets is attributed, “NAV”). This class primarily consists of private
equity funds that have varying investment focus. These investments can never be redeemed with the funds. Instead, the nature of
the investments in this class is that distributions are received through the liquidation of the underlying assets of the fund.
If these investments were held it is estimated that the underlying assets of the fund would be liquidated over 5 to 10 years. As
of March 31, 2012, it is probable that all of the investments in this class will be sold at an amount different from the NAV of
the Company’s ownership interest in partners’ capital. Therefore, the fair values of the investments in this class
have been estimated using recent observable information such as audited financial statements and/or statements of partners’
capital obtained directly from investees on a quarterly or other regular basis. In January 2012 the Company invested approximately
$51,000 in a medical technology entity representing the full commitment to this investment. As of March 31, 2012, the amount of
the Company’s unfunded commitments related to the aforementioned investments is approximately $966,000.
|
|
|
(b)
|
Other investments above which are measured on a nonrecurring basis using Level 3 unobservable
inputs consist of investments primarily in commercial real estate in Florida through private partnerships and two investments in
the stock of private banks in Florida and Texas. The Company does not know when it will have the ability to redeem the investments
and has categorized them as a Level 3 fair value measurement. The Level 3 real estate and related investments of approximately
$1 million primarily consist of one investment in a commercial building located near the Company’s offices purchased in 2005.
This investment is measured using primarily inputs provided by the managing member of the partnerships with whom the Company has
done similar transactions in the past and is well known to management. The fair values of these real estate investments have been
estimated using the net asset value of the Company’s ownership interest in partners’ capital. The investments in private
bank stocks include a private bank and trust located in Coral Gables, Florida in the amount of $250,000 made in 2009, and a $50,000
investment in a bank located in El Campo, Texas made in 2010. The fair values of these bank stock investments have been estimated
using the cost method less distributions received and other than temporary impairments. This investment is valued using inputs
provided by the management of the banks.
|
The following table includes
a roll-forward of the investments classified within level 3 of the fair value hierarchy for the three months ended March 31, 2012:
|
|
|
Level 3 Investments:
|
|
Balance at January 1, 2012
|
|
$
|
1,300,000
|
|
|
Additional investment in limited partnership
|
|
|
—
|
|
|
Other than temporary impairment loss
|
|
|
(28,000
|
)
|
|
Transfers from Level 2
|
|
|
—
|
|
|
Balance at March 31, 2012
|
|
$
|
1,272,000
|
|
|
|
|
|
|
|
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.
|
|
|
For the three months ended March 31,
|
|
|
|
2012
|
|
2011
|
|
Net revenues:
|
|
|
|
|
|
|
|
|
|
Real estate and marina rentals
|
|
$
|
888,000
|
|
|
$
|
876,000
|
|
|
Food and beverage sales
|
|
|
1,746,000
|
|
|
|
1,688,000
|
|
|
Spa revenues
|
|
|
121,000
|
|
|
|
112,000
|
|
|
Total net revenues
|
|
$
|
2,755,000
|
|
|
$
|
2,676,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes:
|
|
|
|
|
|
|
|
|
|
Real estate and marina rentals
|
|
$
|
278,000
|
|
|
$
|
255,000
|
|
|
Food and beverage sales
|
|
|
86,000
|
|
|
|
58,000
|
|
|
Other investments and related income
|
|
|
(299,000
|
)
|
|
|
(511,000
|
)
|
|
Total net income (loss) before income taxes attributable to the Company
|
|
$
|
65,000
|
|
|
($
|
198,000
|
)
|
9.
INCOME TAXES
We
adopted the provisions of ASC Topic 740-10, “Accounting for Uncertainty in Income Taxes” on January 1, 2007.
This topic clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in
accordance with ASC Topic 740, “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. Topic
740-10 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 consolidated
financial statements. Our evaluation was performed for the tax years ended December 31, 2008, 2009, 2010 and 2011, the tax
years which remain subject to examination by major tax jurisdictions as of March 31, 2012.
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 consolidated 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 income of approximately $69,000 ($.07 per share) for the three months ended March 31, 2012. For the three
months ended March 31, 2011 the Company reported a net loss of approximately $207,000 ($.20 per share).
As
discussed further below, total revenues for the three months ended March 31, 2012 as compared with the same period in 2011, increased
by approximately $78,000 or 3%. Total expenses for the three months ended March 31, 2012, as compared with the same period in
2011, decreased by approximately $234,000 or 8%.
REVENUES
Rentals
and related revenues for the three months ended March 31, 2012 as compared with the same period in 2011 increased by $12,000 (
or 3%), primarily as a result of an inflation adjustment in rent due from the tenant at Grove Isle.
