-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ALRdBOutK12YJUQ3TEXwocBbOaisQy2a+0hWbFDOt1eFX3O27GZZk4+s7ZtByJ92 CY07PDvXT4tQtV3p4pZ+qg== 0000889810-95-000080.txt : 19951119 0000889810-95-000080.hdr.sgml : 19951119 ACCESSION NUMBER: 0000889810-95-000080 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROPERTY SECURED INVESTMENTS INC CENTRAL INDEX KEY: 0000790410 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 954320650 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-15730 FILM NUMBER: 95592964 BUSINESS ADDRESS: STREET 1: 445 SOUTH FIGUEROA STREET STREET 2: SUITE 2600 CITY: LOS ANGELES STATE: CA ZIP: 90071-1630 BUSINESS PHONE: 213-612-7714 MAIL ADDRESS: STREET 1: 445 SOUTH FIGUEROA STREET STREET 2: SUITE 2600 CITY: LOS ANGELES STATE: CA ZIP: 90071-1630 10QSB 1 PROPERTY SECURED 3-QTR 10QSB 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 September 30, 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 September 30, 1995, 177,031 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 ------------------------------- The following financial statements are furnished: Balance sheets (unaudited) as of September 30, 1995 and December 31, 1994. Statements of Operations (unaudited) for the nine months and three months ended September 30, 1995 and 1994. Statements of Cash Flows (unaudited) for the nine months ended September 30, 1995 and 1994. Notes to Financial Statements (unaudited). Page 2 of 13 Property Secured Investments, Inc. BALANCE SHEETS (Unaudited) ASSETS September 30, December 31, 1995 1994 ------------- ------------ Cash $ 218,844 $ 170,323 Notes receivable, net of provision for losses of $9,378 and $35,000 (note 2) 234,182 300,243 Accrued interest receivable 4,765 2,496 Real estate 222,098 317,365 ---------- ---------- $ 679,889 $ 790,427 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Accrued expenses and other liabilities $ 29,169 $ 35,039 Deferred revenues 3,940 8,163 ---------- ---------- 33,109 43,202 Stockholders' Equity Common stock, 20,000,000 shares authorized, 177,031 shares issued and outstanding 6,298,479 6,298,479 Additional paid-in capital 2,970 2,970 Distributions in excess of earnings (5,654,669) (5,554,224) ---------- ---------- Total Stockholders' Equity 646,780 747,225 ---------- ---------- $ 679,889 $ 790,427 ========== ========== The accompanying notes are an integral part of these financial statements Page 3 of 13 Property Secured Investments, Inc. STATEMENTS OF OPERATIONS (Unaudited) Nine months ended Three months ended September 30, September 30, ----------------- ----------------- 1995 1994 1995 1994 ---- ---- ---- ---- Income Interest $ 13,344 $ 139,896 $ 6,103 $ 37,042 Loan origination fees 4,223 58,266 43,724 Other 541 2,464 541 263 -------- -------- -------- -------- Total income 18,108 200,626 6,644 81,029 Expenses Operating 97,654 320,654 31,014 116,337 Provision for losses on notes receivable and real estate 675,000 570,000 -------- -------- -------- -------- Total expenses 97,654 995,654 31,014 686,337 Net loss before loss on sale of real estate (79,546) (795,028) (24,370) (605,308) -------- -------- -------- -------- Loss on sale of real estate (20,899) (2,696) (20,899) -------- -------- -------- -------- Net loss $(100,445) $(797,724) $(45,269) $(605,308) ======== ======== ======= ======== Per common share information: Net loss $ (.57) $ (4.51) $ (.26)$ (3.42) ======== ======== ======= ======== Income dividends .00 .00 .00 .00 Return of capital dividends .00 .40 .00 .00 -------- -------- ------- -------- Total dividends $ .00 $ .40 $ .00 $ .00 ======== ======== ======= ======== Weighted average shares outstanding 177,031 177,031 177,031 177,031 ======== ======== ======= ======== 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 nine months ended September 30, 1995 and 1994 (Unaudited) 1995 1994 Cash flows from operating activities: ---- ---- Interest received $ 11,075 $ 161,951 Operating expenses paid (103,524) (331,573) Other income received 541 2,464 -------- -------- Net cash used in operating activities (91,908) (167,158) Cash flows from investing activities: Principal payments received on notes receivable 66,061 269,332 Deposit for sale of assets 25,000 Proceeds on sale of real estate 74,368 303,797 -------- -------- Net cash provided by investing activities 140,429 598,129 Cash flows from financing activities: Cash distributions to stockholders (495,543) Payments on trust deed note payable (137,530) -------- -------- Net cash used in financing activities (633,073) -------- -------- Net increase (decrease) in cash 48,521 (202,102) Cash, beginning of period 170,323 488,369 -------- -------- Cash, end of period $ 218,844 $ 286,267 ======== ======== Cash flows from operating activities: Net loss $(100,445) $(797,724) Adjustments to reconcile net loss to net cash used in operating activities before cash distributions to shareholders: Loss on sale of real estate 20,899 2,696 Provision for losses on notes receivable and real estate 675,000 Amortization of loan origination fees (4,223) (58,266) (Increase) decrease in accrued interest receivable (2,269) 22,055 Decrease in accrued expenses and other liabilities (5,870) (10,919) -------- -------- Net cash used in operating activities $ (91,908) $(167,158) ======== ======== The accompanying notes are an integral part of these financial statements Page 5 of 13 Property Secured Investments, Inc. NOTES TO FINANCIAL