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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-QSB



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|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



| | For the quarterly period ended March 31, 2007
| | ---------------------------------------------

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



| | For the transition period from to
| | ---------------------------------

Commission file
number 1-9900



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ARIZONA LAND INCOME CORPORATION

(Exact name of registrant as specified in its charter)



|                                                              |  |                                    
|------------------------------------------------------------- |  | -----------------------------------
|Arizona                                                       |  | 86-0602478                         
|(State or other jurisdictionof incorporation or organization) |  | (I.R.S. EmployerIdentification No.)



|                                                 |  |           
|------------------------------------------------ |  | ----------
|2999 N. 44th Street, Suite 100, Phoenix, Arizona |  | 85018     
|(Address of principal executive offices)         |  | (Zip Code)

(602) 952-6800

(Registrants telephone number, including area code)



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(Former name, former address and former fiscal year, if changed since last report)



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Indicate by check mark 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 by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).  Yes ̈No  x

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes N/A  No ̈

Indicate by check mark 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 ̈

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date. As of May 15, 2007, there were 1,851,025 shares of Class A common stock and
100 shares of Class B common stock issued and outstanding.



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ARIZONA LAND INCOME CORPORATION

INDEX TO FORM 10-QSB FILING

FOR THE QUARTER ENDED MARCH 31, 2007

Table of Contents



|                                                                    |  |     
|------------------------------------------------------------------- |  | ----
|                                                                    |  | Page
|                                                                    | 
|Part I                                                              |  |     
|                                                                    | 
|Item 1. Financial Statements                                        |  | 3   
|                                                                    | 
|Item 2. Managements Discussion and Analysis or Plan of Operation   |  | 8   
|                                                                    | 
|Item 3. Controls and Procedures                                     |  | 11  
|                                                                    | 
|Part II                                                             |  |     
|                                                                    | 
|Item 1. Legal Proceedings                                           |  | 12  
|                                                                    | 
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |  | 12  
|                                                                    | 
|Item 3. Defaults upon Senior Securities                             |  | 12  
|                                                                    | 
|Item 4. Submission of Matter to a Vote of Security Holders          |  | 12  
|                                                                    | 
|Item 5. Other Information                                           |  | 12  
|                                                                    | 
|Item 6. Exhibits                                                    |  | 12  
|                                                                    | 
|Signatures                                                          |  | 12  



2



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PART I  FINANCIAL INFORMATION

|ITEM 1. | Financial Statements.
|------- | ---------------------

ARIZONA LAND INCOME
CORPORATION

Balance Sheets

(Unaudited)



|                                                           |  |               |             |   |                  |   |             |  
|---------------------------------------------------------- |  | ------------- | ----------- | - | ---------------- | - | ----------- | -
|                                                           |  | March 31,2007 |             |   | December 31,2006 |  
|Assets                                                     |  |               |             |   |                  |   |             |  
|Cash and cash equivalents                                  |  | $             | 651,981     |   |                  | $ | 773,993     |  
|                                                           |  |               |             |   |                  |   |             |  
|Investments                                               |  |               |             |   |                  |   |             |  
|Trading securities                                         |  |               | 3,500,110   |   |                  |   | 1,800,102   |  
|Accrued interest receivable                                |  |               |            |   |                  |   | 67,550      |  
|Mortgage note receivable (net of reserve for loss on sale) |  |               |            |   |                  |   | 3,411,346   |  
|Land held for sale                                         |  |               | 55,890      |   |                  |   | 55,890      |  
|                                                           |  |               |             |   |                  |   |             |  
|Total investments                                          |  |               | 3,556,000   |   |                  |   | 5,334,888   |  
|                                                           |  |               |             |   |                  |   |             |  
|Total assets                                               |  | $             | 4,207,981   |   |                  | $ | 6,108,881   |  
|                                                           |  |               |             |   |                  |   |             |  
|Liabilities                                                |  |               |             |   |                  |   |             |  
|Accounts payable and other liabilities                     |  | $             | 54,591      |   |                  | $ | 25,865      |  
|Dividends payable                                          |  |               |            |   |                  |   | 1,851,025   |  
|                                                           |  |               |             |   |                  |   |             |  
|Total liabilities                                          |  |               | 54,591      |   |                  |   | 1,876,890   |  
|                                                           |  |               |             |   |                  |   |             |  
|Stockholders Equity                                       |  |               |             |   |                  |   |             |  
|Common stock-Class A                                       |  |               | 185,103     |   |                  |   | 185,103     |  
|Common stock-Class B                                       |  |               | 10          |   |                  |   | 10          |  
|Additional paid-in capital                                 |  |               | 21,670,997  |   |                  |   | 21,670,997  |  
|Distributions in excess of earnings                        |  |               | (17,702,720 | ) |                  |   | (17,624,119 | )
|                                                           |  |               |             |   |                  |   |             |  
|Total stockholders equity                                 |  |               | 4,153,390   |   |                  |   | 4,231,991   |  
|                                                           |  |               |             |   |                  |   |             |  
|Total liabilities and stockholders equity                 |  | $             | 4,207,981   |   |                  | $ | 6,108,881   |  
|                                                           |  |               |             |   |                  |   |             |  