Restaurant operations:
Summarized statements of income for the Company’s Monty’s
restaurant for the three months ended March 31, 2012 and 2011 is presented below:
Summarized
statements of income of
Monty’s restaurant
|
|
Three months ended
March 31, 2012
|
|
Percentage
of
sales
|
|
Three months ended
March 31, 2011
|
|
Percentage
of
sales
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food and beverage sales
|
|
$
|
1,746,000
|
|
|
|
100
|
%
|
|
$
|
1,688,000
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of food and beverage sold
|
|
|
519,000
|
|
|
|
29.7
|
%
|
|
|
474,000
|
|
|
|
28.0
|
%
|
|
Labor, entertainment and related costs
|
|
|
366,000
|
|
|
|
21.0
|
%
|
|
|
346,000
|
|
|
|
20.5
|
%
|
|
Other food and beverage direct costs
|
|
|
78,000
|
|
|
|
4.5
|
%
|
|
|
67,000
|
|
|
|
4.0
|
%
|
|
Other operating costs
|
|
|
110,000
|
|
|
|
6.3
|
%
|
|
|
135,000
|
|
|
|
8.0
|
%
|
|
Insurance
|
|
|
80,000
|
|
|
|
4.6
|
%
|
|
|
76,000
|
|
|
|
4.5
|
%
|
|
Management and accounting fees
|
|
|
35,000
|
|
|
|
2.0
|
%
|
|
|
38,000
|
|
|
|
2.3
|
%
|
|
Utilities
|
|
|
55,000
|
|
|
|
3.1
|
%
|
|
|
63,000
|
|
|
|
3.7
|
%
|
|
Rent (as allocated)
|
|
|
164,000
|
|
|
|
9.4
|
%
|
|
|
158,000
|
|
|
|
9.4
|
%
|
|
Total Expenses
|
|
|
1,407,000
|
|
|
|
80.6
|
%
|
|
|
1,357,000
|
|
|
|
80.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before depreciation and noncontrolling interest
|
|
$
|
339,000
|
|
|
|
19.4
|
%
|
|
$
|
331,000
|
|
|
|
19.6
|
%
|
For
the three months ended March 31, 2012 as compared with the same period in 2011 restaurant sales increased by approximately $58,000
(or 3%), with food sales increasing by $43,000 (or 4%) and beverage sales increasing $15,000 (or 2%).
Restaurant
expenses for the three months ended March 31, 2012 as compared with the same period in 2011 remained consistent as a percentage
of sales.
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)
|
|
|
Combined marina
operations
|
|
Combined marina
operations
|
|
Summarized statements of income of marina operations
|
|
Three months
ended March 31,
2012
|
|
Three months
ended March 31,
2011
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Monty’s dockage fees and related
|
|
$
|
286,000
|
|
|
$
|
301,000
|
|
|
Grove Isle marina slip owners dues and dockage fees
|
|
|
126,000
|
|
|
|
112,000
|
|
|
Total marina revenues
|
|
|
412,000
|
|
|
|
413,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Labor and related costs
|
|
|
64,000
|
|
|
|
71,000
|
|
|
Insurance
|
|
|
26,000
|
|
|
|
22,000
|
|
|
Management fees
|
|
|
18,000
|
|
|
|
18,000
|
|
|
Bay bottom lease
|
|
|
54,000
|
|
|
|
56,000
|
|
|
Repairs and maintenance
|
|
|
33,000
|
|
|
|
41,000
|
|
|
Other
|
|
|
18,000
|
|
|
|
11,000
|
|
|
Total Expenses
|
|
|
213,000
|
|
|
|
219,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before interest, depreciation and noncontrolling interest
|
|
$
|
199,000
|
|
|
$
|
194,000
|
|
There
were no significant changes in marina operations for the three months ended March 31, 2012 as compared to the same period in 2011.
Spa operations:
Below are summarized statements of income for Grove Isle spa operations
for the three months ended March 31, 2012 and 2011. The Company owns 50% of the Grove Isle Spa with the other 50% owned by an affiliate
of Grand Heritage, the tenant of the Grove Isle Resort:
|
Summarized statements of income of spa operations
|
|
Three months
ended March 31,
2012
|
|
Three months
ended March 31,
2011
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Services provided
|
|
$
|
104,000
|
|
|
$
|
94,000
|
|
|
Membership and other
|
|
|
17,000
|
|
|
|
18,000
|
|
|
Total spa revenues
|
|
|
121,000
|
|
|
|
112,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
21,000
|
|
|
|
18,000
|
|
|
Salaries, wages and related
|
|
|
38,000
|
|
|
|
32,000
|
|
|
Other operating expenses
|
|
|
58,000
|
|
|
|
44,000
|
|
|
Management and administrative fees
|
|
|
5,000
|
|
|
|
6,000
|
|
|
Other non-operating expenses
|
|
|
3,000
|
|
|
|
3,000
|
|
|
Total Expenses
|
|
|
125,000
|
|
|
|
103,000
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before depreciation and noncontrolling interest
|
|
($
|
4,000
|
)
|
|
$
|
9,000
|
|
Spa
revenues for the three months ended March 31, 2012 as compared with the same period in 2011 increased by $9,000 (or 8%). This
came at the expense of higher promotional costs which was the main reason Spa expenses for the three months ended March 31, 2012
as compared with the same period in 2011 increased by $22,000 (or 21%).
