U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from ____________ to ____________
Commission file number: 33-26036
PROPERTY SECURED INVESTMENTS, INC.
----------------------------------
(Exact name of small business issuer as
specified in its charter)
California 95-4075422
------------------------ ------------------------
(State of Incorporation) (I.R.S. Employer ID No.)
445 South Figueroa Street, Ste. 2600, Los Angeles, CA 90071-1630
(Address of principal executive offices)
(213) 612-7714 (Andrew K. Proctor)
----------------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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........
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date. At May 12, 1995,
707,918 shares of common stock, no par value.
Transitional Small Business Disclosure Format(check one):
Yes.......No...X...
Exhibit Index at Page 11
Page 1 of 12
-1- PAGE
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements.
-------------------------------
The following financial statements are furnished:
Balance sheets (unaudited) as of March 31, 1995 and
December 31, 1994.
Statements of Operations (unaudited) for the three months
ended March 31, 1995 and 1994.
Statements of Cash Flows (unaudited) for the three months
ended March 31, 1995 and 1994.
Notes to Financial Statements (unaudited).
-2- PAGE
Property Secured Investments, Inc.
BALANCE SHEETS
(Unaudited)
ASSETS
March 31, December 31,
1995 1994
---------- ------------
Cash $ 205,786 $170,323
Notes receivable, net of provision for
losses of $9,378 and $35,000 (note 2) 234,886 300,243
Accrued interest receivable 4,765 2,496
Real estate 317,365 317,365
---------- ----------
$ 762,802 $ 790,427
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued expenses and other liabilities $30,458 35,039
Deferred revenues 3,940 8,163
--------- ----------
34,398 43,202
Stockholders' Equity
Common stock, 10,000,000 shares
authorized,707,918 shares issued and
outstanding 6,298,479 6,298,479
Additional paid-in capital 2,970 2,970
Distributions in excess of earnings (5,573,045) (5,554,224)
---------- ----------
Total Stockholders' Equity 728,404 747,225
---------- ----------
$ 762,802 $ 790,427
========== ==========
The accompanying notess are an integral part
of these financial statements
-3-
Property Secured Investments, Inc.
STATEMENTS OF OPERATIONS
For the three months ended March 31, 1995 and 1994
(Unaudited)
1995 1994
---------- ---------
Income Interest $ 4,237 $ 57,358
Loan origination fees 4,223 3,042
Other 555
---------- ---------
Total income $ 8,460 60,955
Operating expenses 27,281 87,214
---------- ---------
Net loss before gain on sale
real estate (18,821) (26,259)
Loss on sale of real estate (2,696)
---------- ---------
Net Loss $ (18,821) $ 28,955
========== =========
Per common share information:
Net Loss $ (0.03) $ (0.04)
========== =========
Income dividends $ 0.00 $ 0.00
Return of capital dividends $ 0.00 $ 0.10
---------- ---------
Total dividends $ 0.00 $ 0.10
========== =========
Weighted average shares outstanding 707,918 707,918
========== =========
The accompanying notess are an integral part
of these financial statements
-4-
Property Secured Investments, Inc.
STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1995 and 1994
(Unaudited)
1995 1994
--------- ---------
Cash flows from operating activities:
Interest received $ (1,473) $ 61,690
Operating expenses paid (31,862) (91,721)
Other income received 555
-------- --------
Net cash used in operating activities (33,335) (29,476)
Cash flows from investing activities:
Principal payments received on
notes receivable 65,357 29,034
Proceeds on sale of real estate 303,797
-------- --------
Net cash provided by investing
activities 65,357 332,831
Cash flows from financing activities
Cash distributions to stockholders (424,751)
Payments on trust deed note payable (136,530)
-------- --------
Net cash used in financing activities (562,281)
-------- --------
Net increase (decrease) in cash 35,463 (258,926)
Cash, beginning of period 170,323 488,369
-------- --------
Cash, end of period $205,786 $229,443
======== ========
Cash flows from operating activities:
Net loss $ (18,821) $ (28,955)
Adjustments to reconcile net loss
to net cash used in operating
activities before cash distributions
to shareholders:
Loss on sale of real estate 2,696
Amortization of loan origination fees (4,223) (3,042)
(Increase) decrease in:
Accrued interest receivable (5,710) (4,332)
Other receivables (5,000)
Increase in accrued expenses and
other liabilities (4,581) 493
-------- --------
Net cash used in operating activities $ (33,335) $ (29,476)
======== ========
The accompanying notess are an integral part
of these financial statements
-5-
Property Secured Investments, Inc.
NOTES TO FINANCIAL STATEMENTS
For the nine months ended September 30, 1994 and 1993
(Unaudited)
The results of operations for the interim periods shown in
this report are not necessarily indicative of the results to
be expected for the year. In the opinion of management, the
information contained herein reflects all adjustments
necessary to make the results of operations for the interim
periods a fair statement of such operations. All such
adjustments are of a normal recurring nature.
