U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
FORM 10-QSB
(Mark One)
[ X ] Quarterly Report Section 13 or 15(d) of the Securities Exchange
Act of 1934
For quarterly period ended __________March 31, 1998_____________________________
OR
[ ] Transition Report pursuant to Section 13 or 15(d) of the
Securities 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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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 90days.
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.
420,375 shares of outstanding stock as of March 31, 1998
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INVESTMENT INCOME PROPERTIES OF AMERICA, INC.
---------------------------------------------
INDEX
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Part I FINANCIAL INFORMATION Page
- ------ --------------------- ----
Item 1 Financial Statements
Balance Sheets as of March 31, 1998
(Unaudited) and
December 31, 1997 ................................. 3
Statements of Operations for the
three Months ended March 31, 1998
And 1997 (Unaudited)............................... 4
Statements of Cash Flows for the
three Months ended March 31, 1998
And 1997 (Unaudited).............................. 5
Notes to Financial Statements (Unaudited) .......... 6
Item 2 Management's Discussion and
Analysis of Financial Condition and
Results of Operations ............................ 7
Part II OTHER INFORMATION
- ------- -----------------
Item 6 Exhibits Index and Reports........................... 8-9
Signatures ...................................................... 10
2
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CONDENSED BALANCE SHEETS
(Unaudited)
March 31, 1998
<TABLE>
<CAPTION>
Assets
March 31, 1998 Dec. 31, 1997
-------------- -------------
<S> <C> <C>
Cash and cash equivalents $ 87,436 $ 153,55
Income receivable 787 787
Due from affiliate 1,221 7,050
Total current assets 89,444 161,389
------------- --------------
Property, plant and equipment, net 2,521,585 2,538,475
Other assets
Deferred offering costs 34,949 34,949
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Total assets $ 2,645,978 $ 2,734,813
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expense $ 292,270 $ 302,825
Mortgage note payable-current portion 14,822 19,582
Notes payable to related parties 1,540,000 1,560,000
Note payable to affiliate 81,500 81,500
------------- -------------
Current total liabilities 1,928,592 1,936,907
Mortgage note payable net of current portion 2,031,813 2,031,813
Commitments and contingencies - -
Stockholders' equity
Common stock - $.001 par value, 100,000,000
Shares authorized,420,375 and 374,125 shares
Issued and outstanding 148 124
Additional paid-in-capital 753,412 705,936
Accumulated deficit (2,067,957) (1,966,976)
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Total stockholders' equity (1,314,427) (1,260,907)
------------- -------------
Total liabilities and stockholders' equity $ 2,645,978 $ 2,734,813
============= =============
</TABLE>
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CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
---- ----
<S> <C> <C>
Revenue
Rental Income $109,794 $ -
Expenses
Selling, general and administrative 141,923 76,069
Loss from operations (32,129) (76,069)
Interest Expense 70,134 16,267
Interest Income (1,243) -
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Loss before income taxes (101,020) (92,366)
Income taxes - -
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Net loss $ (101,020) $ (92,366)
============= ============
Weighted average shares outstanding 389,541 103,400
============= ============
Net loss per share $ ( 2.59) $ ( .89)
============= ============
</TABLE>
4
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CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (101,020) $ 92,336)
Adjustments to reconcile net loss to net cash
Used in operating activities:
Depreciation expense 16,890 797
Amortization expense 0 1,029
Stock issued in lieu of rent expense 0 5,250
Changes in operating assets and liabilities
(Increase) decrease in prepaid expenses 0 (86,100)
Increase (decrease) in accounts payable and
Accrued expenses (10,555) 18,546
Decrease in Due from Affiliate 5,829 0
------------ -----------
Net cash used in operating activities 88,856 152,814
Cash flows used in investing activities:
Purchase of equipment 0 0
Net cash used in investing activities 0 0
Cash flows from financing activities:
Repayment of principal on mortgage note (4,760) 0
Proceeds from notes payable to related parties 0 182,500
Proceeds from issuance of stock 47,500 0
Repayment of note payable to related party 20,000 0
------------ -----------
Net increase (decrease) in cash and cash equivalents (66,116) 29,686
Cash and cash equivalents at beginning of period $ 153,552 $ 29,660
============ ===========
Cash and cash equivalents at end of period 87,436 59,346
Supplemental information:
Cash paid during the year for:
Interest $ - $ -
============ ===========
Income taxes $ - $ -
============ ===========
</TABLE>
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Investment Income Properties of America, Inc.
UNAUDITED NOTES TO FINANCIAL STATEMENTS
NOTE A- BASIS OF PRESENTATION
- -----------------------------
The accompanying unaudited condensed 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 three months ended March 31, 1998, are not necessarily
indicative of the results that may be expected for the year ending December 31,
1998.
The balance sheet at December 31, 1997 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. For further information, refer to the audited
financial statements and footnotes thereto included in the Form 10-KSB filed by
the Company for the year ended December 31, 1997.
