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, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from __________ to __________
Commission file number: 33-26036
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PROPERTY SECURED INVESTMENTS, INC.
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(Exact name of small business issuer as
specified in its charter)
California 95-4075422
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(State of Incorporation) (I.R.S. Employer ID No.)
445 South Figueroa Street, Ste. 2600
Los Angeles, CA 90071-1630
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(Address of principal executive offices)
(213) 612-7714 (Andrew K. Proctor)
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(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 13, 1996, 176,980 shares of common stock, no
par value.
Transitional Small Business Disclosure Format (check one):
Yes.......No...X...
Exhibit Index at Page 12
Page 1 of 13
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
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The following financial statements are furnished:
Balance sheets (unaudited) as of March 31, 1996 and
December 31, 1995.
Statements of Operations (unaudited) for the
three months ended March 31, 1996 and 1995.
Statements of Cash Flows (unaudited) for the three
months ended March 31, 1996 and 1995.
Notes to Financial Statements (unaudited).
Page 2 of 13
Property Secured Investments, Inc.
BALANCE SHEETS
(Unaudited)
ASSETS
March 31, December 31,
1996 1995
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Cash $ 217,078 $ 262,055
Real estate held for sale 200,000 200,000
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$ 417,078 $ 462,055
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued expenses and other
liabilities $ 11,149 $ 25,187
Stockholders' Equity
Common stock, 20,000,000 shares
authorized, 176,980 shares
issued and outstanding 6,298,479 6,298,479
Additional paid-in capital 2,970 2,970
Distributions in excess of earnings (5,895,520) (5,864,581)
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Total Stockholders' Equity 405,929 436,868
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$ 417,078 $ 462,055
========== ==========
The accompanying notes are an integral part
of these financial statements
Page 3 of 13
Property Secured Investments, Inc.
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
March 31,
----------------------
1996 1995
---- ----
Income
Interest $ 1,231 $ 4,237
Loan origination fees - 4,223
------- -------
Total income 1,231 8,460
Operating Expenses 32,170 27,281
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Net loss $(30,939) $(18,821)
======= =======
Per common share information:
Net loss $ (0.18) $ (0.11)
======= =======
Weighted average
shares outstanding 176,980 176,980
======= =======
The accompanying notes are an integral part
of these financial statements
Page 4 of 13
Property Secured Investments, Inc.
STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1996 and 1995
(Unaudited)
1996 1995
Cash flows from operating activities: ---- ----
Interest received $ 1,231 $ (1,473)
Operating expenses paid (46,208) (31,862)
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Net cash used in
operating activities (44,977) (33,335)
Cash flows from investing activities:
Principal payments received on
notes receivable - 68,798
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Net cash provided by
investing activities - 68,798
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Net increase (decrease) in cash (44,977) 35,463
Cash, beginning of period 262,055 170,323
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Cash, end of period $ 217,078 $ 205,786
======== ========
Cash flows from operating activities:
Net loss $ (30,939) $ (18,821)
Adjustments to reconcile net loss
to net cash used in operating
activities before cash
distributions to shareholders:
Amortization of loan
origination fees - (4,223)
Accrued interest receivable - (5,710)
Decrease in accrued expenses and
other liabilities (14,038) (4,581)
-------- --------
Net cash used in operating activities $ (44,977) $ (33,335)
======== ========
The accompanying notes are an integral part
of these financial statements
Page 5 of 13
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements of Property Secured
Investments, Inc. (the "Company" or "PSI") have been
prepared pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC"). Accordingly,
they do not include all of the information and footnotes
required by generally accepted accounting principles
("GAAP") for complete financial statements. The financial
statements should be read in conjunction with the financial
statements and notes thereto included in the Company's
annual report on Form 10-KSB filed with the SEC on March 29,
1996.
In the opinion of management, the financial statements
contain all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the balance
sheets as of December 31, 1995 and March 31, 1996, the
statements of income for the three month periods ended
March 31, 1995 and 1996, and the statements of cash flows
for the three month periods ended March 31, 1995 and 1996.
Operating results for the three month period ended March 31,
1996 are not necessarily indicative of the results that may
be expected for the entire fiscal year ending December 31,
1996.
NOTE 2 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
------------
The Company 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 had investments in
promissory notes collateralized principally by deeds of
trust on California real property. In 1994, the Company
obtained stockholder approval to convert to a perpetual life
REIT.