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
------------
Property Secured Investments, Inc. (the "Company" or "PSI") was
incorporated in 1986 and began operations in 1987. The Company
has elected to be taxed as a Real Estate Investment Trust
("REIT"). The Company has investments in promissory notes
collateralized principally by deeds of trust on Southern
California real property. In 1994, the Company obtained
stockholder approval to convert to a perpetual life REIT.
Allowance for loan losses
-------------------------
The allowance for loan losses is maintained at a level that, in
the Board of Directors judgment, is adequate to absorb future
losses.
Non-performing notes receivable
-------------------------------
Notes receivable are placed on non-accrual status when principal
and interest are past due 90 days or more, or there is reasonable
doubt that principal or interest will be collected. Loans are
not restored to accruing status until principal and interest are
current.
Real Estate
-----------
Real Estate represents property that the Company has obtained
through foreclosure on trust deeds that were in its portfolio and
that it is holding for sale. The property is recorded at the
lower of estimated fair value less estimated selling costs or at
cost. Costs of maintaining foreclosed properties and preparing
them for sale are expensed as incurred.
Deferred Revenues
-----------------
Deferred revenues consist of loan origination fees relating to
loans originated or acquired by the Company. Loan fees have been
-6-
deferred and are being recognized as income on a method
approximating a level yield over the life of each respective
loan. In connection with the sale of the Company's assets
(Note 4), the unamortized balance has been written off to income
at September 30, 1994.
Federal Income Taxes
--------------------
The Company qualifies as an REIT under the Internal Revenue Code
and, accordingly, is not subject to Federal income taxes on
amounts distributed to shareholders, providing it distributes at
least 95% of its taxable income and meets certain other
conditions. The Company believes that it has met the
requirements for continued qualification as a REIT as of
March 31, 1995.
Net Income (Loss) Per Share
---------------------------
Net income (loss) per share is based on the weighted average
number of common shares outstanding.
-7-
Property Secured Investments, Inc.
NOTES TO FINANCIAL STATEMENTS
For the nine months ended September 30, 1994 and 1993
(Unaudited)
NOTE 2 - NOTES RECEIVABLE
Notes receivable represent amounts due from borrowers
relating to loans originated or acquired by the Company with
original loan terms generally ranging from five to thirteen
years. Generally, the notes are collateralized by first or
second deeds of trust on improved property located in
California and provide for monthly payments of principal and
interest with interest rates generally ranging from 8% to
11.90% per annum.
The following is a summary of notes receivable:
March 31, December 31,
1995 1994
--------- -----------
Second trust deeds, collateralized
by residential and commercial
property 244,264 335,243
------- -------
Less provision for
losses on notes 9,378 35,000
------- -------
$ 234,886 $ 300,243
======= =======
-8-
Item 2. Management's Discussion and Analysis of Financial
-----------------------------------------------------------
Condition and Results of Operations
-----------------------------------
Property Secured Investments, Inc. (the "Company") is a
California Corporation. The Company was organized in 1986, began
operations in 1987, and elected in its 1987 Federal Income Tax
Return to be taxed as a Real Estate Investment Trust (a "REIT").
The Company was formed to invest in fixed and variable rate
promissory notes (the "Notes") secured by first and second deeds
of trust on real property located in Southern California. The
Company has also invested in notes which are secured by other
promissory notes. Such other promissory notes were in all cases
secured by deeds of trust and all-inclusive trust deeds. On
September 12, 1994, the Company's shareholders approved a
modification of the Company's Bylaws which had the effect of
permitting the Company to make equity investments in real
property as well as invest in Notes secured by real property.
The Company's newly elected Board of Directors has not as yet
made any new investments for the Company since its election in
September of last year.
The Company ceased acquiring Notes in 1991 and shortly
thereafter began to distribute the proceeds of the Company's Note
portfolio to its shareholders as payments were received. At the
Company's annual shareholders meeting for 1994, the shareholders
approved a proposal to sell substantially all of the Company's
real estate assets. Most of the Notes in the Company's
portfolio were either sold or paid off in the fourth quarter of
1994. The Company had two Notes and two pieces of real estate
remaining in its portfolio on December 31, 1994. One of those
Notes was sold by the Company for $65,000 on February 28, 1995.
The Company's Board of Directors is currently exploring
opportunities for recapitalizing the Company through, among other
things, a new public offering of the Company's common stock, and
the opportunities currently available for investment in real
estate structured either as equity or secured debt. If the Board
determines that it is in the best interests of the Company and
its shareholders to raise new capital for further investment, it
is not currently possible to project the overall effect of such
activities on the Company's net income for 1995. If the Board
does not decide to raise new capital and resume investment
activities, it will seek to sell or otherwise liquidate the
Company's remaining assets and distribute the proceeds of such
liquidations and all of the Company's reserves, after the payment
of expenses, to the Company's shareholders as soon as possible.