The accompanying notes are an integral part of these financial statements.



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ARIZONA LAND INCOME CORPORATION

Statements of Operations

(Unaudited)



|                                           |  |                                   |           |   |                                   |   |          
|------------------------------------------ |  | --------------------------------- | --------- | - | --------------------------------- | - | ---------
|                                           |  | Three months ended March 31, 2007 |           |   | Three months ended March 31, 2006
|                                           |  |                                  
|Income                                     |  |                                   |           |   |                                   |   |          
|Interest income on mortgages               |  | $                                 | 36,367    |   |                                   | $ | 96,900   
|Interest on temporary investments          |  |                                   | 31,433    |   |                                   |   | 12,357   
|Sign lease income                          |  |                                   | 3,750     |   |                                   |   | 3,750    
|                                           |  |                                   |           |   |                                   |   |          
|                                           |  |                                  
|Total income                               |  |                                   | 71,550    |   |                                   |   | 113,007  
|                                           |  |                                   |           |   |                                   |   |          
|                                           |  |                                  
|Expenses                                   |  |                                   |           |   |                                   |   |          
|Professional services                      |  |                                   | 62,022    |   |                                   |   | 17,632   
|Administration and general                 |  |                                   | 79,429    |   |                                   |   | 2,838    
|Directors fees                            |  |                                   | 8,700     |   |                                   |   | 8,700    
|                                           |  |                                   |           |   |                                   |   |          
|                                           |  |                                  
|Total expenses                             |  |                                   | 150,151   |   |                                   |   | 29,170   
|                                           |  |                                   |           |   |                                   |   |          
|                                           |  |                                  
|Net (loss) Income                          |  | $                                 | (78,601   | ) |                                   | $ | 83,837   
|                                           |  |                                   |           |   |                                   |   |          
|Earnings (loss) per common share           |  | $                                 | (0.04     | ) |                                   | $ | 0.05     
|Dividends declared per share               |  | $                                 | 0.00      |   |                                   | $ | 0.10     
|Weighted average common shares outstanding |  |                                   | 1,851,025 |   |                                   |   | 1,851,025

The accompanying notes are an integral part of these financial statements.



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ARIZONA LAND INCOME CORPORATION

Statements of Cash Flows

(Unaudited)



