FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from___________ to _______________
Commission file number 1-9900
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ARIZONA LAND INCOME CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Arizona 86-0602478
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2999 N. 44th Street, Suite 100, Phoenix, Arizona 85018
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(Address of principal executive offices)
(Zip Code)
(602) 952-6800
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(Registrant's telephone number, including area code)
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(Former name,former address and former fiscal year,if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 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
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes N/A No
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
As of August 2, 1996, there were 2,522,580 shares of Class A common
stock and 100 shares of Class B common stock issued and outstanding.
<PAGE>
Table of Contents
Page
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Part I
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Item 1. Financial Statements.......................................3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..........7
Part II
- -------
Item 1. Legal Proceedings..........................................8
Item 2. Changes in Securities......................................8
Item 3. Defaults upon Senior Securities............................8
Item 4. Submission of Matters to a Vote of
Security Holders.......................................8
Item 5. Other Information..........................................8
Item 6. Exhibits and Reports on Form 8-K...........................8
Signatures..........................................................8
<PAGE>
ARIZONA LAND INCOME CORPORATION
Balance Sheets
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<TABLE>
<CAPTION>
June 30, 1996 December 31,
(Unaudited) 1995
------------- ------------
<S> <C> <C>
Assets
Cash and temporary investments $ 1,518,002 $ 1,391,357
------------- -------------
Investments -
Accrued interest receivable 195,718 303,479
Mortgages receivable 6,452,468 6,722,529
Investment in partnerships 354,307 314,307
Land held for sale 10,655,502 11,136,319
------------- -------------
17,657,995 18,476,634
Less - Reserve for losses (1,513,953) (1,513,953)
------------- -------------
Total investments, net 16,144,042 16,962,681
------------- -------------
Other assets, net 49,164 64,418
------------- -------------
Total assets $ 17,711,208 $ 18,418,456
============= =============
Liabilities
Dividends payable $ 0 $ 65
Accounts payable and other liabilities 171,151 191,226
------------- -------------
Total liabilities 171,151 191,291
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Stockholders' Equity
Common stock-Class A 252,258 253,258
Common stock-Class B 10 10
Additional paid-in capital 24,536,138 24,585,170
Distributions in excess of income (7,248,349) (6,611,273)
------------- -------------
Total stockholders' equity 17,540,057 18,227,165
------------- -------------
Total liabilities & stockholders' equity $ 17,711,208 $ 18,418,456
============= =============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
3
<PAGE>
ARIZONA LAND INCOME CORPORATION
Statements of Operations
(Unaudited)
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<TABLE>
<CAPTION>
Three months Three months Six months Six months
ended ended ended ended
June 30, 1996 June 30,1995 June 30, 1996 June 30, 1995
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Revenue
Interest on Mortgages $ 137,627 $ 140,875 $ 262,859 $ 232,187
Interest on Temporary Investments 17,464 15,552 35,725 29,203
Farm Lease Income 11,054 11,000 21,108 27,778
------------- ------------ ------------ ------------
Total revenue before sale of properties 166,145 167,427 319,692 289,168
------------- ------------ ------------ ------------
Expenses
Interest Expense - - 3,914 1,930
Professional Services 22,250 21,789 49,611 44,598
Advisory Fee 12,509 13,669 29,310 29,429
Administration and General 12,378 7,969 24,967 27,656
Directors' Fees 5,800 5,000 11,600 15,800
Property Taxes 38,795 38,795 77,590 76,727
------------- ----------- ------------ ------------
Total expenses 91,732 87,222 196,992 196,140
------------- ----------- ------------ ------------
Income before gain on sale of properties 74,413 80,205 122,700 93,028
Gain on sale of properties - - - 190,891
------------- ----------- ------------ ------------
Net income $ 74,413 $ 80,205 $ 122,700 $ 283,919
============= =========== ============ ============
Earnings per common share $0.03 $0.03 $0.05 $0.11
Dividends declared per share $0.00 $0.00 $0.30 $0.75
Weighted average number of shares of
common stock outstanding 2,522,580 2,532,580 2,522,580 2,564,455
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
ARIZONA LAND INCOME CORPORATION
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six months ended Six months ended
June 30, 1996 June 30, 1995
------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 122,700 $ 283,919
Adjustments to reconcile net income to net cash provided by (used in)
operating activities-
Gain on land sale - (190,891)
(Increase) decrease in accrued interest receivable 107,761 (24,626)
