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, 1999____________________________
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.
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(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 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.
2,948,693 shares of outstanding stock as of March 31, 1999
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INVESTMENT INCOME PROPERTIES OF AMERICA, INC.
---------------------------------------------
INDEX
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<TABLE>
<CAPTION>
<S> <C> <C>
Part I FINANCIAL INFORMATION Page
- ------ --------------------- ----
Item 1 Financial Statements
Balance Sheets as of March 31, 1999
(Unaudited) and
December 31, 1998 ....................................3
Statements of Operations for the three
Months ended March 31, 1999
And 1998 (Unaudited) ................................4
Statements of Cash Flows for the three
Months ended March 31, 1999
And 1998 (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
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Item 6 Exhibits Index and Reports............................10
Signatures ...........................................11
</TABLE>
2
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CONDENSED BALANCE SHEETS
(Unaudited)
March 31, 1999
Assets
<TABLE>
<CAPTION>
March 31, 1999 Dec. 31, 1998
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<S> <C> <C>
Cash and cash equivalents $ 14,477 $ 40,159
Income receivable 814 -
Due from affiliate 13,179 9,008
Prepaid Expenses 1,096 -
------------ --------------
Total current assets 29,566 49,167
Property, plant and equipment, net 4,758,285 4,790,150
Other assets
Deferred offering costs 6,642 10,225
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Total assets $4,794,493 $4,849,542
============ ==============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Accounts payable and accrued expense $ 352,485 $ 320,030
Mortgage notes payable-current portion 51,787 50,846
Notes payable to related parties 1,512,000 1,515,000
Note payable to affiliate 34,500 34,500
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Current total liabilities 1,950,772 1,920,376
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Mortgage notes payable net of current portion 3,930,831 3,943,946
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Commitments and contingencies - -
Stockholders' deficit
Common stock - $.001 par value, 100,000,000
Shares authorized,2,948,693 and 2,906,561 shares
Issued and outstanding 2,908 2,907
Additional paid-in-capital 5,354,008 5,301,976
Accumulated deficit (6,444,026) (6,319,663)
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Total stockholders' deficit (1,087,110) (1,014,780)
------------ --------------
Total liabilities and stockholders' deficit $ 4,794,493 $ 4,849,542
============ ==============
</TABLE>
Investment Income Properties of America, Inc.
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CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
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Revenue
<S> <C> <C>
Rental Income $ 201,259 $ 109,794
Expenses
Selling, general and administrative 220,590 141,923
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Income (Loss) from operations (19,331) (32,129)
Interest Expense 105,377 70,134
Interest Income (345) (1,243)
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Loss before income taxes (124,363) (101,020)
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Income taxes - -
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Net loss $ (124,363) $ (101,020)
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Weighted average shares outstanding 2,920,605 389,541
============ ===========
Net loss per share $ (.04) $ (2.59)
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</TABLE>
Investment Income Properties of America, Inc.
4
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CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
1999 1998
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net loss $ (124,363) $ (101,020)
Adjustments to reconcile net loss to net cash
Used in operating activities:
Depreciation expense 31,865 16,890
Changes in operating assets and liabilities
Decrease in other assets 3,583 -
(Increase) decrease in prepaid expenses (6,081) -
Increase (decrease) in accounts payable and
Accrued expenses (32,455) (10,555)
Decrease in Due from Affiliate - 5,829
------------ -------------
Net cash used in operating activities (62,541) (88,856)
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 (12,174) (4,760)
Proceeds from notes payable to related parties (3,000) 0
Proceeds from issuance of stock 52,033 47,500
Repayment of note payable to related party - 20,000
------------ -------------
36,859 62,740
Net increase (decrease) in cash and cash equivalents (25,682) (66,116)
Cash and cash equivalents at beginning of period $ 40,159 $ 153,552
============ =============
Cash and cash equivalents at end of period $ 14,477 $ 87,436
============ =============
Supplemental information:
Cash paid during the period for:
Interest $ 105,377 $ 70,134
============ =============
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, 1999, are not necessarily
indicative of the results that may be expected for the year ending December 31,
1999.
The balance sheet at December 31, 1998 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, 1998.
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.
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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, 1999, there were 2,948,693 outstanding shares, of
which 737,193 or 25% were owned by the investors and 2,216,500 or 75% 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, having an address of 950 North
Federal Highway, 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% above the prime
rate, is payable monthly and is collateralized by the property and an assignment
of rental income and the leases. 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 simple warranty.
The Property consists of 31 rental suits, 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, that had owned the Property and
leased office space thereon for the past 20 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 of services rendered to the Company in connection with
the selection and acquisition of the Property, the Company paid 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. PRMS will serve as property manager for the Property and be paid a
monthly management fee equal to 5% of the gross revenues of the Property.