|                                                                                                  |  |                                   |            |   |                                   |   |          |  
|------------------------------------------------------------------------------------------------- |  | --------------------------------- | ---------- | - | --------------------------------- | - | -------- | -
|                                                                                                  |  | Three months ended March 31, 2007 |            |   | Three months ended March 31, 2006 |  
|Cash flows from operating activities:                                                             |  |                                   |            |   |                                   |   |          |  
|Net income (loss)                                                                                 |  | $                                 | (78,601    | ) |                                   | $ | 83,837   |  
|Adjustments to reconcile net income (loss) to net cash provided by(used in) operating activities- |  |                                   |            |   |                                   |   |          |  
|(Increase) decrease in accrued interest receivable                                                |  |                                   | 67,550     |   |                                   |   | (256     | )
|(Increase) in trading securities                                                                  |  |                                   | (45,897    | ) |                                   |   | (8,184   | )
|Increase in accounts payable and other liabilities                                                |  |                                   | 28,726     |   |                                   |   | 8,384    |  
|                                                                                                  |  |                                   |            |   |                                   |   |          |  
|Net cash provided by (used in) operating activities                                               |  |                                   | (28,222    | ) |                                   |   | 83,781   |  
|                                                                                                  |  |                                   |            |   |                                   |   |          |  
|Cash flows from investing activities:                                                             |  |                                   |            |   |                                   |   |          |  
|Proceeds from sale of mortgage note receivable                                                    |  |                                   | 3,411,346  |   |                                   |   |         |  
|Purchase of trading securities                                                                    |  |                                   | (3,500,111 | ) |                                   |   | (500,331 | )
|Proceeds from sale of trading securities                                                          |  |                                   | 1,846,000  |   |                                   |   | 808,000  |  
|                                                                                                  |  |                                   |            |   |                                   |   |          |  
|Net cash provided by investing activities                                                         |  |                                   | 1,757,235  |   |                                   |   | 307,669  |  
|                                                                                                  |  |                                   |            |   |                                   |   |          |  
|Cash flows used in financing activities:                                                          |  |                                   |            |   |                                   |   |          |  
|Payment of dividends                                                                              |  |                                   | (1,851,025 | ) |                                   |   | (185,103 | )
|                                                                                                  |  |                                   |            |   |                                   |   |          |  
|Net cash used in financing activities                                                             |  |                                   | (1,851,025 | ) |                                   |   | (185,103 | )
|                                                                                                  |  |                                   |            |   |                                   |   |          |  
|Increase (decrease) in cash and temporary investments                                             |  |                                   | (122,012   | ) |                                   |   | 206,347  |  
|                                                                                                  |  |                                   |            |   |                                   |   |          |  
|Cash and temporary investmentsbeginning of period                                                |  |                                   | 773,993    |   |                                   |   | 71,116   |  
|                                                                                                  |  |                                   |            |   |                                   |   |          |  
|Cash and temporary investmentsend of period                                                      |  | $                                 | 651,981    |   |                                   | $ | 277,463  |  
|                                                                                                  |  |                                   |            |   |                                   |   |          |  
|Schedule of Non-Cash Investing and Financing Activities:                                          |  |                                   |            |   |                                   |   |          |  
|Dividends declared in excess of dividends paid                                                    |  | $                                 |           |   |                                   | $ | 185,103  |  
|                                                                                                  |  |                                   |            |   |                                   |   |          |  

The accompanying notes are an integral part of these financial statements.



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ARIZONA LAND INCOME CORPORATION

Notes to Financial Statements

March 31, 2007



|Note | 1 Basis of Presentation
|---- | -----------------------

The financial statements
have been prepared by Arizona Land Income Corporation (the Company) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission and the instructions to Form 10-QSB. In the opinion of the Company, the
unaudited financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position, the results of operations and cash flows for the periods presented. The results of
operations for the three months ended March 31, 2007 are not necessarily indicative of the results to be expected for the full year.



|Note | 2 Summary of Significant Accounting policies
|---- | --------------------------------------------

Cash and Cash Equivalents: Investments with an original maturity of less than 90 days when purchased are considered cash equivalents. On occasion, the Company may have deposits with financial institutions in excess of governmental
insured limits.

Trading Securities: U.S. Treasury Notes and debt securities of other governmental agencies with original maturities
of 120 days or more are classified as trading securities upon acquisition and recorded at fair value. Gains and losses are included in income on trading securities in the accompanying statements of operations. Substantially all income from trading
securities for the three months ended March 31, 2007 and 2006 resulted from interest earned on securities. These securities are presented at the amortized cost which approximates market.

Income Taxes and REIT Status: The Company has elected treatment as a real estate investment trust (REIT) under Internal Revenue Code
(IRC) Sections 856-860. A REIT is taxed in the same manner as any corporation except that it may deduct certain qualifying distributions made to shareholders and reduce or eliminate any potential income taxes. This distribution deduction
must be at least 90% of the REITs taxable income. The Company has met the distribution requirement for all years presented, and thus has not recorded any income tax provision in the accompanying statements of operations.

For income tax purposes, certain expenses or reserves for financial reporting purposes are not allowed as current tax deductions. Similarly, the Company
may take certain current deductions for tax purposes that are not current expenses for financial reporting purposes.

