<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended March 31, 1996
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [Fee Required]
For the transition period from ______________________ to _______________________
Commission file Number 33-47228
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ANGELES MORTGAGE INVESTMENT TRUST
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
California 95-6890805
- ---------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
</TABLE>
340 North Westlake Boulevard, Suite 230, Westlake Village, California 91362
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (805) 449-1335
- --------------------------------------------------------------------------------
No Change
- --------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year If Changed Since Last Report
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
Title of each class Name of each exchange on
which registered
Class A Shares American Stock Exchange
- --------------------------------------------------------------------------------
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
NONE
- --------------------------------------------------------------------------------
(Title of class)
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.
[X] Yes [ ] No
Total Pages 13
<PAGE> 2
ANGELES MORTGAGE INVESTMENT TRUST
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
Part I. Financial Information
Item 1. Balance Sheets - March 31, 1996 and December 31, 1995 3
Statements of Operations - Three Months Ended March 31,
1996 and 1995 4
Statements of Stockholders Equity 5
Statements of Cash Flows - Three Months Ended March 31,
1996 and 1995 6
Notes to the Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. Other Information
Item 1. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security-Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
2
<PAGE> 3
PART I FINANCIAL INFORMATION
ANGELES MORTGAGE INVESTMENT TRUST
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31 December 31
-------------------------------
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Notes Receivable
Mortgage notes receivable,
(primarily due from affiliates) $ 26,057,000 $ 25,782,000
Promissory notes receivable,
(primarily due from affiliates) 19,329,000 19,515,000
------------ ------------
45,386,000 45,297,000
Foreclosed real estate held for sale 2,900,000 3,400,000
------------ ------------
48,286,000 48,697,000
Less: Allowances for estimated losses (13,667,000) (13,598,000)
------------ ------------
34,619,000 35,099,000
Cash 1,558,000 1,229,000
Security investment 930,000 0.00
Accrued interest receivable 436,000 460,000
Prepaid expenses and other 311,000 544,000
------------ ------------
Total assets $ 37,854,000 $ 37,332,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $286,000 $193,000
------------ ------------
Total liabilities 286,000 193,000
------------ ------------
Shareholders' equity:
Class A Shares (2,826,700 issued and outstanding,
$1.00 par value, unlimited shares authorized) 2,827,000 2,827,000
Class B Shares (1,675,113 issued and outstanding,
$.01 value, unlimited shares authorized) 14,000 14,000
Additional paid-in capital 51,719,000 51,719,000
Accumulated distributions in excess of cumulative net
income (16,992,000) (17,421,000)
------------ ------------
Total shareholders' equity 37,568,000 37,139,000
------------ ------------
Total liabilities and shareholders' equity $ 37,854,000 $ 37,332,000
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 4
ANGELES MORTGAGE INVESTMENT TRUST
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended
March 31
----------------------------
1996 1995
----------- -----------
<S> <C> <C>
Revenue:
Interest income $ 718,000 $ 772,000
Rental income 66,000 5,000
Gain from sale of real estate 184,000 0.00
Recovery of bad debt 186,000 12,844,000
----------- -----------
Total revenue 1,154,000 13,621,000
----------- -----------
Costs and expenses:
Property operating expenses 9,000 0.00
Interest expense to bank 0.00 91,000
General and administrative 428,000 705,000
Amortization of loan fees 6,000 15,000
----------- -----------
Total costs and expenses 443,000 811,000
----------- -----------
Net income before extraordinary item 711,000 12,810,000
Extraordinary item:
Debt forgiveness 0.00 1,844,000
----------- -----------
Net income $ 711,000 $14,654,000
----------- -----------
Net income before extraordinary item per Class A Share $0.25 $3.74
Extraordinary item 0.00 0.53
----------- -----------
Net income per Class A Share $0.25 $4.27
=========== ===========
Cash distributions per Class A Share $0.10 $0.00
=========== ===========
