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 September 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.
77,050 shares of outstanding as of September 30, 1996
<PAGE>
INVESTMENT INCOME PROPERTIES OF AMERICA, INC.
INDEX
Part I FINANCIAL INFORMATION Page
----
Item 1 Financial Statements
Balance Sheets as of September 30, 1996
(Unaudited) and December 31, 1995 ..............
Statements of Operations for the three
months and nine months ended September 30, 1996
and 1995 (Unaudited)............................
Statements of Cash Flows for the nine
months ended September 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 ....................................
<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 September 30, 1996, there were 77,050 shares outstanding of the
Operating Partnership, of which 64,000, or 83.1% were owned by the Investors and
13,050, or 16.2% 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 funds to purchase the Northwood Apartments. The
$75,000 deposit was retained by the seller and expensed by the Company.
Results of Operations for the Nine Months Ended September 30, 1996 and
1995
Net Loss. For the nine months ended September 30, 1996, the Company had a
net loss of $428,840 compared to a loss of $144,218 for the same period in 1995.
Interest income. Interest income decreased $1,961 to $707 for the nine
months ended September 30, 1996 compared to $2,557 for the same period in 1995,
primarily due to reduction in cash in interest bearing accounts as a result of
cash flow needs.
General and administrative expense. General and administrative costs were
$398,864 for the nine months ended September 30, 1996, compared to $122,464 for
same period in 1995. The increase is due to the write off of $233,898 in
deferred offering costs.
1
<PAGE>
Interest expense. Increased $6,372 to $30,683 for the nine months ended
September 30, 1996 compared to $24,311 for the same period in 1995, primarily
due to increases in loans from related parties.
Results of Operations for the Three Months Ended September 30, 1996 and
1995
For the three months ended September 30, 1996 the Company had a net loss
of $55,407 compared to a net loss of $44,679 for the three months ended
September 30, 1995.
For the three months ended September 30, 1996, interest income decreased
$845 to $81 compared to $926 for the three months ending September 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.
Interest expense increased $2,547 to $11,116 for the three months ended
September 30, 1996 compared to $8,569 for the period ended September 30, 1995,
primarily due to increase in loans from related parties.
Selling general and administrative expenses were $44,372 for the three
months ended September 30, 1996 compared to $37,036 for the three months ended
September 30, 1995. The increase is primarily due to increases in professional
fees.
Liquidity and Capital Resources
The Company's outstanding indebtedness at September 30, 1996 totaled
$654,239.
At September 30, 1996, the Company had a working capital deficit of
$631,568 as compared to working capital deficit of $520,223 at December 31,
1995. The increase in the working capital deficit was primarily attributable to
an increase loans from related parties.
Net cash used in operating activities was $148,866 for the nine months
ended September 30, 1996 as compared to cash used in operating activities of
$315,818 for the nine months ended September 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. Net cash provided from
investing activities was $6,504 for the nine months ended September 30, 1996, as
compared to cash used in investing activities of $2,503 for the nine months
ended September 30, 1995. The increase in cash used in investing activities for
the nine months ended September 30, 1997 was attributable primarily to the
purchase of equipment. Net cash provided by financing activities was $97,500 for
the nine months ended September 30, 1996 as compared to net cash provided by
financing activities for the nine months ended September 30, 1995 of $475,000.
The decrease in cash provided by financing activities is primarily attributable
to less 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.
2
<PAGE>
However, the Company sustained a substantial loss from operations in 1996 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.
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.
By: /s/ Fredric B. Layne
- ------------------------- -------------------------------------
(Date) Fredric B. Layne
President and CEO
4
<PAGE>
Investment Income Properties of America, Inc.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue
Interest Income $ 707 $ 2,557 $ 81 $ 926
Expenses
Selling, general and administrative 398,864 122,464 44,372 37,036
--------- --------- -------- --------
Loss from operations (398,157) (119,907) (44,291) (36,110)
Interest expense 30,683 24,311 11,116 8,569
--------- --------- -------- --------
Loss before income taxes (428,840) (144,218) (55,407) (44,679)
Income taxes -- -- -- --
--------- --------- -------- --------
Net loss $(428,840) $(144,218) $(55,407) $(44,679)
========= ========= ======== ========
Weighted average shares outstanding 79,555 76,000 85,333 76,000
--------- --------- -------- --------
Net loss per share $ (5.39) $ (1.90) $ (.65) $ (.59)
========= ========= ======== ========
</TABLE>
<PAGE>
Investment Income Properties of America, Inc.
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30
------------
1996 1995
---- ----
Cash flows from operating activities:
Net loss $(428,840) $(144,218)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation expense 1,515 318
Amortization expense 3,086 --
Stock issued in lieu of rent expense 10,500 --
Changes in operating assets and liabilities
Decrease (increase) in prepaid expenses 13,017 (34,473)
Decrease (increase) in other assets 308,898 (260,311)
Increase (decrease) in accounts payable
and accrued expenses (57,043) 122,866
--------- ---------
Net cash used in operating activities (148,866) (315,818)
Cash flows used in investing activities:
Purchase of equipment (6,504) (2,503)
--------- ---------
Net cash used in investing activities (6,504) (2,503)
Cash flows from financing activities:
Proceeds from notes payable to related parties 97,500 475,000
--------- ---------
Net cash provided by financing activities 97,500 475,000
--------- ---------
Net (decrease) increase in cash and cash equivalents (57,870) 156,679
Cash and cash equivalents at beginning of period 80,541 304,077
--------- ---------
Cash and cash equivalents at end of period $ 22,671 $ 460,756
========= =========
Supplemental information:
Cash paid during the year for:
Interest $ -- $ --
========= =========
Income taxes $ -- $ --
========= =========
<PAGE>
Investment Income Properties of America, Inc.
BALANCE SHEETS
(Unaudited)
ASSETS
Sept. 30, 1996 Dec. 31, 1995
-------------- -------------
Cash and cash equivalents $ 22,671 $ 80,541
Prepaid Expenses -- 13,017
Property and equipment, net 9,965 4,976
Other assets
Deposit -- 75,000
Deferred offering costs -- 233,898
Deferred loan costs 5,144 8,230
--------- ---------
Total assets $ 37,780 $ 415,662
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expense $ 81,739 $ 138,781
Notes payable to related parties 572,500 475,000
--------- ---------
Total liabilities 654,239 613,781
Commitments and contingencies
Stockholders' equity
Common stock - $.001 par value, 100,000,000
shares authorized; 77,050 and 76,000 shares
at September 30, 1996 and December 31, 1995,
respectively; issued and outstanding 2 --
Additional paid-in capital 10,498 --
Accumulated deficit (626,959) (198,119)
--------- ---------
Total stockholders' equity (616,459) (892,302)
--------- ---------
Total liabilities and stockholders' equity $ 37,780 $ 415,662
========= =========
<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 nine months ended September 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
10-QSB Sept. 30, 1997 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 22,671
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 22,671
<PP&E> 9,965
<DEPRECIATION> 0
<TOTAL-ASSETS> 37,780
<CURRENT-LIABILITIES> 654,239
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> (616,461)
<TOTAL-LIABILITY-AND-EQUITY> 37,780
<SALES> 0
<TOTAL-REVENUES> 707
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 398,864
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,683
<INCOME-PRETAX> (428,840)
<INCOME-TAX> 0
<INCOME-CONTINUING> (428,840)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (428,840)
<EPS-PRIMARY> (5.39)
<EPS-DILUTED> 0
</TABLE>