On July 13, 2006,
the FASB issued Interpretation No. 48. Accounting for Uncertainty in Income Taxes  An Interpretation of FASB Statement No. 109(Fin 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in
an entitys financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or
expected to be taken on a tax return. Under FIN 48, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing
authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006.



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The Company adopted the provisions of FIN 48 on January 1, 2007. As a result of the adoption of FIN
48, the Company has not recognized any change to the January 1, 2007 balance in retained earnings. At January 1, 2007 and March 31, 2007, the Company had no unrecognized tax benefits that, if recognized, would affect the
Companys effective income tax rate in future periods. The adoption of FIN 48 did not impact our consolidated financial condition, results of operations or cash flows.

The Companys practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrued
interest or penalties at January 1, 2007 and no accrued interest or penalties at March 31, 2007.

The Company is subject to
taxation in the U.S. The Companys tax years for 2000 and forward.



|Note | 3 Mortgage Note Receivable
|---- | --------------------------

The mortgage note
receivable which totaled $3,516,852 at December 31, 2006 was received as partial consideration for the Companys sale of the property associated with Loan No. 6. The Company sold its remaining holdings of approximately 280 acres in
Maricopa County, Arizona on May 10, 2004.

In February 2007, the Company sold its interest in the note receivable to a related party
for $3,411,346 and invested the proceeds from that sale in trading securities. As of December 31, 2006, the Company recorded an impairment reserve for loss on sale of $105,506, resulting in no gain or loss for the three months ended
March 31, 2007.



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|ITEM2.    Managements | Discussion and Analysis or Plan of Operation.
|---------------------- | ---------------------------------------------

Arizona Land Income Corporation (the Company) is an Arizona corporation, which has elected to be treated as a real estate investment trust (a REIT) under the Internal Revenue Code of 1986. The statements of
operations filed herewith cover the periods from January 1, 2007 through March 31, 2007, and January 1, 2006 through March 31, 2006.

Potential Dissolution/Transaction with Pacific Office. As disclosed in the Companys prospectus used in connection with the Companys 1988 initial public offering and in its subsequent annual reports on Form 10-KSB, the
Companys intent at the time of the public offering was to dissolve within a approximately eight years after the date of such offering.

For the past several years, we have been liquidating our loan and land holdings and returning
capital to our shareholders through regular and special dividends. In the second quarter ended June 30, 2004, we sold our remaining holdings (with the exception of a small parcel of approximately 1/100THof an acre) of approximately 280 acres related to Loan No. 6. As partial consideration for the Companys sale of the property associated
with Loan No. 6, the Company received a mortgage note receivable which totaled $3,516,852 at December 31, 2006. In February 2007, the Company sold its interest in the note receivable to a related party for $3,411,346 and invested the
proceeds from that sale in trading securites.

In January 2005, we engaged Peacock, Hislop, Staley & Given, Inc., a financial
advisor (PHS&G) to assist in developing and evaluating strategic alternatives available to the Company to enhance shareholder value. Alternatives that were being considered included a change of business plan for the Company, a merger
or sale of the Company, a combination of these, or the decision to take no action other than the completion of the liquidation of the Company. We issued a press release on January 24, 2005 announcing our engagement with PHS&G and the
purpose of the engagement. Our Board of Directors believed that PHS&Gs historic relationship with, and long knowledge of, the Company put it in a unique position to assist in determining the best course of action for the Company to take.

Our engagement of PHS&G has entailed an effort by PHS&G to locate a possible merger, partner or acquirer for the Company that
would result in enhanced shareholder value. Our agreement with PHS&G calls for the Company to pay PHS&G a fee of 4% of the transaction value (but in no event more than $250,000) only upon the successful completion of its efforts.