Weighted average Class A Shares outstanding 2,826,700 3,394,026
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements
4
<PAGE> 5
ANGELES MORTGAGE INVESTMENT TRUST
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated
Distributions in
Additional Excess of
Class A Class B Paid-In Cumulative Net
Shares Shares Capital Income Total
---------- -------- ---------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $2,827,000 $14,000 $51,719,000 $(17,421,000) $37,139,000
Distributions paid to Class A
Shareholders -- -- -- (282,000) (282,000)
Net income -- -- -- 711,000 711,000
---------- ------- ----------- ------------ -----------
Balance at March 31, 1996 $2,827,000 $14,000 $51,719,000 $(16,992,000) $37,568,000
========== ======= =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements
5
<PAGE> 6
ANGELES MORTGAGE INVESTMENT TRUST
STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Three months ended
March 31
--------------------------
1996 1995
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 711,000 $14,654,000
Adjustments to reconcile net income to cash
flows from operating activities:
Gain from sale of real estate (184,000) --
Recovery of bad debt (186,000) (12,844,000)
Extraordinary gain -- (1,844,000)
Amortization of loan fees 6,000 15,000
Decrease (increase) in interest receivable (4,000) (379,000)
Decrease (increase) in prepaid expenses and other assets 233,000 (42,000)
Increase (decrease) in accounts payable and
accrued expenses 93,000 318,000
Decrease in unearned loan fee income (6,000) (24,000)
----------- ----------
Cash flows provided by (used in) operating activities 663,000 (146,000)
----------- ----------
Cash flows from investing activities:
Principal collections of notes receivable 201,000 5,000
Proceeds from sale of real estate 677,000 --
Investment in securities (979,000) --
Principal collections of investment securities 49,000 --
----------- ----------
Cash flows provided by (used in) investing activities (52,000) 5,000
----------- ----------
Cash flows used in financing activities:
Distributions to Class A Shareholders (282,000) --
----------- ----------
(282,000) --
----------- ----------
Increase (decrease) in cash and cash equivalents 329,000 (141,000)
Cash and cash equivalents:
At beginning of period 1,229,000 1,104,000
----------- ----------
At end of period $ 1,558,000 $ 963,000
=========== ==========
Schedule of noncash investing activities:
Recast past due interest into principal on note receivable $ 255,000 $ --
</TABLE>
The accompanying notes are an integral part of the financial statements
6
<PAGE> 7
ANGELES MORTGAGE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - The accompanying financial statements have not been audited by
independent certified accountants, but in the opinion of management all of the
adjustments necessary to present fairly the financial position of Angeles
Mortgage Investment Trust (the "Trust") and the results of operations and its
cash flows at the date and for periods indicated have been included. Certain
prior year amounts have been reclassified to conform to current year
classifications.
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principals for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly they do not include all the information and footnotes required by
generally accepted accounting principals for complete financial statements.
Operating results for the three month period ended March 31, 1996 are
not indicative of the results that may be expected for the year ending December
31, 1996.
For further information, refer to the financial statements and notes
thereto included in the Trust's annual report on Form 10-K for the year ended
December 31, 1995.
NOTE 2 - The net income per Class A Share was based on 2,826,700 and
3,394,026 weighted average Class A Shares outstanding during the three months
ended March 31, 1996 and 1995, respectively, after deduction of the 1% interest
for Class B Shares.
NOTE 3 - In December 1995 the Trust paid off the outstanding balance on the
line of credit and did not draw on the line during the quarter ending March 31,
1996. The Trust's line of credit expires July 31, 1996 and requires monthly
interest only payments based upon prime plus 1% and a 0.5% commitment fee paid
quarterly based upon the $5 million line of available credit.
NOTE 4 - In February 1996 the Trust, pending a longer term investment, acquired
a security investment in Federal Home Loan Mortgage Corporation in the amount
of $979,000 with a coupon rate of 8.5% and matures June 1, 1996. The Trust
maintains this investment at its original cost which approximates market value.
