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 March 31, 1997
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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
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(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 May 20, 1997, there were 2,360,080 shares of Class A common stock
and 100 shares of Class B common stock issued and outstanding.
<PAGE>
Table of Contents
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Page
Part I
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>
March 31, 1997 December 31,
(Unaudited) 1996
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<S> <C> <C>
Assets
Cash and temporary investments $ 1,236,436 $ 1,191,853
------------ ------------
Investments -
Accrued interest receivable 119,287 206,664
Mortgages receivable 4,292,143 4,363,668
Investment in partnership 378,755 378,755
Land held for sale 10,349,264 10,162,284
------------ ------------
15,139,449 15,111,371
Less - Reserve for losses (1,513,953) (1,513,953)
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Total investments, net 13,625,496 13,597,418
------------ ------------
Total assets $ 14,861,932 $ 14,789,271
============ ============
Liabilities
Accounts payable and other liabilities 54,381 62,140
Accrued property taxes 99,196 90,296
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Total liabilities 153,577 152,436
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Stockholders' Equity
Common stock-Class A 236,008 236,008
Common stock-Class B 10 10
Additional paid-in capital 23,791,072 23,791,072
Distributions in excess of income (9,318,735) (9,390,255)
------------ ------------
Total stockholders' equity 14,708,355 14,636,835
------------ ------------
Total liabilities and stockholders' equity $ 14,861,932 $ 14,789,271
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
ARIZONA LAND INCOME CORPORATION
Statements of Operations
(Unaudited)
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<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 1997 March 31, 1996
-------------------- ------------------
<S> <C> <C>
Income
Interest on mortgages $ 101,101 $ 125,232
Interest on temporary investments 18,986 18,261
Farm lease income 10,159 10,054
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Total income 130,246 153,547
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Expenses
Interest expense 1,747 3,914
Professional services 23,631 27,361
Advisory fee 10,192 12,458
Administration and general 8,456 16,932
Directors' fees 5,800 5,800
Property taxes 8,900 38,795
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Total expenses 58,726 105,260
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Net income $ 71,520 $ 48,287
=========== ===========
Earnings per common share $0.03 $0.02
=========== ===========
Weighted average number of
shares of common stock outstanding 2,360,080 2,532,580
Dividends declared per share $0.00 $0.30
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
ARIZONA LAND INCOME CORPORATION
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 71,520 $ 48,287
Adjustments to reconcile net income to net cash provided by operating
activities-
Decrease in accrued interest receivable 87,377 163,254
Increase in accounts payable and other liabilities 1,141 33,306
Decrease in other assets - 3,529
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Net cash provided by operating activities 160,038 248,376
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Cash Flows from Investing Activities:
Cash payments for assessments on land held for sale (186,980) (166,090)
Principal payments received under mortgages 71,525 158,324
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Net cash used in investing activities (115,455) (7,766)
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Cash Flows from Financing Activities:
Purchase of investment in partnership - (40,000)
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Net cash used in financing activities - (40,000)
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Increase in Cash and Temporary Investments 44,583 200,610
Cash and temporary investments - beginning of period 1,191,853 1,391,357
----------- ------------
Cash and temporary investments - end of period $ 1,236,436 $ 1,591,967
=========== ============
Schedule of Non-Cash Investing and Financing Activities:
Dividends declared in excess of dividends paid - 759,869
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Period for:
Interest $ 1,747 $ 3,914
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
Arizona Land Income Corporation
Notes to Financial Statements
March 31, 1997
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 and the instructions to
Form 10-QSB. 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 months ended March 31,
1997, 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. The statements of operations
filed herewith cover the periods from January 1, 1996 through March 31, 1996,
and January 1, 1997 through March 31, 1997.
For the quarter ended March 31, 1997, the Company had total income of
$130,000 compared to $153,000 for the quarter ended March 31, 1996. This
decrease was primarily attributable to a decrease in interest on mortgages from
$125,000 to $101,000, which resulted from a reduction in the Company's
portfolio.
The Company expenses decreased to approximately $59,000 during the
first quarter of fiscal 1997 from approximately $105,000 in the first quarter of
fiscal 1996. This decrease is primarily attributable to a decrease of $8,500 in
administrative and general expenses, and a decrease of $30,000 in property
taxes.
The Company reported net income of $72,000 for the quarter ended March
31, 1997, compared to $48,000 for the quarter ended March 31, 1996.
For the operating period of January 1, 1997 through March 31, 1997,
cash flow provided by operating activities totaled $160,000 and consisted of
$87,000 from a decrease in accrued interest and an increase of $1,000 in
accounts payable and other liabilities plus net income.
For the operating period of January 1, 1997 through March 31, 1997,
cash flow used in investing activities totaled $115,000 and consisted of $72,000
of principal payments received on its mortgage portfolio offset by $187,000 paid
pursuant to an agreement on one of its properties.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share." The new standard simplifies the computation of earnings per share (EPS)
and increases comparability to international standards. The Company is required
to adopt the new standard in its fiscal year 1997 financial statements. All
prior-period EPS information, including interim EPS, is required to be restated
at that time; however, because of the simple capital structure of the Company,
SFAS 128 is not exkpected to have a material impact on the Company's reported
EPS, and on a pro forma basis would not have changed EPS in either the first
quarter of 1997 or in 1996.
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. Nonetheless, the
Company will continue to vigorously assert any and all its legal rights in the
event of a default.
The Company had no land sales during the first quarter of 1997 but, as
of the date of this report, the Company has completed three land sales during
the second quarter of 1997. The first sale resulted from the sale of a 15 acre
parcel of property located in Phoenix, Arizona, which the Company acquired
through foreclosure on Loan No. 10. This sale netted the Company $1,086,000 cash
and a note receivable totaling $965,000. The second sale was an 8 acre parcel
which had secured Loan No. 17 and was received through foreclosure by the
Company. This sale netted the Company $949,000 cash. The third sale was a 3.36
acre parcel of property which the Company acquired through foreclosure on Loan
No. 17. This sale netted the Company $623,000 cash.
In addition to the above-referenced three land sales, the Company has
sales pending for two parcels of land which the Company obtained as a result of
the foreclosure on Loan No. 17. Both of these parcels are in escrow and are
scheduled to close in the second and third quarters of 1997. If such sales are
consummated, the Company should receive $900,000 in cash or notes receivable,
however, there can be no assurance that such sales will be consummated.
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 intends to dissolve within
approximately eight years from the date of such public offering. The precise
date on which the Company will dissolve will be determined by the Company's
Board of Directors and will depend upon market conditions and other pertinent
factors. The Board of Directors also has the discretion to indefinitely continue
the operation of the Company. As of May 20, 1997, the Board has not made a
decision regarding the dissolution of the Company.
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.
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
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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
May 20, 1997
- ------------------------ -------------------------------
Date Thomas R. Hislop
Vice President and
Chief Financial Officer
8
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 1,236
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 1,514
<INVENTORY> 15,139
<CURRENT-ASSETS> 1,356
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 14,862
<CURRENT-LIABILITIES> 154
<BONDS> 0
0
0
<COMMON> 236
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 14,862
<SALES> 0
<TOTAL-REVENUES> 130
<CGS> 0
<TOTAL-COSTS> 59
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 71
<INCOME-TAX> 0
<INCOME-CONTINUING> 71
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 71
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
