U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from _________ to _________
Commission file number: 33-26036
--------
PROPERTY SECURED INVESTMENTS, INC.
---------------------------------------
(Exact name of small business issuer as
specified in its charter)
California 95-4075422
----------------------- ------------------------
(State of Incorporation) (I.R.S. Employer ID No.)
445 South Figueroa Street, Ste. 2600,
Los Angeles, CA 90071-1630
--------------------------------------
(Address of principal executive offices)
(213) 612-7714 (Andrew K. Proctor)
---------------------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the
past 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. At June 30, 1995, 707,918 shares of common stock, no par
value.
Transitional Small Business Disclosure Format(check one):
Yes.......No...X...
Exhibit Index at Page 11
Page 1 of 12 <PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
--------------------
The following financial statements are furnished:
Balance sheets (unaudited) as of June 30, 1995 and
December 31, 1994.
Statements of Operations (unaudited) for the six months
and three months ended June 30, 1995 and 1994.
Statements of Cash Flows (unaudited) for the six months
ended June 30, 1995 and 1994.
Notes to Financial Statements (unaudited).
Page 2 of 12 <PAGE>
Property Secured Investments, Inc.
BALANCE SHEETS
(Unaudited)
ASSETS
June 30, December 31,
1995 1994
-------- ------------
Cash $ 158,072 $ 170,323
Notes receivable, net of
provision for losses of
$9,378 and $35,000 (note 2) 234,711 300,243
Accrued interest receivable 4,765 2,496
Real estate 317,365 317,365
---------- ----------
$ 714,913 $ 790,427
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued expenses and other
liabilities $ 18,924 $ 35,039
Deferred revenues 3,940 8,163
---------- ----------
22,864 43,202
Stockholders' Equity
Common stock, 10,000,000 shares
authorized,707,918 shares
issued and outstanding 6,298,479 6,298,479
Additional paid-in capital 2,970 2,970
Distributions in excess of
earnings (5,609,400) (5,554,224)
---------- ----------
Total Stockholders' Equity 692,049 747,225
---------- ----------
$ 714,913 $ 790,427
========== ==========
The accompanying notes are an integral part
of these financial statements
Page 3 of 12 <PAGE>
Property Secured Investments, Inc.
STATEMENTS OF OPERATIONS
(Unaudited)
Six months ended Three months ended
June 30, June 30,
1995 1994 1995 1994
---- ---- ---- ----
Income
Interest $ 7,241 $102,854 $ 3,004 $ 45,496
Loan origination fees 4,223 14,542 11,500
Other 2,201 1,646
-------- -------- -------- --------
Total income 11,464 119,597 3,004 58,642
Expenses
Operating 66,640 204,317 39,359 117,103
Provision for losses
on notes receivable
and real estate 105,000 105,000
-------- -------- -------- --------
Total expenses 66,640 309,317 39,359 222,103
-------- -------- -------- --------
Net loss before loss on
sale of real estate (55,176) (189,720) (36,355) (163,461)
-------- -------- -------- --------
Loss on sale of
real estate (2,696)
-------- -------- -------- --------
Net loss $(55,176) $(192,416) $(36,355) $(163,461)
======== ======== ======== ========
Per common share
information:
Net loss $ (.08) $ (.27) $ (.06) $ (.23)
======== ======== ======== ========
Income dividends .00 .00 .00 .00
Return of capital
dividends .00 .10 .00 .00
-------- -------- -------- --------
Total dividends $ .00 $ .10 $ .00 $ .00
======== ======== ======== ========
Weighted average
shares outstanding 707,918 707,918 707,918 707,918
======== ======== ======== ========
The accompanying notes are an integral part
of these financial statements
Page 4 of 12 <PAGE>
Property Secured Investments, Inc.
STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1995 and 1994
(Unaudited)
1995 1994
---- ----
Cash flows from operating activities:
Interest received $ (4,972) $112,100
Operating expenses paid (82,755) (221,099)
Other income received 2,201
-------- --------
Net cash used in operating activities (77,783) (106,798)
Cash flows from investing activities:
Principal payments received on
notes receivable 65,532 225,361
Deposit for sale of assets 25,000
Proceeds on sale of real estate 303,797
-------- --------
Net cash provided by
investing activities 65,532 555,158
Cash flows from financing activities:
Cash distributions to stockholders (495,543)
Payments on trust deed note payable (137,530)
-------- --------
Net cash used in financing activities (633,073)
-------- --------
Net decrease in cash (12,251) (185,713)
Cash, beginning of period 170,323 488,369
-------- --------
Cash, end of period $158,072 $302,646
======== ========
Cash flows from operating activities:
Net loss $(55,176) $(192,416)
Adjustments to reconcile net loss
to net cash used in operating
activities before cash distributions
to shareholders:
Loss on sale of real estate 2,696
Provision for losses on notes
receivable and real estate 105,000
Amortization of loan origination
fees (4,223) (14,542)
(Increase) decrease in accrued
interest receivable (2,269) 9,246
Decrease in accrued expenses and
other liabilities (16,115) (16,782)
-------- --------
Net cash used in operating activities $(77,783) $(106,798)
======== ========
The accompanying notes are an integral part
of these financial statements
Page 5 of 12 <PAGE>
Property Secured Investments, Inc.