NOTE 5 - In August 1995 the Trust obtained title to the 4705 Van Epps property
through a deed-in-lieu of foreclosure, recorded the property at $500,000 and
recognized approximately $151,000 as recovery of bad debt in 1995. The
property was sold in February 1996, for $752,000 and the Trust received net
cash proceeds of approximately $677,000. The Trust realized a $184,000 gain on
the sale.
NOTE 6 - During the quarter ended March 31, 1996 recovery of bad debts
represents proceeds received from the loan referred to by the Trust as
"Northprior," for which an allowance for estimated loss had been established.
There is a possibility that the Trust may receive additional proceeds from the
Northprior loan from amounts held in an escrow account in order to remediate
environmental problems at the property.
NOTE 7 - During the quarter ended March 31, 1996 the Trust modified a second
mortgage referred to as Brittany Point. In connection with the modification,
the Trust extended the maturity date to December 31, 2000, required monthly
cash flow payments and capitalized approximately $283,000 of past due interest
into principal of which approximately $28,000 had been previously accrued as
interest receivable. The Trust did not recognize any interest income in
connection with the loan modification.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Trust has invested in loans (the "Trust Loans") which were
made principally to partnerships that were affiliated with Angeles Corporation
("Angeles"), parent company to the Trust's prior advisor, Angeles Funding
Corporation (the "Advisor" or "AFC"), but the majority of which are now
controlled by Insignia Financial Group, Inc. ("Insignia").
In February 1993, the Trust's policy of distributing monthly the Net
Cash from operations to its Class A Shareholders was suspended as a result of
the failure of the Insignia partnerships and entities affiliated with Angeles
to fully service their respective Trust Loan obligations and Angeles' inability
to fulfill its guarantee of a minimum annual distribution of $2.00 per Class A
Share through May 1994. The Trust announced on December 20, 1995 that it had
reduced its bank and other debt to zero and scheduled its first dividend
payment in three years to Class A Shareholders of record on January 22, 1996
which was paid on February 13, 1996 , in the amount of $0.10 per Class A Share.
In addition, during the first quarter ended March 31, 1996 the Trust declared a
second quarterly dividend of $0.12 per Class A Share to shareholders of record
on April 23, 1996 and payable on May 15, 1996.
As of July 25, 1995, the Trust has a new line of credit established
with the Bank, in the amount of $5 million. This new line of credit requires
monthly interest only payments based upon prime plus 1%, a 0.5% commitment fee
based on the $5 million line of credit paid quarterly and matures July 31,
1996. The new line of credit which substituted the prior loan with the Bank
allows the Trust to draw on such line to facilitate the foreclosure process on
Trust loans. In December 1995 the Trust paid off the outstanding balance on
the line of credit and did not draw on the line during the quarter ending March
31, 1996.
The Trust's liquidity is dependent upon its borrowers having
sufficient cash to pay interest and principal payments as they become due. In
February 1993, a significant number of the Insignia Partnerships failed to
service their debt obligations under the Trust Loans. The Trust has since
completed the process of restructuring the majority of the Trust Loans. The
restructured loan terms typically include a reduction in the interest rate, an
extension of the loan term, payment of at least net cash flow from the
operation of the relevant property on a current basis and a modest increase in
the principal balance of the loan as consideration for the modification.
In August 1995 the Trust obtained title through a deed-in-lieu of
foreclosure as a result of recourse provisions in a defaulted loan, on 4705 Van
Epps, an industrial warehouse located in Cleveland, Ohio. In February 1996,
the Trust sold this property for $752,000, resulting in net cash proceeds of
approximately $677,000.
During the period in which the Trust is evaluating new investments,
the Trust invested $979,000 in February 1996 in the Federal Home Loan Mortgage
Corporation, which has a coupon rate of 8.5% and matures June 1, 1996.
During 1994 the Trust began the foreclosure process on the Colony Cove
note receivable on which the Trust holds a first trust deed mortgage. The
Trust foreclosed on 200 acres of raw land, located in Ellenton, Florida, in
April 1996 and does not expect to incur a loss on its original investment.
