U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
|X| Quarterly Report under 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 33-95758
INVESTMENT INCOME PROPERTIES OF AMERICA, INC.
---------------------------------------------
(Exact name of registrant as specified in its Charter)
Delaware 65-0544042
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
950 North Federal Highway, Suite 219 Pompano Beach, Florida 33062
- ------------------------------------------------------------- ----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 954-783-2004
_______________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check 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 XX No |_|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
76,000 shares of outstanding as of June 30, 1996
<PAGE>
INVESTMENT INCOME PROPERTIES OF AMERICA, INC.
INDEX
Part I FINANCIAL INFORMATION Page
----
Item 1 Financial Statements
Balance Sheets as of June 30, 1996
(Unaudited) and December 31, 1995...............
Statements of Operations for the three
months and six months ended June 30, 1996
and 1995 (Unaudited)............................
Statements of Cash Flows for the six months ended
June 30, 1996 and 1995 (Unaudited)..............
Notes to Financial Statements (unaudited)..........
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations.............
Part II OTHER INFORMATION
Item 6 Exhibits Index.....................................
Signatures...................................................
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
This Form 10-Q contains forward-looking statements including, without
limitation, statements relating to development activities of the Company within
the meaning of Section 27A of the Securities Act of 1933 an Section 21E of the
Securities Exchange Act of 1934. Although the Company believes that the
expectations reflected in such forward-looking statements are based on
reasonable assumptions, the Company's actual results and performance of
Apartment Communities could differ materially from those set forth in the
forward-looking statements. Certain factors that might cause such a difference
include general economic conditions, local real estate conditions, construction
delays due to unavailability of materials, weather conditions or other delays.
Overview
The following discussion should be read in conjunction with the
Financial Statements of the Company and the Notes thereto appearing elsewhere
herein.
As of June 30, 1996, there were 76,525 shares outstanding of which
64,000 or 84.6% were owned by the investors and 12,525 or 16.4% were owned by
other stockholders (including certain officers and directors of the Company).
Historical Results of Operations
The Company entered into an agreement on April 18, 1995 to purchase the
Northwood Terrace Apartments in Oakland Park, Florida. The original purchase
price was $3,350,000 and was subsequently amended to $3,400,000 with a closing
of May 15, 1996. The Company had paid $75,000 in deposits under the agreement.
Subsequent to May 15, 1996, the contract was terminated because the Company was
not able to raise the necessary fund to purchase the Northwood Apartments. The
$75,000 deposit was retained by the seller and expensed by the Company.
Results of Operations for the Six Months Ended June 30, 1996 and 1995
For the six months ended June 30, 1996, the Company had a net loss of
$373,433 compared to a net loss of $99,539 for the same period ended June 30,
1995.
For the six months ended June 30, 1996, interest income decreased to
$626 compared to $1,631 for the six month ending June 30, 1995. The decrease in
interest income is due to a reduction in cash in interest bearing accounts as a
result of cash flow needs.
1
<PAGE>
Interest expense increased $3,825 to $19,567 for the six months ended
June 30, 1996 compared to $15,742 for the same period in 1995, primarily due to
increase in loans from related parties.
Selling, general and administrative expenses were $354,492 for the six
months ended June 30, 1996 compared to $85,428 for the six months ended June 30,
1995. The increase is primarily due to the write-off of deferred offering costs
as a result of the Company's unsuccessful public offering.
Results of Operations for the Three Months Ended June 30, 1996 and 1995
For the three months ended June 30, 1996 the Company had a net loss of
$55,012 compared to a net loss of $50,716 for the same period in 1995.
For the three months ended June 30, 1996, interest income decreased $461
to $26 compared to $487 for the three months ending June 30, 1995. The increase
in interest income is due to a reduction in cash in interest bearing accounts as
a result of cash flow needs.
Interest expense increased $1,591 to $10,067 for the three months ended
June 30, 1996 compared to $8,476 for the period ended June 30, 1995, primarily
due to increase in loans from related parties.
Selling general and administrative expenses were $44,971 for the three
months ended June 30, 1996 compared to $42,727 for the three months ended June
30, 1995.
Liquidity and Capital Resources
The Company's outstanding indebtedness at June 30, 1996 totaled
$601,003.
At June 30, 1996, the Company had a working capital deficit of $587,421
as compared to working capital deficit of $520,223 at December 31, 1995. The
decrease in the working capital deficit was primarily attributable to a
reduction in accounts payable and the write off of prepaid expenses.
Net cash used in operating activities was $107,955 for the six months
ended June 30, 1996 as compared to cash used in operating activities of $264,309
for the six months ended June 30, 1995. The decrease in cash used in operating
activities is primarily attributable to a decrease in other assets as a result
of the write off of deferred offering costs and deposits. Net cash used in
investing activities was $6,504 for the six months ended June 30, 1996, as
compared to cash used in investing activities of $2,112 for the six months ended
June 30, 1995. The increase in cash used in investing activities for the six
months ended June 30, 1996 was attributable primarily to the purchase of
equipment. Net cash provided by financing activities was $47,500 for the six
months ended June 30, 1996 as compared to net cash provided by financing
activities for the six
2
<PAGE>
months ended June 30, 1995 of $475,000. The decrease in cash provided by
financing activities is primarily attributable to a reduction of funds provided
by related parties.
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplate continuation of
the Company as a going concern. However, the Company sustained a substantial
loss from operations in 1995 which has resulted in a deterioration in the
Company's financial position.