The Company is unable to predict with any confidence the
resulting impact upon the Company's net income from such a
decision, although both income and expenses should decrease
significantly in 1995 from the levels in 1994 under such a course
-9-
of action. The Company anticipates that its expenses in 1995
will exceed its income.
There has been little change in the Company's financial condition
between the end of the last fiscal year and the end of the first
quarter of 1995. The principal changes in the financial
condition and results of operation of the Company between the
first quarter of 1994 and the first quarter of this year are
primarily the result of the sale of most of the Company's Note
portfolio and the distribution of much of the proceeds of that
sale to the Company's shareholders in the last quarter of 1994.
The Company's interest income declined by more than 92% and its
total income was reduced by over 86% from the first quarter of
1994 to the first quarter of 1995. On the other hand, the
Company's operating expenses also dropped by more than 68%
between the two periods. The Company's net losses for those
quarters were, as a result, similar. Until and unless the
Company is successful in raising new capital to fund its
operations, it is anticipated that the results of the Company's
operations in future quarters will be similar to that in the
first quarter of this year.
PART II - OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K.
-------------------------------------------
(a) Exhibits
No. Description
--- -----------
3a Articles of Incorporation of Property Secured
Investments, Inc. * (3-a)
3b Bylaws of Property Secured Investments, Inc.**
(3-b)/***
4a Articles of Incorporation of Property Secured
Investments, Inc. * (3-a)
4b Bylaws of Property Secured Investments, Inc.
**(3-b)/***
27 Financial Data Schedule
*Incorporated by reference to the Company's Registration
Statement on Form S-11, filed with the Commission on December 12,
1988. (References in () are to original exhibit numbers.)
-10-
**Incorporated by reference to Amendment No. 1 to the Company's
Registration Statement on Form S-11 filed with the Commission on
August 14, 1989, modified as set forth in the Company's
definitive Proxy Statement filed with the Commission on
August 11, 1994. (References in () are to original exhibit
numbers.)
***Incorporated by reference to the Company's definitive Proxy
Statement filed with the Commission on August 11, 1994, pages
33-37.
(b) No reports on Form 8-K were filed by the Company with the
Securities and Exchange Commission during the first quarter of
1995.
SIGNATURES
----------
Pursuant to the requirements of the Exchange Act, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Property Secured Investments, Inc.
----------------------------------
(Registrant)
Dated: May 15, 1995 By: /s/Andrew K. Proctor
--------------------
Andrew K. Proctor,
Chairman and President
Dated: May 15, 1995 By: /s/Andrew K. Proctor
--------------------
Andrew K. Proctor,
Treasurer
-11-
EXHIBIT INDEX
No. Description Page #
--- ----------- ------
3a Articles of Incorporation of Property
Secured Investments, Inc. * (3-a)
3b Bylaws of Property Secured
Investments, Inc.** (3-b)/***
4a Articles of Incorporation of Property
Secured Investments, Inc. * (3-a)
4b Bylaws of Property Secured
Investments, Inc. **(3-b)/***
27 Financial Data Schedule 12
* Incorporated by reference to the Company's Registration
Statement on Form S-11, filed with the Commission on
December 12, 1988. (References in () are to original
exhibit numbers.)
** Incorporated by reference to Amendment No. 1 to the
Company's Registration Statement on Form S-11 filed with the
Commission on August 14, 1989, modified as set forth in the
Company's definitive Proxy Statement filed with the
Commission on August 11, 1994. (References in () are to
original exhibit numbers.)
*** Incorporated by reference to the Company's definitive Proxy
Statement filed with the Commission on August 11, 1994,
pages 33-37.
-12-
[TYPE] EX-27
[ARTICLE] 5
[MULTIPLIER] 1,000
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-END] MAR-31-1995
[CASH] $ 205,786
[SECURITIES] -0-
[RECEIVABLES] 234,886
[ALLOWANCES] 9,386
[INVENTORY] -0-
[CURRENT-ASSETS] -0-
[PP&E] -0-
[DEPRECIATION] -0-
[TOTAL-ASSETS] 762,802
[CURRENT-LIABILITIES] 34,398
[BONDS] -0-
[PREFERRED-MANDATORY] -0-
[PREFERRED] -0-
[COMMON] 6,298,479
[OTHER-SE] -0-
[TOTAL-LIABILITY-AND-EQUITY] 762,802
[SALES] -0-
[TOTAL-REVENUES] 8,460
[CGS] -0-
[TOTAL-COSTS] 27,281
[OTHER-EXPENSES] -0-
[LOSS-PROVISION] -0-
[INTEREST-EXPENSE] -0-
[INCOME-PRETAX] <18,821>
[INCOME-TAX] -0-
[INCOME-CONTINUING] <18,821>
[DISCONTINUED] -0-
[EXTRAORDINARY] -0-
[CHANGES] -0-
[NET-INCOME] <18,821>
[EPS-PRIMARY] <.03>
[EPS-DILUTED] <.03>