8
<PAGE> 9
The Trust's management on a quarterly basis reviews the carrying value
of the Trust's Loans and properties held for sale. Generally accepted
accounting principles require that the carrying values of a note receivable or
property held for sale cannot exceed the lower of its carrying amount or its
estimated net realizable value. The estimate of net realizable value is based
on management's review and evaluation of the collateral properties as well as
recourse provisions included in certain notes receivable. The allowance for
loan loss as of March 31, 1996 was approximately $13 million. However, the
provision for loss is an estimate which is inherently uncertain and depends on
the outcome of future events. The Trust's estimates are based on an analysis of
the loan portfolio, composition of the loan portfolio, the value of collateral
and current economic conditions.
From time to time the Trust has held, and will continue to hold
discussions with other REITs and other real estate related companies to
consider expanding the Trust's portfolio through a transaction involving the
issuance of Trust shares or entering into joint ventures or partnerships which
would ultimately result in the issuance in Trust shares.
RESULTS OF OPERATIONS
During the three months ended March 31, 1996 total revenue
decreased significantly as compared to total revenue for the three months ended
March 31, 1995 which is due to the Angeles Corporation bankruptcy settlement
which was effective March 31, 1995. The Trust recognized a recovery of bad debt
of $12,844,000 as a result of the settlement, for which the Trust received
proceeds of cash in excess of $6 million on April 14, 1995. Simultaneous to
the Angeles settlement, the Trust settled its claims with the various
partnerships associated with Insignia, which resulted in a extraordinary income
of $1,844,000 resulting from the Trust being able to negotiate the settlement
of these claims at a discount. Total income for the quarter ended March 31,
1996 represents a significant decrease from the same quarter ended 1995 due to
the two settlement transactions.
Interest income for the three months ended March 31, 1996
decreased 7% when compared to the quarter ended March 31, 1995. The decrease
is primarily due to interest income of approximately $378,000, which
represented interest received from the Angeles settlement for the period August
1994 to April 14, 1995 on the $6.1 million note. Other than this one time
income receipt of interest proceeds for the quarter ended March 31, 1995,
interest income actually increased for the comparable period ending March 31,
1996 by approximately 30%. Rental income and property operating expenses
increased significantly for the three months ended March 31, 1996 when compared
to the quarter ended March 31, 1995. This increase relates to the Trust owning
three properties during the first quarter ended March 31, 1995, one of which
was sold at the end of February 1996, while owning only one property during the
quarter ended March 31, 1995.
Interest expense to the Bank decreased as the Trust had no
borrowings on the bank line of credit during the quarter ended March 31, 1996,
while the Trust had an average outstanding balance on the loan of $3,500,000
for the quarter ended March 31, 1995.
The decrease in general and administrative expenses for the
quarter ended March 31, 1996 when compared to the previous quarter for the same
period, is due to legal fees and proxy related costs of approximately $250,000
which the Trust incurred during the quarter ended March 31, 1995. The
increased 1995 legal fees relate primarily to a lawsuit brought against a group
of shareholders and individuals who the Trust believes acquired the Trust Class
A Shares based on insider information and
9
<PAGE> 10
the 1995 proxy costs relate to the 1995 annual shareholders meeting due to the
existence of a proxy fight. During the quarter ended March 31, 1996 the Trust
continues to incur legal fees related to this lawsuit.
10
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Trust is currently involved in the following lawsuits:
1. Angeles Mortgage Investment Trust vs. Morton D. Kirsch, an individual,
Wherco, Inc., a California corporation, Jeffrey Schultz, and individual,
Schultz Investments, an entity, Jonathan Schultz, an individual, John Barry
Clemens, an individual, and Jules P. Kirsch, an individual, and DOES 1
through 50, inclusive Superior Court of the State of California for the Los
Angeles, Case No. BC 125243
On April 5, 1995, the Trust filed this action for violations of California
Corporations Code Sections 25402 and 25502.5 and California Business and
Professions Code Sections 17200 et. seq. The action seeks damages and
injunctive relief based on defendants' use of "inside information" in
connection with their purchase of Class A shares of stock in the Trust.