The recoverability of a major portion of the recorded asset amounts
shown in the accompanying balance sheet is dependent upon commencement of
successful operations of the Company, which in turn is dependent upon the
Company's ability to finance its future operations. The financial statements do
not include any adjustments relating to the recoverability and classification of
recorded assets and liability amounts which might result from the above
uncertainties.
The Company has and will continue to take a number of steps to reduce
its operating losses. The Company will continue to increase its efforts in
marketing their initial public offering of the Company's shares to raise funds.
Management believes that as a result of the action stated above, the Company can
continue in existence for the next twelve months; however, there is no assurance
that such action will be consummated or will eliminate the Company's need for
additional capital.
PART II. OTHER INFORMATION
3
<PAGE>
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.
INVESTMENT INCOME PROPERTIES OF
AMERICA, INC.
_11/5/97 By: /s/ Fredric B. Layne
(Date) -----------------------------
Fredric B. Layne
President and CEO
4
<PAGE>
Investment Income Properties of America, Inc.
BALANCE SHEETS
(Unaudited)
ASSETS
June, 30, 1996 Dec. 31, 1995
-------------- -------------
Cash and cash equivalents $ 13,582 $ 80,541
Prepaid expenses -- 13,017
Property and equipment, net 10,762 4,976
Other assets
Deposit -- 75,000
Deferred offering costs 4,184 233,898
Deferred loan costs 6,173 8,230
--------- ---------
Total assets $ 34,701 $ 415,662
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expense $ 78,503 $ 138,781
Notes payable to related parties 522,500 475,000
--------- ---------
Total liabilities 601,003 613,781
Commitments and contingencies -- --
Stockholders' equity
Common stock - $.001 par value, 100,000,000
shares authorized; 76,525 and 76,000 shares
at June 30, 1996 and December 31, 1995,
respectively, issued and outstanding 1 --
Additional paid-in capital 5,249 --
Accumulated deficit (571,552) (198,119)
--------- ---------
Total stockholders' equity (566,302) (198,119)
--------- ---------
Total liabilities and stockholders' equity $ 34,701 $ 415,662
========= =========
<PAGE>
Investment Income Properties of America, Inc.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30 June 30
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue
Interest Income $ 626 $ 1,631 $ 26 $ 487
Expenses
Selling, general and administrative 354,492 85,428 44,971 42,727
--------- --------- -------- ---------
Loss from operations (353,866) (83,797) (44,945) (42,240)
Interest expense 19,567 15,742 10,067 8,476
--------- --------- -------- ---------
Loss before income taxes (373,433) (99,539) (55,012) (50,716)
Income taxes -- -- -- --
--------- --------- -------- ---------
Net loss $(373,433) $ (99,539) $(55,012) $ (50,716)
========= ========= ======== =========
Weighted average shares outstanding 76,667 154,450 77,333 154,450
========= ========= ======== =========
Net loss per share $ (4.87) $ (.64) $ (.71) $ (.33)
========= ========= ======== =========
</TABLE>
<PAGE>
Investment Income Properties of America, Inc.
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30
-------
1996 1995
---- ----
Cash flows from operating activities:
Net loss $(373,433) $ (99,539)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation expense 718 212
Amortization expense 2,057 --
Stock issued in lieu of rent expense 5,250 --
Changes in operating assets and liabilities
Decrease in prepaid expenses 13,017 (34,475)
Decrease in other assets 304,715 (213,367)
Decrease in accounts payable and accrued expenses (60,279) (82,860)
--------- ---------
Net cash used in operating activities (107,955) (264,309)
Cash flows used in investing activities:
Purchase of equipment (6,504) (2,112)
--------- ---------
Net cash used in investing activities (6,504) (2,112)
Cash flows from financing activities:
Proceeds from notes payable to related parties 47,500 475,000
--------- ---------
Net cash provided by financing activities 47,500 475,000
--------- ---------
Net decrease in cash and cash equivalents (66,959) 208,579
Cash and cash equivalents at beginning of period 80,541 304,077
--------- ---------
Cash and cash equivalents at end of period $ 13,582 $ 512,656
========= =========
Supplemental information:
Cash paid during the year for:
Interest $ -- $ --
========= =========
Income taxes $ -- $ --
========= =========
<PAGE>
Investment Income Properties of America, Inc.
UNAUDITED NOTES TO FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with the generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB. Accordingly,
they do not include all 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 fair presentation have been included. Operating results
for the six months ended June 30, 1996 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1996.
The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date, but does not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
NOTE B - FORMATION AND OPERATIONS OF THE COMPANY
Investment Income Properties of America, Inc. (the "Company"), is a
Delaware corporation which intends to qualify as a real estate investment trust
("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"). The
Company has a limited operating history. The Company has been formed to invest
primarily in existing residential properties in South Florida. The Company
intends to seek properties which hold potential for appreciation, including
properties which may be suitable for future conversion into condominium units.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
June 30, 1996 10-QSB and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-20-1996
<CASH> 13,582
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,582
<PP&E> 10,762
<DEPRECIATION> 0
<TOTAL-ASSETS> 34,701
<CURRENT-LIABILITIES> 601,003
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> (571,553)
<TOTAL-LIABILITY-AND-EQUITY> 34,701
<SALES> 0
<TOTAL-REVENUES> 626
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 354,492
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,567
<INCOME-PRETAX> (373,433)
<INCOME-TAX> 0
<INCOME-CONTINUING> (373,433)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (373,433)
<EPS-PRIMARY> (4.87)
<EPS-DILUTED> 0
</TABLE>