NOTES TO FINANCIAL STATEMENTS
For the six months ended June 30, 1995 and 1994
The results of operations for the interim periods shown in
this report are not necessarily indicative of the results to be
expected for the year. In the opinion of management, the
information contained herein reflects all adjustments necessary
to make the results of operations for the interim periods a fair
statement of such operations. All such adjustments are of a
normal recurring nature.
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
------------
Property Secured Investments, Inc. (the "Company" or "PSI")
was incorporated in 1986 and began operations in 1987. The
Company has elected to be taxed as a Real Estate Investment Trust
("REIT"). The Company has investments in promissory notes
collateralized principally by deeds of trust on Southern
California real property. In 1994, the Company obtained
stockholder approval to convert to a perpetual life REIT.
Allowance for Loan Losses
-------------------------
The allowance for loan losses is maintained at a level that,
in the Board of Directors judgment, is adequate to absorb future
losses.
Non-performing Notes Receivable
-------------------------------
Notes receivable are placed on non-accrual status when
principal and interest are past due 90 days or more, or there is
reasonable doubt that principal or interest will be collected.
Loans are not restored to accruing status until principal and
interest are current.
Real Estate Held for Sale
-------------------------
Real Estate represents property that the Company has
obtained through foreclosure on trust deeds that were in its
portfolio and that it is holding for sale. The property is
recorded at the lower of estimated fair value less estimated
selling costs or at cost. Costs of maintaining foreclosed
properties and preparing them for sale are expenses as incurred.
Deferred Revenues
-----------------
Deferred revenues consist of loan origination fees relating
to loans originated or acquired by the Company. Loan fees have
been deferred and are being recognized as income on a method
approximating a level yield over the life of each respective
loan.
Page 6 of 12 <PAGE>
Federal Income Taxes
--------------------
The Company qualifies as an REIT under the Internal Revenue
Code and, accordingly, is not subject to Federal income taxes on
amounts distributed to shareholders, providing it distributes at
least 95% of its taxable income and meets certain other
conditions. The Company believes that it has met the require-
ments for continued qualification as a REIT as of June 30, 1995.
Net Loss Per Share
------------------
Net loss per share is based on the weighted average number
of common shares outstanding.
NOTE 2 - NOTES RECEIVABLE
Notes receivable represent amounts due from borrowers
relating to loans originated or acquired by the Company with
original loan terms generally ranging from five to thirteen
years. Generally, the notes are collateralized by first or
second deeds of trust on improved property located in California
and provide for monthly payments of principal and interest with
interest rates generally ranging from 8% to 11.9% per annum.
The following is a summary of notes receivable:
June 30, December 31,
1995 1994
------------ ------------
Second trust deeds,
collateralized by residential
and commercial property 244,089 335,243
------- -------
Less provision for losses
on notes 9,378 35,000
------- -------
$234,711 $300,243
======== ========
Page 7 of 12 <PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
-------------------------------------------------
Property Secured Investments, Inc. (the "Company") is a
California Corporation. The Company was organized in 1986, began
operations in 1987, and elected in its 1987 Federal Income Tax
Return to be taxed as a Real Estate Investment Trust, a REIT.
The Company was formed to invest in fixed and variable rate
promissory notes (the "Notes") secured by first and second deeds
of trust on real property located in Southern California. The
Company has also invested in notes which are secured by other
promissory notes. Such other promissory notes were in all cases
secured by deeds of trust and all-inclusive trust deeds. On
September 12, 1994, the Company's shareholders approved a
modification of the Company's Bylaws which had the effect of
permitting the Company to make equity investments in real
property as well as investing in Notes secured by real property.
The Company's Board of Directors has not as yet made any new
investments for the Company since its election in September of
last year.
The Company ceased acquiring Notes in 1991 and shortly
thereafter began to distribute the proceeds of the Company's Note
portfolio to its shareholders as payments were received. At the
Company's annual shareholders meeting for 1994, the shareholders
approved a proposal to sell substantially all of the Company's
real estate assets. Most of the Notes in the Company's portfolio
were either sold or paid off in the fourth quarter of 1994 or
first quarter of 1995. In the first quarter of 1995, the Company
terminated the Purchase and Sale Agreement pursuant to which the
Company had disposed of the majority of its assets, leaving it
with three assets in its portfolio, one note and two pieces of
real estate.