On July 10, 1998, the Company purchased Centre Place Professional Park, a one
story office complex consisting of Three (3) One Story Buildings totaling 33,062
square feet, having an address of 1495, 1497, 1499 Forest Hill Blvd. West Palm
Beach, Florida (the "Second Property"). The Company purchased the second
property for $2,320,500. The second property was financed through a purchase
money mortgage of $1,972,425 and funds provided through loans by individuals who
also own shares in the Company. The Mortgage bears interest at 7.25% and is
payable monthly and is collateralized by the second property.
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The Second Property consisits of 29 rental suites, 25 of which are currenlty
leased to tenants engaged in a variety of business, including financial
services, investment banking, publishing computer technology, healthcare
servises, accounting and law. The suites provide for a combined total of 28,240
square feet of rental area. The Company purchased the Second Property from a
third party, unaffiliated with the Company, that had owned the Property and
leased space thereon for the past 6 years.
In consideration of services rendered to the Company in connection
with the selection and acquisition of the Second Property, the Company paid
PRMS, an affiliate of the Company, a property acquisition fee of 2% of the
purchase price of the Property of $46,410.00. PRMS will serve as property
manager for the Second Property and will be paid a monthly management fee equal
to 5% of the gross revenues of the Second Property.
Results of Operations for the Three Months Ended March 31, 1998 and
1997
For the three months ended March 31, 1999, the Company had a net
loss of $88,230 compared to a net loss of $101,020 for the same period in 1998.
Interest income decreased $898 to $345 for the three months ended
March 31, 1999, compared to $1,243 for the same period in 1998, primarily due to
an decrease in cash invested in interest bearing accounts as a result of cash
flow needs.
Interest expense increased $35,243 to $105,377 for the three months
ended March 31, 1999, compared to $70,134 for the same period in 1998, primarily
due to an increase in loans from related parties and mortgage payments related
to a second property.
General and administrative expenses were $184,457 for the three
months ended March 31, 1999, compared to $141,923 for the same period in 1998,
primarily due to professional fees incurred for accounting and legal services.
Liquidity and Capital Resources
The Company's outstanding indebtedness at March 31, 1999, totaled
$5,881,603. This amount included approximately $352,485 of accounts payable,
$1,512,000 of unsecured notes payable to related parties, $34,500 of notes
payable to affiliate and third party mortgage note payable of $3,982,618.
At March 31, 1999, the Company had a working capital deficit
$1,921,206 as compared to a working capital deficit of $1,871,209 at December
31, 1998. The increase in the working capital deficit was primarily attributable
to an increase in accounts payable.
Net cash used in operating activities was $26,408 for the three
months ended March 31, 1999, as compared to cash used in operating activities of
$88,856 for the three months ended March 31, 1998. The decrease in cash used in
operating activities is primarily attributable to a decrease in other assets as
a result of deposits made on potential apartment building acquisitions that were
forfeited. Net cash provided by financing activities was $726 for the three
months ended March 31, 1999, as compared to net cash provided by financing
activities for the three months ended March 31, 1998, of $62,740. The decrease
in cash provided by financing activities is primarily attributable to a decrease
in funds borrowed from related parties and the issuance of less stock.
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 1998, 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
8
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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 Private Placement Memorandum 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.
Subsequent Events
The Company raised $15,900 through the sale of 5,299 shares of the
Company's common stock to accredited investors.
In March 1999 the Company issued 36,833 of Common Stock from treasury to
a third party as compensation for the assistance in the funding of the
aforementioned Private Placement Memorandum.
Beginning March 31, 1999, the Company, pursuant to a Private Placement
Memorandum, is attempting to issue 1,250,000 shares of Company common stock for
total gross proceeds of $5,000,000. As received, the proceeds from this Private
Placement will be used for the repayment of debt , and deposits on properties to
be purchased by the Company.
The Company signed letters of intent for future acquisition of a $394
Million Dollar Portfolio of Apartment Complexes, located in the states of
Florida, Colorado, Texas, Utah and Kansas. The construction of these 15 projects
are planned to be completed between September 1999, and June 2001. Investment
Income Properties of America, Inc. has agreed to take possession of these
properties when they are at least 60% leased.
The Company plans to use the funds that are raised from subsequent
sales of debt and or equity financing in connection with the above and future
acquisitions.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
- ------- ------------------
The Company is not involved in any pending litigation.
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.
Investment Income Properties of America, Inc.
10
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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
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 14,477
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 29,566
<PP&E> 4,785,285
<DEPRECIATION> 31,865
<TOTAL-ASSETS> 4,794,493
<CURRENT-LIABILITIES> 1,950,772
<BONDS> 0
0
0
<COMMON> 2,948,693
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,794,493
<SALES> 0
<TOTAL-REVENUES> 201,259
<CGS> 0
<TOTAL-COSTS> 220,590
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 105,377
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (124,363)
<EPS-BASIC> (0.04)
<EPS-DILUTED> 0
</TABLE>