(Decrease) in accounts payable and other liabilities (20,140) (310,547)
Accretion of discount mortgages - (657)
Decrease in other assets 15,254 26,966
----------- ------------
Net cash provided by (used in) operating activities 225,575 (215,836)
----------- ------------
Cash Flows from Investing Activities:
Cash payments for assessments and planning on land held for sale (204,070) -
Cash proceeds from land sale 684,887 2,682,240
Principal payments received under mortgages 270,060 132,056
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Net cash provided by investing activities 750,877 2,814,296
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Cash Flows from Financing Activities:
Payment of dividends (759,774) (1,899,435)
Purchase of investment in partnership (40,000) (40,000)
Repurchase of shares of Class A common stock (50,033) (125,897)
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Net cash used in financing activities (849,807) (2,065,332)
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Increase in Cash and Temporary Investments 126,645 533,128
Cash and temporary investments - beginning of period 1,391,357 315,801
----------- ------------
Cash and temporary investments - end of period $ 1,518,002 $ 848,929
=========== ============
Schedule of Non-Cash Investing and Financing Activities:
Seller financing in conjunction with land sale $ - $ 3,084,540
Dividends declared in excess of dividends paid 65 65
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Period for:
Interest - 1,930
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
Arizona Land Income Corporation
Notes to Financial Statements
June 30, 1996
Note 1 Basis of Presentation - The financial statements have been
prepared by Arizona Land Income Corporation (the "Company")
without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of the
Company, the unaudited financial statements contain all
adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the financial position, the
results of operations and cash flows for the periods
presented.
Note 2 The results of operations for the three and six months ended
June 30, 1996, are not necessarily indicative of the results
to be expected for the full year.
Note 3 See Item 2, Management's Discussion and Analysis of
Financial Condition and Results of Operations for a discussion
of mortgages in default. It is the Company's normal policy to
discontinue the accrual of interest for notes in default as of
the default date.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Arizona Land Income Corporation (the "Company") is an Arizona
corporation which has elected to be treated as a real estate investment trust (a
"REIT") under the Internal Revenue Code of 1986.
For the quarter ended June 30, 1996, the Company had total revenues of
$166,000 compared to total revenues of $167,000 for the quarter ended June 30,
1995. This decrease was primarily attributable to a decrease in interest income
on mortgage receivables.
The Company's expenses increased to $92,000 in the second quarter of
fiscal 1996 from $87,000 in the second quarter of 1995. This increase was
primarily due to an increase in property maintenance expenses of the Company
from $8,000 to $12,000.
For the operating period of January 1, 1996 through June 30, 1996, the
Company reported total revenues of $320,000 compared to $289,000 for the
operating period of January 1, 1995 through June 30, 1995. This increase was a
result of an increase of mortgage interest received, which increased from
$232,000 in 1995 to $263,000 in 1996. The Company also reported expenses of
$197,000 for the first six months of fiscal 1996 as compared to $196,000 for the
same period during fiscal 1995.
Adverse market conditions negatively affected real estate values in the
Southwest during the early 1990's resulting in a decline in real estate values
and an increase in mortgage defaults. The Southwest real estate market has begun
to improve and land values have stabilized and improved in certain instances.
The Company believes that such improvements will reduce the number of loan
defaults or modifications; however, there can be no assurances in this regard.
Nonetheless, the Company will continue to vigorously assert any and all its
legal rights in the event of a default.
The Company completed two land sales during the second quarter of 1996.
The first resulted from the sale of a 5 acre parcel of property located in
Phoenix, Arizona, which the Company acquired through foreclosure on Loan No 17.
This sale netted the Company $412,000 cash. The second sale was a 3 acre parcel
which had secured Loan No. 17. This sale netted the Company $273,000. In
summary, the Company had two land sales during the second quarter of 1996, which
produced $685,000 cash.
The Company has 4 additional parcels of land resulting from foreclosure
on Loan No. 17. All of these parcels are in escrow to close in the fourth
quarter of 1996 and the first quarter of 1997. If such sales are consummated,
the Company should receive $2,400,000 in cash or notes receivable; however,
there can be no assurance that such sales will be consummated. In its endeavor
to sell the property associated with Loan No. 17, the Company anticipates an
expenditure of approximately $400,000 to $500,000 to fund additional
planning/zoning requirements of the City of Phoenix and to access improvements
required by the purchasers.