STATEMENTS For the nine months ended September 30, 1995 and 1994 (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 Held for Sale ------------------------- 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 deferred and are being recognized as income on a method approximating a level yield over the life of each respective loan. Page 6 of 13 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 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 September 30, 1995. Net Loss Per Share ------------------ Net loss per share is based on the weighted average number of common shares outstanding. Stock Split ----------- In July 1995, the Company affected 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. The common stock outstanding and weighted average shares outstanding for all periods presented have been adjusted to reflect this stock split. 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 11.9% per annum. The following is a summary of notes receivable: September 30, December 31, 1995 1994 ------------- ------------ Second trust deeds, collateralized by residential and commercial property 243,560 335,243 ------- ------- Less provision for losses on notes 9,378 35,000 ------- ------- $234,182 $300,243 ======= ======= Page 7 of 13 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 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 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 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, leaving it with three assets in its portfolio, one note and two pieces of real estate. Pursuant to a vote of shareholders at the annual meeting held in September, 1994, the Company affected a one-for-four reverse stock split on July 11, 1995. In September, 1995, the Company sold one of its two pieces of real property for net proceeds of $74,368 which were paid in cash. The Company realized a loss of $20,899 on the sale of such property which was acquired by foreclosure. The property is located in Acton, California. As to the Company's sole remaining piece of real property, the Company recently prevailed in its unlawful detainer action and obtained possession of the property. The Company is currently preparing the property, which is located in Inglewood, California, to market it for sale. The Company's Board of Directors continues to explore 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 Page 8 of 13 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 practicable. 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 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 third quarter of 1995. The principal changes in the financial condition and results of operation of the Company between the third quarter of 1994 and the third 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 nearly 84% and its total income was reduced by nearly 92% from the third quarter of 1994 to the third quarter of 1995. On the other hand, the Company's operating expenses also dropped by more than 73% between the two periods. 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 third quarter of this year. Item 4. Items Submitted to a Vote of Security-Holders ------------------------------------------------------ At the Company's annual meeting held on August 1, 1995, the Company's shareholders elected the Board of Directors for the forthcoming year consisting of: Elbert R. Lewis, Andrew K. Proctor, Hubert Scheffy, Jr., Sidney Harris and David A. Hillard, all of whom were re-elected to the Board. Each of the candidates received 356,086 votes; 73,086 votes were withheld with respect to each candidate; there were 14,353 broker non-votes. Such vote reflects shareholdings as of the record date of June 23, 1995, and does not reflect the impact of the reverse stock split discussed in Item 2 above. At the above annual meeting, shareholders also voted on a proposal to grant 60,000 shares of the Company's common stock to certain of the Company's Directors and Officers as compensation for services to the Company. This proposal was not approved, receiving 167,073 votes in favor; 103,730 votes against; 21,688 votes abstained; there were 141,969 broker non-votes. Page 9 of 13 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 [FN] 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. (b) No reports on Form 8-K were filed by the Company with the Securities and Exchange Commission during the third quarter of 1995. 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. ---------------------------------- (Registrant) Dated: November 14, 1995 By: /s/ Andrew K. Proctor -------------------------- Andrew K. Proctor, Chairman and President Dated: November 14, 1995 By: /s/ Andrew K. Proctor -------------------------- Andrew K. Proctor, Treasurer Page 11 of 13 EXHIBIT INDEX No. Description Page # ---- ----------------- ------ 3a Articles of Incorporation of Property Secured Investments, Inc. * (3-a) 3b Bylaws of Property Secured Investments, (3-b)/ Inc. 4a Articles of Incorporation of Property Secured Investments, Inc. (3-a) 4b Bylaws of Property Secured Investments, (3-b)/ Inc. 27 Financial Data Schedule 13 [FN] 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. Page 12 of 13 EX-27 2
5 9-MOS DEC-31-1995 SEP-30-1995 218,844 0 243,560 9,378 0 0 222,098 0 679,889 33,109 0 6,298,479 0 0 0 679,889 0 18,108 0 79,546 20,899 0 0 (100,445) 0 (100,445) 0 0 0 (100,445) (.57) (.57)
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