Estimates
---------
In preparing financial statements in conformity with
generally accepted auditing principles, management makes
estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could
differ from those estimates.
Real Estate
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Real Estate represents one property that the Company has
obtained through foreclosure on a trust deed that was in its
portfolio and is held for sale. The property is recorded at
its estimated fair value less estimated selling costs which
is lower than cost. Costs of maintaining the foreclosed
Page 6 of 13
property and preparing it for sale are expensed as incurred.
The property is located in Inglewood, California.
Federal Income Taxes
--------------------
The Company qualifies as a REIT under the Internal Revenue
Code and, accordingly, is not subject to Federal income
taxes on amounts distributed to stockholders, 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, 1996.
Net Loss Per Share
------------------
Net loss per share is based on the weighted average number
of common shares outstanding.
Stock Split
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In July 1995, the Company effected a one-for-four reverse
stock split of its common stock. Pursuant to the terms of
such stock split, in lieu of the issuance of any fractional
shares that would otherwise result from the reverse stock
split, the Company shall issue one additional share of
common stock. Note that the 176,980 outstanding share
balance is subject to adjustments based on the actual 1 for
4 reverse split calculation of each individual account, with
the fractional share interest rounded up to the next full
share. The common stock outstanding and weighted average
shares outstanding for all periods presented have been
adjusted to reflect this stock split.
Page 7 of 13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
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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 ("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 investing in
Notes secured by real property. The Company's Board of Directors
has not as yet made any new investments for the Company since its
election in September of 1994.
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 or
first quarter of 1995. In the first quarter of 1995, the Company
terminated the Purchase and Sale Agreement pursuant to which the
Company had disposed of the majority of its assets.
The Company has one remaining real estate asset, which is a
piece of real property located in Inglewood, California. Such
property is currently being marketed for sale.
The Company's Board of Directors is exploring the
Company's prospects for raising new capital 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 1996. 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 asset and distribute the
proceeds of such liquidation and all of the Company's reserves,
after the payment of expenses, to the Company's shareholders.
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 1996. The principal changes in the financial
condition and results of operation of the Company between the
third quarter of 1995 and the third quarter of this year are
Page 8 of 13
primarily the result of the sale of the Company's Note
portfolio and resulting decrease in the Company's income.
The Company's interest income declined by nearly 71.0% and
its total income was reduced by nearly 85.4% from the first
quarter of 1995 to the first quarter of 1996. The Company's
operating expenses increased 17.9% between the two periods from
$27,281 in 1995 to $32,170 in 1996. Such increase was primarily
a result of increased expenses related to the liquidation of assets
in the fourth quarter of 1995, renovation of the Company's
remaining real property asset and the due diligence investigation
of potential merger or investment opportunities. The Company
continues to have net operating losses as a result of its reduced
income. 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.
Page 9 of 13
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
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(a) Exhibits
No. Description
---- ------------
3.1 Articles of Incorporation of Property Secured
Investments, Inc., as amended <F*> (3.1)
3.2 Restated Bylaws of Property Secured
Investments, Inc. <F*> (3.2)
27 Financial Data Schedule
[FN]
<F*> Incorporated by reference to the Company's Annual Report
on Form 10-KSB for 1995, filed with the Commission on
March 29, 1996. (References in () are to original
exhibit numbers.)
(b) No reports on Form 8-K were filed by the Company with
the Securities and Exchange Commission during the first
quarter of 1996.
Page 10 of 13
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.
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(Registrant)
Dated: May 14, 1996 By: /s/ Andrew K. Proctor
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Andrew K. Proctor,
Chairman and President
Dated: May 14, 1996 By: /s/ Andrew K. Proctor
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Andrew K. Proctor, Treasurer
Page 11 of 13
EXHIBIT INDEX
No. Description Page #
---- ----------------- ------
3.1 Articles of Incorporation of Property
Secured Investments, Inc., as amended <F*> (3-a)
3.2 Restated Bylaws of Property Secured (3-b)/
Investments, Inc. <F*> <F*>
27 Financial Data Schedule 13
[FN]
<F*> Incorporated by reference to the Company's Annual
Report of Form 10-KSB for 1995, filed with the
Commission on March 29, 1996. (References in ()
are to original exhibit numbers.)
Page 12 of 13