The Company's Board of Directors continues to explore
opportunities for recapitalizing the Company through, among other
things, a new public offering of the Company's common stock, and
the opportunities currently available for investment in real
estate structured either as equity or secured debt. If the Board
determines that it is in the best interests of the Company and
its shareholders to raise new capital for further investment, it
is not currently possible to project the overall effect of such
activities on the Company's net income for 1995. If the Board
does not decide to raise new capital and resume investment
activities, it will seek to sell or otherwise liquidate the
Company's remaining assets and distribute the proceeds of such
liquidations and all of the Company's reserves, after the payment
of expenses, to the Company's shareholders as soon as
practicable. The Company is unable to predict with any
confidence the resulting impact upon the Company's net income
from such a decision, although both income and expenses should
decrease significantly in 1995 from the levels in 1994 under such
a course of action. The Company anticipates that its expenses in
1995 will exceed its income.
Page 8 of 12 <PAGE>
There has been little change in the Company's financial
condition between the end of the last fiscal year and the end of
the second quarter of 1995. The principal changes in the
financial condition and results of operation of the Company
between the second quarter of 1994 and the second quarter of this
year are primarily the result of the sale of most of the
Company's Note portfolio and the distribution of much of the
proceeds of that sale to the Company's shareholders in the last
quarter of 1994. The Company's interest income declined by
nearly 93% and its total income was reduced by over 90% from the
second quarter of 1994 to the second quarter of 1995. On the
other hand, the Company's operating expenses also dropped by more
than 67% between the two periods. The Company continues to have
net operating losses as a result of its reduced income. Until
and unless the Company is successful in raising new capital to
fund its operations, it is anticipated that the results of the
Company's operations in future quarters will be similar to that
in the second quarter of this year.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits
No. Description
---- -------------
3a Articles of Incorporation of Property Secured
Investments, Inc. <F*> (3-a)
3b Bylaws of Property Secured Investments, Inc. <F**>
(3-b)/<F***>
4a Articles of Incorporation of Property Secured
Investments, Inc. <F*> (3-a)
4b Bylaws of Property Secured Investments, Inc. <F**>
(3-b)/<F***>
27 Financial Data Schedule
[FN]
<F*> Incorporated by reference to the Company's Registration
Statement on Form S-11, filed with the Commission on
December 12, 1988. (References in () are to original
exhibit numbers.)
<F**> Incorporated by reference to Amendment No. 1 to the
Company's Registration Statement on Form S-11 filed
with the Commission on August 14, 1989, modified as set
forth in the Company's definitive Proxy Statement filed
with the Commission on August 11, 1994. (References in
() are to original exhibit numbers.)
Page 9 of 12 <PAGE>
<F***> Incorporated by reference to the Company's definitive
Proxy Statement filed with the Commission on August 11,
1994, pages 33 - 37.
(b) Report on Form 8-K dated March 17, 1995, was filed by the
Company in which it was reported that the Company had changed its
principal accountants from Singer, Lewak, Greenbaum and Goldstein
to Deloitte & Touche ad that the Purchase and Sale Agreement
between the Company and Jess Kent & Company had been terminated.
SIGNATURES
Pursuant to the requirements of the Exchange Act, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Property Secured Investments, Inc.
----------------------------------
(Registrant)
Dated: August 14, 1995 By: /s/Andrew K. Proctor
-----------------------------
Andrew K. Proctor,
Chairman and President
Dated: August 14, 1995 By: /s/Andrew K. Proctor
-----------------------------
Andrew K. Proctor, Treasurer
Page 10 of 12 <PAGE>
EXHIBIT INDEX
No. Description Page #
---- ----------- ------
3a Articles of Incorporation of Property Secured
Investments, Inc. <F*> (3-a)
3b Bylaws of Property Secured Investments, Inc.
<F**> (3-b)/
<F***>
4a Articles of Incorporation of Property Secured
Investments, Inc. <F*> (3-a)
4b Bylaws of Property Secured Investments, Inc.
<F**> (3-b)/
<F***>
27 Financial Data Schedule 12
[FN]
<F*> Incorporated by reference to the Company's Registration
Statement on Form S-11, filed with the Commission on
December 12, 1988. (References in () are to original
exhibit numbers.)
<F**> Incorporated by reference to Amendment No. 1 to the
Company's Registration Statement on Form S-11 filed
with the Commission on August 14, 1989, modified as set
forth in the Company's definitive Proxy Statement filed
with the Commission on August 11, 1994. (References in
() are to original exhibit numbers.)
<F***> Incorporated by reference to the Company's definitive
Proxy Statement filed with the Commission on August 11,
1994, pages 33 - 37.
Page 11 of 12 <PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 158,072
<SECURITIES> 0
<RECEIVABLES> 234,711
<ALLOWANCES> 9,378
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 714,913
<CURRENT-LIABILITIES> 22,864
<BONDS> 0
<COMMON> 6,298,479
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 714,913
<SALES> 0
<TOTAL-REVENUES> 11,464
<CGS> 0
<TOTAL-COSTS> 66,640
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (55,176)
<INCOME-TAX> 0
<INCOME-CONTINUING> (55,176)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (55,176)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
