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, 1996
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 0-20047
I.R.S. Employer Identification Number 41-1691930
Royale Investments, Inc.
3430 List Place
Minneapolis,MN 55416
Telephone: (612) 920-4078
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
requirements for the past 90 days. Yes X No_____
The number of shares outstanding of the Registrant's stock as of August 10, 1996
was:
1,420,000 Shares of Common Stock Outstanding
<PAGE>
<TABLE>
Royale Investments, Inc.
BALANCE SHEETS
<CAPTION>
June 30, Dec. 31,
1996 1995
(Unaudited)
ASSETS
REAL ESTATE INVESTMENTS:
<S> <C> <C>
Property subject to operating leases $25,027,358 $25,027,358
Less: accumulated depreciation 1,680,234 1,403,020
23,347,124 23,624,338
CASH AND CASH EQUIVALENTS 184,031 257,970
MARKETABLE SECURITIES 530,091 580,121
OTHER ASSETS 369,056 316,944
$24,430,302 $24,779,373
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
<S> <C> <C>
Mortgage notes payable $14,787,795 $14,915,643
Dividends payable 177,500 177,500
Accounts payable and other liabilities 106,581 97,922
15,071,876 15,191,065
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value
Authorized - 50,000,000 shares
Issued - 1,420,000 shares 14,200 14,200
Additional paid-in capital 12,353,398 12,353,398
Distributions in excess of
accumulated earnings (3,009,172) (2,779,290)
9,358,426 9,588,308
$24,430,302 $24,779,373
</TABLE>
<PAGE>
<TABLE>
Royale Investments, Inc.
STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
INCOME:
<S> <C> <C> <C> <C>
Rental income $616,616 $609,045 $1,227,662 $1,218,091
Interest income 7,912 14,736 17,262 25,672
624,528 623,781 1,244,924 1,243,763
EXPENSES:
Operations and management 101,701 98,652 189,883 180,933
Mortgage and other interest 312,280 309,091 625,871 635,494
Depreciation and amortization 141,771 142,050 283,541 284,100
Administrative and general 4,710 4,175 20,511 20,202
560,462 553,968 1,119,806 1,120,729
NET INCOME $ 64,066 $ 69,813 $ 125,118 $ 123,034
PER COMMON SHARE:
Net income $.05 $.05 $.09 $.09
Dividends declared $.13 $.13 $.25 $.25
Weighted average number of
shares outstanding 1,420,000 1,420,000 1,420,000 1,420,000
FUNDS FROM OPERATIONS $202,673 $208,420 $402,332 $400,248
PER SHARE $.14 $.15 $.28 $.28
</TABLE>
<PAGE>
<TABLE>
Royale Investments, Inc.
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months Ended June 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 125,118 $ 123,034
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 283,541 284,100
Amortization of marketable securities (13,698)
Changes in operating assets and liabilities:
Increase in receivables (55,876)
(Increase) decrease in other assets (2,562) 26,735
Increase (decrease) in accounts payable and
other liabilities 8,658 (57,077)
Net cash provided by operating activities 345,181 376,792
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturity of marketable securities 588,000
Purchase of marketable securities (524,272) -
Net cash provided by investing activities 63,728 -
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on mortgage loans (127,848) (117,941)
Dividends paid (355,000) (479,250)
Net cash (used) by financing activities (482,848) (597,191)
NET DECREASE IN CASH (73,939) (220,399)
CASH AND CASH EQUIVALENTS:
Beginning of period 257,970 1,130,864
End of period $ 184,031 $ 910,465
Supplementary data:
Income taxes paid $3,125 $2,992
Interest paid $626,514 $642,289
</TABLE>
<PAGE>
Royale Investments, Inc.
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
Note 1 - Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance
with the instructions to Form 10-QSB and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three and six months ended June 30, 1996, should not
be considered indicative of the results that may be expected forthe year ended
December 31, 1996. The accompanying financial statements and footnotes thereto
should be read in conjunction with the company's annual report on Form 10-KSB
for the year ended December 31, 1995.
<PAGE>
ROYALE INVESTMENTS, INC.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Results of Operations
During the six month periods ended June 30, 1996 and 1995, the Company owned
and leased seven properties to operators of retail food stores.
Revenues for the second quarter and for the six months ended June 30, 1996,
increased slightly over the comparable periods of 1995 due to an increase in
rent income from the Minneapolis Cub store, but was offset by a decrease in
interest income.
Expenses in 1996 were generally consistent with 1995 and with management's
expectations. Net income decreased by $6,000 for the second quarter of 1996
compared to the second quarter of 1995, but increased $2,000 for the comparable
six month periods ended June 30, 1996 and 1995. This was the result of timing
differences in recording expenses.
The Company considers Funds from operations ("FFO") in evaluating property
acquisitions and its operating performance, and believes that FFO should be
considered along with net income and cash flows as a measure of the Company's
operating performance and liquidity. Since depreciation expense was consistent
in 1996 and 1995, and is the only adjustment that the Company makes to net
income in arriving at FFO, the resulting changes of ($6,000) for the second
quarter, and $2,000 for the six months ended June 30, 1996, were the same as net
income for each of the comparable periods, as previously discussed.
Liquidity and Capital Resources
The Company's properties are all leased on a triple-net basis, which places
the risk of rising operating and maintenance costs on the tenant. The leases
generally provide that the tenant is also responsible for roof and structural
repairs. Hence, the Company's only demand for funds has been for the payment of
operating expenses, dividends and mortgage payments. Property acquisitions have
been funded by equity offerings and mortgage borrowings.
Net cash provided by operating activities totaled $345,000 and $377,000 for
the six months ended June 30, 1996 and 1995, respectively. As discussed
previously, net income and FFO were generally consistent in the two periods.
Therefore, the decrease was the result of changes in operating assets and
liabilities arising from timing differences in receipts and disbursements. The
Company considers its liquidity and ability to generate cash to be sufficient to
meet its operating and distribution requirements for 1996.
The Company invests in short-term treasury securities from time to time,
and investing activities reflect those transactions.
Net cash used in financing activities totaled $483,000 and $597,000 for the
six months ended June 30, 1996 and 1995, respectively, including dividends paid
to shareholders.
The Company declared a dividend of $177,500, or $.125 per share, on June
17, 1996, payable to shareholders of record on July 1, 1996. The dividend was
paid on July 15, 1996.
<PAGE>
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On May 20, 1996, the Company held its Annual Shareholders Meeting. The
following matters were voted upon at the meeting:
The election of six directors to serve until the next annual meeting and
until their successors are elected and qualified. The results of the election
appear below:
Abstentions
Votes Against and broker
Name Votes for or withheld non-votes
Vernon R. Beck 1,241,831 24,716 153,453
John Parsinen 1,236,466 30,081 153,453
Orvin J. Hall 1,242,466 24,081 153,453
Kurt Schoenrock 1,242,466 24,081 153,453
Kenneth D. Wethe 1,242,466 24,081 153,453
Allen C. Gehrke 1,242,466 24,081 153,453
No other matters were voted upon at the meeting.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits filed with Form 10-QSB
Exhibit 27. Financial Data Schedule
b) No reports filed on Form 8-K for the quarter ended June 30, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused the report to be signed on it's behalf by the
undersigned, thereunto duly authorized.
Dated: August 14, 1996
ROYALE INVESTMENTS, INC.
By:________________________
Vernon R. Beck
Chief Executive Officer
By:________________________
Kenneth R. Neubauer
Chief Financial Officer
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 184031
<SECURITIES> 530091
<RECEIVABLES> 22599
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<BONDS> 14787795
0
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