SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
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
ARIZONA LAND INCOME CORPORATION
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(Exact name of registrant as specified in its charter)
Arizona 86-0602478
------------------------------- -------------------
(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 [ ]
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 [ ]
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 8, 2000, there were 2,160,280 shares of Class A common stock
and 100 shares of Class B common stock issued and outstanding.
<PAGE>
Table of Contents
Page
----
Part I
Item 1. Financial Statements............................................... 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................... 7-8
Part II
Item 1. Legal Proceedings.................................................. 9
Item 2. Changes in Securities.............................................. 9
Item 3. Defaults upon Senior Securities.................................... 9
Item 4. Submission of Matters to a Vote of
Security Holders................................................. 9
Item 5. Other Information.................................................. 9
Item 6. Exhibits and Reports on Form 8-K................................... 9
Signatures.................................................................. 9
2
<PAGE>
ARIZONA LAND INCOME CORPORATION
Balance Sheets
June 30, December 31,
2000 1999
------------ ------------
(Unaudited)
Assets
Cash and temporary investments $ 2,829,585 $ 1,907,438
------------ ------------
Investments -
Accrued interest receivable 221,731 282,406
Mortgages receivable 5,578,034 7,247,564
Investment in partnership 333,538 325,538
Land held for sale 3,152,278 3,182,034
------------ ------------
9,285,581 11,037,542
Less - Reserve for losses (601,103) (618,769)
------------ ------------
Total investments, net 8,684,478 10,418,773
------------ ------------
Total assets $ 11,514,063 $ 12,326,211
============ ============
Liabilities
Accounts payable and other liabilities $ 22,641 $ 25,362
Accrued property taxes 6,613 7,671
Dividends payable 1,296,233 233,533
------------ ------------
Total liabilities 1,325,487 266,566
------------ ------------
Stockholders' Equity
Common stock-Class A 216,028 230,848
Common stock-Class B 10 10
Additional paid-in capital 22,926,311 23,551,348
Distributions in excess of income (12,953,773) (11,722,561)
------------ ------------
Total stockholders' equity 10,188,576 12,059,645
------------ ------------
Total liabilities & stockholders' equity $ 11,514,063 $ 12,326,211
============ ============
The accompanying notes are an integral part of these balance sheets.
3
<PAGE>
ARIZONA LAND INCOME CORPORATION
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months Three months Six months Six months
ended ended ended ended
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Income
Interest on mortgages $ 140,436 $ 178,167 $ 309,546 $ 332,917
Interest on temporary investments 31,975 46,576 49,128 93,658
Other income 3,000 3,200 6,000 6,600
---------- ---------- ---------- ----------
Total income before sale of properties 175,411 227,943 364,674 433,175
---------- ---------- ---------- ----------
Expenses
Professional services 12,019 8,771 29,119 34,002
Advisory fee 7,659 9,967 15,750 19,826
Administration and general 9,931 18,276 23,381 25,939
Directors' fees 10,800 5,400 16,778 11,200
Property taxes 2,500 6,400 5,000 6,400
---------- ---------- ---------- ----------
Total expenses 42,909 48,814 90,028 97,367
---------- ---------- ---------- ----------
Income before gain on sale of properties 132,502 179,129 274,646 335,808
Gain on sale of properties 4,618 10,150 4,618 12,569
---------- ---------- ---------- ----------
Net income $ 137,120 $ 189,279 $ 279,264 $ 348,377
========== ========== ========== ==========
Earnings per common share $ 0.06 $ 0.08 $ 0.13 $ 0.15
Dividends declared per share $ 0.60 $ 1.10 $ 0.70 $ 1.20
Weighted average number of shares of
common stock outstanding 2,166,313 2,360,080 2,177,046 2,360,080
</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, 2000 June 30, 1999
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 279,264 $ 348,377
Adjustments to reconcile net income to net cash provided
by operating activities-
Gain on land sale (4,618) (12,569)
Decrease in accrued interest receivable 60,675 155,690
Decrease in accounts payable and other liabilities (3,779) (3,048)
----------- -----------
Net cash provided by operating activities 331,542 488,450
----------- -----------
Cash flows from investing activities:
Cash proceeds from land sale 14,114 7,811
Principal payments received under mortgages 1,672,124 767,738
Cash payments to purchase mortgage interest -- (657,285)
----------- -----------
Net cash provided by investing activities 1,686,238 118,264
----------- -----------
Cash flows from financing activities:
Additional investment in partnership (8,000) --
Payment of dividends (447,776) (236,008)
Repurchase of Class A Common Stock (639,857) --
----------- -----------
Net cash used in financing activities (1,095,633) (236,008)
----------- -----------
Increase in cash and temporary investments 922,147 370,706
Cash and temporary investments - beginning of period 1,907,438 4,105,346
----------- -----------
Cash and temporary investments - end of period $ 2,829,585 $ 4,476,052
=========== ===========
Schedule of Non-Cash Investing and Financing Activities:
Seller financing in conjunction with land sale $ 2,594 $ 13,403
Dividends declared in excess of dividends paid 1,296,168 2,596,088
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
Arizona Land Income Corporation
Notes to Financial Statements
June 30, 2000
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,
2000, 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.