Net realized and unrealized gain from investments in marketable
securities:
Net
realized and unrealized gain from investments in marketable securities for the three months ended March 31, 2012 and 2011 was
approximately $92,000 and $62,000, respectively. 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 months ended March 31, 2012 and 2011 was approximately $48,000 and $9,000, respectively.
For further details refer to Note 5 to Condensed Consolidated Financial Statements (unaudited).
Realized loss from interest rate swap contract:
In conjunction with amendment
of the Bayshore bank loan in March 2011 the interest rate swap contract liability was paid down by $198,400 (in the same proportion
as the amount of the loan principal paid down). As a result, the Company reclassified a previously unrealized loss of $198,400
from accumulated other comprehensive income to realized loss on interest rate swap contract within the condensed consolidated statements
of comprehensive income for the three months ended March 31, 2011. There was no realized loss from the interest rate swap contract
for the three months ended March 31, 2012.
EXPENSES
Expenses
for rental and other properties for the three months ended March 31, 2012 and 2011 were $115,000 and $182,000, respectively. This
decrease of $67,000 (or 37%) was primarily due to decreased ground rent at the Monty’s property due to prior period rent
adjustments.
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.
Depreciation and amortization expense
for the three months ended March 31, 2012 and 2011 were $223,000 and $381,000, respectively. This decrease of approximately $158,000
(or 41%) was primarily due to non-recurring amortization of loan costs associated with the Monty’s loan modification completed
in March 2011.
Professional
fees and expenses for the three months ended March 31, 2012 and 2011 were $46,000 and $87,000, respectively. This decrease of
$41,000 (or 47%) was primarily due to lower legal expenses at the Monty’s property and lower professional fees at the corporate
level.
Interest
expense for the three months ended March 31, 2012 and 2011 were $220,000 and $252,000, respectively. This decrease of $32,000
(or 13%) was primarily due to lower outstanding loan balance as a result of the previously reported refinancing of the Monty’s
property bank loan in March 2011.
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 primarily consist of maturities of debt obligations of approximately $6.2 million in 2012 and contributions
committed to other investments of approximately $966,000 due upon demand. The funds necessary to meet these obligations are expected
from the proceeds from the sales of properties or investments, bank construction loan, refinancing of existing bank loans, distributions
from investments and available cash.
Included
in the maturing debt obligations for 2012 is a note payable to the Company’s 49% owned affiliate, T.G.I.F. Texas, Inc. (“TGIF”)
of approximately $3.2 million 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 three months ended March 31, 2012, net cash provided by operating activities was approximately $497,000. This was primarily
from the Company’s rental operations cash flow.
For
the three months ended March 31, 2012, net cash provided by investing activities was approximately $172,000. This consisted primarily
of approximately $447,000 in net proceeds from sales of marketable securities and distributions from other investment of $107,000.
These sources of funds were partially offset by purchases of marketable securities of $226,000, contributions to other investments
of $73,000 and additions to fixed assets of $83,000.
For
the three months ended March 31, 2012, net cash used in financing activities was approximately $114,000 consisting solely of loan
principal repayments.
|
Item 3.
|
|
Quantitative and Qualitative Disclosures about
Market Risk
|
Not
applicable
|
Item
4
.
|
|
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 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 effective 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
|
Item 1.
|
|
Legal
Proceedings
|
The
Company was a co-defendant in two lawsuits in the circuit court in Miami Dade County Florida. These cases arose from claims by
a condominium association and resident seeking a declaratory judgment regarding certain provisions of the declaration of condominium
relating to the Grove Isle Club and the developer. The claim by the association has been dismissed as to all counts related to
the Company; however the association has filed an appeal. The Company believes that the claims are without merit and intends
to vigorously defend its position. The ultimate outcome of this litigation cannot presently be determined. However, in management’s
opinion the likelihood of a material adverse outcome is remote. Accordingly, adjustments, if any that might result from the resolution
of this matter have not been reflected in the financial statements.
|
Item
2.
|
|
Unregistered Sales of Equity Securities and Use of Proceeds:
None
|
|
Item 3.
|
|
Defaults
Upon Senior Securities:
None.
|
|
Item 4.
|
|
Mine
Safety Disclosures:
None
|
|
Item 5.
|
|
Other
Information:
None
|
(a)
Certifications pursuant to 18 USC Section 1350-Sarbanes-Oxley Act of 2002.
Filed
herewith.
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.
|
|
|
|
|
|
/s/ Larry Rothstein
|
|
Dated: May 15, 2012
|
Larry Rothstein
|
|
|
President, Treasurer and Secretary
|
|
|
Principal Financial Officer
|
|
|
|
|
|
/s/ Carlos Camarotti
|
|
Dated: May 15, 2012
|
Carlos Camarotti
|
|
|
Vice President- Finance and Controller
|
|
|
Principal Accounting Officer
|
15
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