During the second quarter of 1996, the Company received $78,631.95 as
the payoff on Loan No. 17-2, which is associated with the sale of property
received through foreclosure on Loan No. 17.
The Company, during the second quarter of 1996, has agreed to sell a 3
acre portion of its property located at 16th Street and Bell Road in Phoenix,
Arizona. This property was acquired through foreclosure on Loan No. 10. Such
sale, if consummated, will net the Company $695,000 cash in the fourth quarter
of 1996. However, there can be no assurance that such sale will be consummated.
On March 21, 1996, the Company declared a $.30 per share extraordinary
cash distribution, which was paid on April 15, 1996, to the shareholders of
record on April 1, 1996.
The Company believes that funds generated from operations will be
sufficient to meet its capital requirements. No other arrangements, such as
lines of credit, have been made to obtain external sources of capital. While no
assurance can be given, the Company believes that such arrangements could be
obtained by the Company, if necessary.
As disclosed in the Company's prospectus used in connection with the
Company's 1988 initial public offering, the Company's intent at the time of the
public offering was to dissolve within approximately eight years after the date
of such offering. The Company currently has no immediate plans to dissolve and
may not voluntarily dissolve anytime in the immediate future. Any decision by
the Company to dissolve will be determined by the Company's Board of Directors
and will depend upon market conditions and other pertinent factors. The
Company's Board of Directors possesses the discretion to (i) continue to operate
the Company and hold such First Mortgage Loans or real property until the
Company's Board of Directors determines that it is the Company's best interest
to dispose of such investments; (ii) sell such First Mortgage Loans or real
property on or about the dissolution date, in which case the sale proceeds in
excess of monies owed by the Company to creditors will be distributed to the
shareholders on a pro rata basis, or (iii) issue to the shareholders
participating interests in such First Mortgage Loans or real property on a basis
proportionate to their respective stock ownership interests in the Company. In
the event the Company issues to its shareholders participating interests in a
First Mortgage Loan, the Advisor will continue to act as servicing agent for the
First Mortgage Loan and will be paid a quarterly servicing fee equal to 1/16 of
1% of the aggregate outstanding loan balance of the First Mortgage Loan until
the First Mortgage Loan is sold or repaid.
The mortgage loan numbers referred to in the above paragraphs are
identifiers for those loans on the books and records of the Company.
Additionally, these numbers are identified in the Company's initial offering
prospectus dated June 6, 1988.
7
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities.
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Company held the Annual Meeting of Shareholders on May 8,
1996.
(b) Thomas Hislop, Burton Freireich and Robert Blackwell were
elected directors of the Company at the Annual Meeting.
(c) Tabulation of the voting was as follows:
<TABLE>
<CAPTION>
Votes Votes Broker
Name of Nominee Votes For Against Withheld Nonvotes
--------------- --------- ------- -------- --------
<S> <C> <C> <C> <C>
Thomas R. Hislop 2,433,226 0 0 0
Burton P. Freireich 2,433,226 0 0 0
Robert Blackwell 2,433,226 0 0 0
</TABLE>
(d) Not Applicable
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Furnish the exhibits required by Item 601 of Regulation S-K.
Exhibit No. Description Method of Filing
----------- ----------- ----------------
27 Financial Data Schedules Filed Herewith
(b) Reports of Form 8-K
None
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.
ARIZONA LAND INCOME CORPORATION
(S) Thomas R. Hislop
August 2, 1996
- ------------------------ ---------------------------------------------
Date Thomas R. Hislop
Vice President and Chief Financial Officer
8
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 830748
<NAME> Arizona Land Income Corporation
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 1,518
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 1,514
<INVENTORY> 17,462
<CURRENT-ASSETS> 1,713
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 17,711
<CURRENT-LIABILITIES> 171
<BONDS> 0
0
0
<COMMON> 252
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 17,711
<SALES> 0
<TOTAL-REVENUES> 320
<CGS> 0
<TOTAL-COSTS> 197
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 123
<INCOME-TAX> 0
<INCOME-CONTINUING> 123
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 123
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