The Trust seeks treble damages pursuant to the Corporations Code, plus
attorneys fees, prejudgement interest and an injunction. The Trust filed
its second amended complaint on July 11, 1995. All defendants have filed
answers to the second amended compliant. Discovery is ongoing.
2. Angeles Mortgage Investment Trust vs. Morton D. Kirsch, an individual,
Wherco, Inc., a California corporation, Leland Evans, an individual,
Jonathan Schultz, an individual, John B. Clemens, an individual, Jules P.
Kirsch, an individual, Lee C. McClurkin, an individual, and Arthur G. Weiss,
an individual United States District Court, Central District of California,
Case No. 95-2670 WDK (CTx)
On April 21, 1995, the Trust filed this action in Federal Court for
violations of Sections 13(d) and 14(a) of the Securities and Exchange Act
of 1934 and the rules and regulations promulgated thereunder. This action
seeks injunctive relief based on defendants' failure to disclose complete
and accurate information in violation of the Federal Securities Laws. On
May 2, 1995, Morton D. Kirsch and Wherco, Inc. filed a Counterclaim and
Third Party Compliant for injunctive relief against the Trust, and Third
Party Defendants Insignia Financial Group, Inc., a Delaware corporation,
MAE GP Corporation, a Delaware corporation, Ronald J. Consiglio, an
individual, J. D'Arcy Chisholm, an individual, Bryan L. Herrmann, an
individual, and Jack E. McDonald, an individual. On May 17, 1995, Morton
D. Kirsch and Wherco, Inc., dismissed the Counterclaim and Third Party
Compliant. Discovery is ongoing.
11
<PAGE> 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
On March 13, 1996 the Trust held its annual shareholders meeting to elect a
four member board of trustees and to ratify the appointment of BDO Seidman, LLP
as the Trust's independent accountants for the Trust's fiscal year ending
December 31, 1996.
The four trustees that were elected as a result of the meeting are Ronald J.
Consiglio, J. D'Arcy Chisholm, Bryan L. Herrmann and Curtis J. Crivelli.
Masseurs. Consiglio, Chisholm and Herrmann were all trustees prior to the
election and continued to hold such positions after the election, with Mr.
Crivelli as a newly voted in member of the trustees. In addition, the
shareholders ratified the appointment of BDO Seidman, LLP, as the 1996
independent accountants for the Trust.
The shareholder vote was as follows:
<TABLE>
<CAPTION>
Votes
----------------------------- Broker
For Against Withheld Abstentions Non-Votes
--------- ------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
J. D'Arcy Chisholm 3,708,426 -- 24,011 -- --
Ronald J. Consiglio 3,705,952 -- 26,485 -- --
Curtis J. Crivelli 3,709,574 -- 22,863 -- --
Bryan L. Hermann 3,709,574 -- 22,863 -- --
Ratification of BDO
Seidman, LLP 3,701,893 10,861 -- 19,683 --
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
None.
B. REPORTS ON FORM 8-K
None.
Note: All items required under Part II of Form 10-Q which are applicable have
been reported herein.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Trust has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ANGELES MORTGAGE INVESTMENT TRUST
By /s/ Anna Merguerian
-----------------------------
Anna Merguerian
Chief Financial Officer
Date: May 1, 1996
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,558,000
<SECURITIES> 930,000
<RECEIVABLES> 747,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,235,000
<PP&E> 34,619,000<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 37,854,000
<CURRENT-LIABILITIES> 286,000
<BONDS> 0
0
0
<COMMON> 37,568,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 37,854,000
<SALES> 1,154,000<F2>
<TOTAL-REVENUES> 1,154,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 443,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 711,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 711,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 711,000
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.25
<FN>
<F1>Includes mortgage and promissory notes of $31,719,000.
<F2>Includes gain on sale of real estate of $184,000 and recovery of bad debt of
$186,000.
</FN>
</TABLE>