Note 4 In April and May 2000, the Company received payment in full on
mortgage receivable Loan No. 10 of Approximately $1,055,000, and on
mortgage receivable Loan No. 5 of approximately $496,000,
respectively.
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 April 1, 2000 through June 30, 2000, and January
1, 2000 through June 30, 2000.
For the quarter ended June 30, 2000, the Company had total income before
sale of properties of approximately $175,000 compared to $228,000 for the
quarter ended June 30, 1999. This decrease was primarily attributable to a
decrease of approximately $38,000 in interest on mortgages.
The Company expenses decreased to approximately $43,000 during the second
quarter of fiscal 2000 from approximately $49,000 in the second quarter of
fiscal 1999. This decrease is primarily attributable to a decrease of
approximately $8,000 in administration and general expenses.
The Company reported net income of approximately $137,000 for the quarter
ended June 30, 2000, compared to $189,000 for the quarter ended June 30, 1999.
The net income for 2000 included a gain on the sale of properties of
approximately $5,000 compared to $10,000 in 1999. The Company's income for the
second quarter 2000, without regard to said gain was approximately $132,000.
The Company reported total income before sale of properties of
approximately $365,000 for the operating period of January 1, 2000 through June
30, 2000, compared to $433,000 for the same period during fiscal 1999. This
decrease resulted from a decrease of approximately $45,000 in interest on
temporary investments and a decrease of approximately $23,000 in interest on
mortgages. For the operating period of January 1, 2000 through June 30, 2000,
the Company reported expenses of approximately $90,000 compared to $97,000 for
the same period during fiscal 1999.
The Company reported net income of approximately $279,000 for the period
from January 1, 2000 through June 30, 2000. Such net income includes
approximately $5,000 of gain on sale of properties. The net income for the
comparable prior period was approximately $348,000, which included a gain on
sale of properties of approximately $13,000.
The Company reported an increase in cash and temporary investments of
approximately $922,000. This increase resulted primarily from $1,672,000
principal payments received under mortgages. The Company also distributed
approximately $448,000 in cash dividends and repurchased approximately $640,000
of Class A Common Stock during the operating period of January 1, 2000 through
June 30, 2000.
Adverse market conditions negatively affected real estate values in Arizona
and in the metropolitan Phoenix area during the early 1990's resulting in a
decline in real estate values and an increase in mortgage defaults. The Phoenix
real estate market has improved 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 three small land sales during the first half of 2000.
The Company acquired the three parcels of property located in Pinal County,
Arizona, through foreclosure on Loan No. 6. The first sale was a 4.7 acre parcel
of property; the Company received $3,582 in cash from this sale. The second sale
was a 1 acre parcel of land which the Company received a note for $2,594 and
$307 in cash. The third sale was a 10.8 acre parcel of land which the Company
received $10,225 in cash from this sale.
The Company has one land sale pending on the property which the Company
obtained through foreclosure on Loan No. 6.
In April of 2000, the Company received a cash payoff of approximately
$1,055,000 on Loan No. 10. In May 2000, the Company received a cash payoff of
approximately $496,000 on Loan No. 5. These collections were in addition to
periodic collections of principal on other notes.
7
<PAGE>
On June 13, 2000, the Board of Directors declared a $.60 per share dividend
with a record date of June 30, 2000, and payable July 14, 2000. The total amount
distributed to shareholders was approximately $1,296,000. The Company also paid
a dividend of $.10 per share, distributed to shareholders of record on April 4,
2000, with a payable date of April 14, 2000. The total amount distributed to
shareholders was approximately $217,000.
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 intended 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 August 8, 2000, 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.
8
<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 16, 2000.
(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:
Votes Votes Broker
Name of Nominee Votes For Against Withheld Nonvotes
--------------- --------- ------- -------- --------
Thomas R. Hislop 1,696,928 0 0 0
Burton P. Freireich 1,696,828 0 0 0
Robert Blackwell 1,696,928 0 0 0
(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
August 8, 2000 /s/ Thomas R. Hislop
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Date Thomas R. Hislop
Vice President and Chief Financial Officer
9