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 and commercial properties in the Southeast and
Southwestern regions of the United States. The Company intends to seek
properties which hold potential for appreciation, including properties which may
be suitable for future conversion into condominium units.
6
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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 and 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 performances of Office
Complexes and 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 March 31, 1998, there were 420,375 outstanding shares, of
which 404,875 or 96.31% were owned by the investors and 15,500 or 3.69% were
owned by other stockholders (including certain officers and directors of the
Company).
On June 30, 1997, The Company purchased 950 Professional Building, a
three story office complex consisting of 40,000 square feet in Pompano Beach,
Florida (the "Property"). The Company purchased the Property for $2,600,000. The
purchase was financed through a purchase money mortgage of $2,080,000 and funds
provided through loans by individuals who also own shares in the Company. The
mortgage bears interest at 1% below the prime rate, is payable monthly and is
collateralized by the property. During any time the mortgage is outstanding, the
seller has the option to convert the mortgage and note to common stock of the
Company. Title to the Property was conveyed by a fee simply warranty.
The Property consists of 31 rental suites, 29 of which are currently
leased to 29 tenants that are engaged in a variety of businesses, including
financial services, investment banking, publishing, computer technology, health
care services, accounting and law. The suites provide for a combined total of
26,000 square feet of rentable area. The Company purchased the Property from a
third party, unaffiliated with the Company, who had owned the Property and
leased office space thereon for the past 28 years. The Company will use one
suite on the Property as its corporate headquarters and continue to use the
remainder of the Property as office building rental or leasing space.
In consideration for services rendered to the Company in connection
with the selection and acquisition of the Property, the Company will pay
Professional Realty and Management Services, Inc. ("PRMS"), an affiliate of the
Company, a property acquisition fee of 4% of the purchase price of the Property
or $104,000 when the equity for the acquisition of the Property is fully raised.
PRMS will serve as property manager for the Property and will be paid a monthly
management fee equal to 5% of the gross revenues of the Property.
Results of Operations for the Three Months Ended March 31, 1998 and
1997
For the three months ended March 31, 1998, the Company had a net
loss of $101,020 compared to a net loss of $92,336 for the same period in 1997.
7
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Interest income increased $221 to $821 for the three months ended
March 31, 1998, compared to $600 for the same period in 1997, primarily due to
an increase in cash invested in interest bearing accounts as a result of cash
flow needs.
Interest expense increased $53,867 to $70,134 for the three months
ended March 31, 1998, compared to $16,267 for the same period in 1997, primarily
due to an increase in loans from related parties.
General and administrative expenses were $141,923 for the three
months ended March 31, 1998, compared to $76,069 for the same period in 1997,
primarily due to professional fees incurred for accounting and legal services.
Liquidity and Capital Resources
The Company's outstanding indebtedness at March 31, 1998, totaled
$3,960,405. This amount included approximately $292,270 of accounts payable,
$1,540,000 of unsecured notes payable to related parties, $81,500 of notes
payable to affiliate and a third party mortgage note payable of $2,031,813.
At March 31, 1998, the Company had a working capital deficit
$2,067,987 as compared to a working capital deficit of $1,260,907 at December
31, 1997. The increase in the working capital deficit was primarily attributable
to an increase in accounts payable and loans from related parties.
Net cash used in operating activities was $88,856 for the three
months ended March 31, 1998, as compared to cash used in operating activities of
$152,814 for the three months ended March 31, 1997. The decrease in cash used in
operating activities is primarily attributable to a decrease in other assets as
a results of deposits made on potential apartment building acquisitions that
were forfeited. Net cash provided by financing activities was $22,740 for the
three months ended March 31, 1998, as compared to net cash provided by financing
activities for the three months ended March 31, 1997, of $182,500. The decrease
in cash provided by financing activities is primarily attributable to a decrease
in funds borrowed from 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 1997, 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 its 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
Item 1. Legal Proceedings.
- ------ -----------------
The Company is not involved in any pending litigation.
8
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Item 2. Changes in Securities.
- ------ ----------------------
There have been no materially modified changes this period.
Item 3. Defaults Upon Senior Securities.
- ------ --------------------------------
There have been no material defaults this period.
Item 4. Submission of Matters to a Vote of Security Holders.
- ------ ---------------------------------------------------
No matters were submitted to a vote of security holders this period.
Item 5. Other Information.
- ------ -----------------
No other information to report.
Item 6. Exhibits and Reports.
- ------ --------------------
Financial Data Schedule.
9
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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:______________________________
(Date) Fredric B. Layne
President and CEO
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 87,436
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 89,444
<PP&E> 2,521,585
<DEPRECIATION> 16,889
<TOTAL-ASSETS> 2,645,978
<CURRENT-LIABILITIES> 1,928,592
<BONDS> 0
0
0
<COMMON> 420,375
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,645,978
<SALES> 0
<TOTAL-REVENUES> 109,794
<CGS> 0
<TOTAL-COSTS> 141,923
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 70,134
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (101,020)
<EPS-PRIMARY> (2.59)
<EPS-DILUTED> 0
</TABLE>
