HMG/Courtland Properties : HMG COURTLAND PROPERTIES INC Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

RESULTS OF OPERATIONS

The Company reported net loss of approximately $376,000 (or $0.37 per share) and $965,000 (or $0.95 per share) for the three months ended March 31, 2021 and 2020, respectively.

REVENUES

Rentals and related revenues for the three months ended March 31, 2021 and 2020 were approximately $20,000 and $19,000, respectively and primarily consists of rent from the Advisor to CII for its corporate office.

Net realized and unrealized gain (loss) from investments in marketable securities:

Net realized and unrealized gain from investments in marketable securities for the three months ended March 31, 2021 was approximately $63,000. For the three months ended March 31, 2020, net unrealized loss from marketable securities of approximately $870,000 was primarily the result of the large decline in the overall U.S. stock market experienced as a result of business closures from the on-going pandemic. For further details, refer to Note 6 to the Condensed Consolidated Financial Statements (unaudited).

Equity loss from operations of residential real estate partnership:

Equity loss from operations of residential real estate partnership for the three months ended March 31, 2021 was approximately $144,000. For further details, refer to Note 4 to the Condensed Consolidated Financial Statements (unaudited).

Income from other investments:

Income from other investments for the three months ended March 31, 2021 and 2020 was approximately $43,000 and $114,000, respectively. For further details, refer to Note 7 to the Condensed Consolidated Financial Statements (unaudited).

Other than temporary impairment losses from other investments ("OTTI"):

OTTI valuation adjustment for the three months ended March 31, 2021 and 2020 was zero and $50,000, respectively. This was the result of one investment written down in the first quarter of 2020. For further details, refer to Note 7 to the Condensed Consolidated Financial Statements (unaudited).

EXPENSES

Operating expenses from rental and other properties for the three months ended March 31, 2021 as compared with the same period in 2020 increased by approximately $37,000 (or 211%) primarily due to a loss on the sale of land held for development located in Hopkinton, Rhode Island. The property had a carrying value of $209,000 and was sold for $200,000. After commissions, legal and closing costs the loss was approximately $28,000. The Company had attempted to develop this property for several years and was unsuccessful.

EFFECT OF INFLATION:

Inflation affects the costs of holding the Company's investments. Increased inflation would decrease the purchasing power of our mainly liquid investments.

LIQUIDITY, CAPITAL EXPENDITURE REQUIREMENTS AND CAPITAL RESOURCES

The Company's material commitments primarily consist of a note payable to the Company's 49% owned affiliate, T.G.I.F. Texas, Inc. ("TGIF") of $450,000 due on demand and contributions committed to other investments of approximately $1.1 million due upon demand. The funds necessary to meet these obligations are expected from the proceeds from the sales of investments, distributions from investments and available cash.

MATERIAL COMPONENTS OF CASH FLOWS

For the three months ended March 31, 2021, net cash used in operating activities was approximately $293,000, primarily consisting of operating expenses.

For the three months ended March 31, 2021, net cash provided by investing activities was approximately $84,000. This consisted primarily of net proceeds from sales and redemptions of marketable securities of $275,000, distributions from other investments of $81,000, distribution from affiliate of $138,000 and proceeds from the sale of the land in Hopkinton, Rhode Island (we took back a first mortgage of $50,000 on the sale). These sources of funds were partially offset by uses of cash consisting primarily of $211,000 in purchases of marketable securities and $317,000 of contributions to other investments.

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For the three months ended March 31, 2021, net cash used in financing activities was approximately $704,000, consisting of $504,000 dividend paid and $200,000 principal payment on note due to affiliate.

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