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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 June 30, 1999
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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
- ------------------------------- -------------------
(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
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- --------------------------------------------------------------------------------
(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 [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
2,956,818 shares of outstanding stock as of June 30, 1999
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INVESTMENT INCOME PROPERTIES OF AMERICA, INC.
INDEX
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<CAPTION>
PAGE
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PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Balance Sheets as of June 30, 1999 (Unaudited) and
December 31, 1998 ............................................. 1
Statements of Operations for the six Months ended
June 30, 1999 and 1998 (Unaudited)............................. 2
Statements of Cash Flows for the six Months ended
June 30, 1999 and 1998 (Unaudited) ............................ 3
Notes to Financial Statements (Unaudited) ....................... 4
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations ........................... 5
PART II OTHER INFORMATION
Item 6 Exhibits Index and Reports....................................... 7
SIGNATURES....................................................... 8
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INVESTMENT INCOME PROPERTIES OF AMERICA, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
JUNE 30, 1999 DEC. 31, 1998
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<S> <C> <C>
ASSETS
Cash and cash equivalents $ 13,389 $ 40,159
Income Tax receivable 822 --
Due from affiliate 3,726 9,008
Prepaid Expenses 1,096 --
Total current assets 29,033 49,167
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Property, plant and equipment, net 4,726,419 4,790,150
Other assets
Deferred offering costs 5,954 10,225
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Total assets $ 4,761,406 $ 4,849,542
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LIABILITIES AND STOCKHOLDERS' DEFICIT
Accounts payable and accrued expense $ 397,985 $ 320,030
Mortgage note payable-current portion 52,745 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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Total current liabilities 1,997,230 1,920,376
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Mortgage note payable net of current portion 3,917,280 3,943,946
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Commitments and contingencies -- --
Stockholders' Deficiency
Common stock - $.001 par value, 100,000,000
Shares authorized, 2,956,818 and 2,906,561 shares
Issued and outstanding 2,957 2,907
Additional paid-in-capital 5,366,459 5,301,976
Accumulated deficit (6,522,520) (6,319,663)
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Total stockholders' deficit (1,153,104) (1,014,780)
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Total liabilities and stockholders' deficiency $ 4,761,406 $ 4,849,542
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INVESTMENT INCOME PROPERTIES OF AMERICA, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
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1999 1998
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<S> <C> <C>
Revenue
Rental Income $ 391,630 $ 222,043
Expenses
Selling, general and administrative 385,484 282,496
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Gain (Loss) from operations 5,782 (60,453)
Interest Expense 209,448 140,178
Interest Income (808) 3,467)
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Loss before income taxes (202,858) (197,164)
Income taxes -- --
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Net loss $ (202,858) $ (197,164)
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Weighted average shares outstanding 2,929,190 1,083,781
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Net loss per share $ (.07) $ (.18)
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</TABLE>
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INVESTMENT INCOME PROPERTIES OF AMERICA, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30
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1999 1998
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<S> <C> <C>
Cash flows from operating activities:
Net loss $(202,857) $(197,164)
Adjustments to reconcile net loss to net cash
Used in operating activities:
Depreciation expense 63,731 33,777
Changes in operating assets and liabilities
Decrease in other assets 4,272 --
(Increase) decrease in prepaid expenses (6,036) --
Increase (decrease) in accounts payable and
Accrued expenses 77,955 (17,607)
Decrease in Due from Affiliate -- 1,920
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Net cash used in operating activities (63,535) (146,154)
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Cash flows used in investing activities:
Deposit on Building-Centre Place 0 (50,000)
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Net cash used in investing activities 0 (50,000)
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Cash flows from financing activities:
Repayment of principal on mortgage note (24,767) (9,609)
Proceeds from notes payable to related parties (3,000) --
Proceeds from issuance of stock 64,532 652,000
Repayment of note payable to related party -- (45,000)
Repayment of note payable to affiliate -- (29,000)
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Net cash provided by financing activities 36,375 568,391
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Net increase (decrease) in cash and cash equivalents (26,770) 372,237
Cash and cash equivalents at beginning of period 40,159 153,552
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Cash and cash equivalents at end of period $ 13,389 $ 525,789
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Supplemental information:
Cash paid during the year for:
Interest 209,448 $ 76,778
========= =========
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 six months ending June 30, 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 June 30, 1999, there were 2,956,818 outstanding shares, of
which 745,318 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 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% above the prime rate, is payable monthly and is
collateralized by the property and assignment of rental income and 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.
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 uses one suite on
the Property as its corporate headquarters.
In consideration for 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 when the equity for the acquisition of the Property is fully raised.
PRMS is serving as property manager for the Property and will earn 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 "Property"). The Company purchased the
property for $2,320,500. This Property will be 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 collareralized by the property and assignment of rental income
and leases.
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The 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 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 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 serves as property manager for the Property
and earns a monthly management fee equal to 5% of the gross revenues of the
Property.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE30, 1999 AND 1998
For the six months ended June 30, 1999, the Company had a net loss
of $202,858 compared to a net loss of $197,164 for the same period in 1998.
Interest income decreased $2659 to $805 for the six months ended
June 30, 1999, compared to $3,467 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 $69,270 to $209,448 for the six months
ended June 30, 1999, compared to $140,178 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 $385,848 for the six months
ended June 30, 1999, compared to $292,496 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 June 30, 1999, totaled
$5,914,510. This amount included approximately $397,985 of accounts payable,
$1,512,000 of unsecured notes payable to related parties, $34,500 of notes
payable to affiliate and third party mortgage notes payable of $3,970,025.
At June 30, 1999, the Company had a working capital deficit
$1,968,197 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 $63,535 for the six months
ended June 30, 1999, as compared to cash used in operating activities of $88,856
for the six months ended June 30, 1998. The decrease in cash used in operating
activities was primarily attributable to a decrease in that no purchase of any
buildings occurred in the six months ended June 30, 1999. Net cash provided by
financing activities was $36,375 for the six months ended June 30, 1999, as
compared to net cash provided by financing activities for the six months ended
June 30, 1998, of $56,839. The decrease in cash provided by financing activities
is primarily attributable to a decrease in 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 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
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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.
SUBSEQUENT EVENTS
The Company raised $ 12,500 through the sale of 3,125 shares of the
Company's common stock to accredited investors during this three month period
ended 6/30/99. The Company raised a total of $28,400 through the sale of 8,424
shares of the Company's common stock to accredited investors during the six
month period ended 6/30/99.
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 had signed letters of intent to acquire 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 were
planned to be completed between September 1999, and June 2001. Investment Income
Properties of America, Inc. agreed to take possession of these properties when
they were at least 60% leased. The Company ended talks and cancelled the letters
of intent to purchase this portfolio of Apartment Complexes, ending this period
whereas the seller and the Company could not come to agreeable terms.
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.
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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.
October 12, 1999 By: /s/ Fredric B. Layne
- ------------------------------ --------------------------------
(Date) Fredric B. Layne
President and CEO
8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 13,389
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 29,033
<PP&E> 4,726,419
<DEPRECIATION> 63,731
<TOTAL-ASSETS> 4,761,406
<CURRENT-LIABILITIES> 1,997,230
<BONDS> 0
0
0
<COMMON> 2,956,818
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,761,406
<SALES> 0
<TOTAL-REVENUES> 391,630
<CGS> 0
<TOTAL-COSTS> 385,484
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 209,448
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (202,858)
<EPS-BASIC> (.07)
<EPS-DILUTED> 0
</TABLE>