In connection with PHS&Gs receipt of certain offers from interested parties relating to a potential transaction with Company, our Board met
in March 2005 for the purpose of forming a special committee composed of qualified independent directors (the Special Committee). The Special Committee was tasked with investigating and negotiating a potential business disposition,
liquidation or other strategic transaction regarding the Company. We announced on October 3, 2006 that we had entered into a Master Formation and Contribution Agreement (as subsequently amended, the Master Agreement) with POP
Venture, LLC, a Delaware limited liability company (Pacific Office Contributor), as described in our annual report on Form 10-KSB for the fiscal year ended December 31, 2006 (see Item 1. Description of BusinessProposed
Transactions with Pacific Office Contributor in that Form 10-KSB). Pursuant to the Master Agreement, the Company will form an umbrella partnership (UPREIT) in which the Company is the sole general partner. Upon consummation of the
transactions contemplated by the Master Agreement (the Closing),



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the UPREIT will acquire ownership interests in up to ten office properties (the Contributed Properties),
which comprise approximately 2.8 million square feet of office space, in consideration for common units and convertible preferred units in the UPREIT with a value equal to the net asset value of the interests in the Contributed Properties at
Closing. This value is estimated to be approximately $165 million.

Sale of Mortgage Note Receivable

As described in more detail in Note 3 of the notes to our financial statements included elsewhere herein (see Part I, Item 1 above), the Company had
a mortgage note receivable which totaled $3,516,852 as December 31, 2006. This note receivable was received as partial consideration for the Companys sale of the property associated with Loan No. 6 in May 2004.

In February 2007, the Company sold its interest in the note receivable to a related party for $3,411,346 and invested the proceeds from that sale in
trading securities. As of December 31, 2006, the Company recorded an impairment reserve for loss on sale of $105,506, resulting in no gain or loss for the three months ended March 31, 2007.

Results of Operations

For the quarter ended
March 31, 2007, the Company had total income of approximately $72,000 compared to approximately $113,000 for the quarter ended March 31, 2006. This decrease was primarily attributable to a decrease in interest income on mortgages from
approximately $97,000 to approximately $36,000. This decrease in interest income on mortgages was due to the Company selling its interest in the note receivable to a related party for $3,411,346.

The Companys expenses for the quarter ended March 31, 2007 were approximately $150,000 compared to approximately $29,000 for the quarter ended
March 31, 2006. The Companys fees for professional services increased to approximately $62,000 for the quarter ended March 31, 2007 from approximately $18,000 for the same period of 2006. The increases in professional services can be
attributed to expenses associated with the proposed transaction between the Company and the Pacific Office Contributor, which is described above. The Companys administration and general expenses increased to approximately $79,000 for the
quarter ended March 31, 2007 compared to approximately $3,000 for the quarter ended March 31, 2006.

The increases in administration and general
expenses can be attributed to expenses associated with compliance with the Sarbanes-Oxley Act of 2002.

Effective the third quarter 2005
the Company elected to waive the advisory fee to the Advisor as no new loans or mortgages have been made.

The Company reported a net loss
of approximately $79,000 for the quarter ended March 31, 2007, compared to net income of approximately $84,000 for the quarter ended March 31, 2006. The net loss in income is primarily attributable to a decrease in interest on mortgages
and an increase in professional services and administration and general expenses, as noted above.



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For the operating period of January 1, 2007 through March 31, 2007, the Company reported an
increase in trading securities of approximately $1,700,000 as a result of the investment of proceeds from the sale of its mortgage note receivable as discussed above.

Liquidity and Capital Resources

The Company currently has no commitments for any material capital
expenditures and does not anticipate any such expenditures in the foreseeable future.

On December 1, 2006, the Company declared a
$1.00 per share dividend with a record date of January 5, 2007, paid on January 26, 2007. The Company has agreed under the Master Agreement not to declare or pay any further dividends prior to the consummation of the transactions
contemplated by the Master Agreement.

Critical Accounting Estimates

The Company estimates the carrying value of its mortgages receivable, land held for sale and certain other investments. The carrying value of the receivables is reported at the principal balance less any allowance for
notes that, in the opinion of management, are impaired. At March 31, 2007, the Company had made no provisions for impairment on any of its assets.



10



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ITEM3.    Controls and Procedures.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive
officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-5 of the Securities Exchange Act of 1934, as amended. Based on this evaluation, our chief executive
officer and chief financial officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in our reports that we file with or submit to the Securities and Exchange Commission
(SEC) is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms. There have been no significant changes in our internal controls or in other factors that could significantly
affect those internal controls over financial reporting.



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PART IIOTHER INFORMATION

Item 1. Legal Proceedings.

Not Applicable

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Not Applicable

Item 3. Defaults Upon Senior Securities.

Not Applicable

Item 4. Submission of Matters to a Vote of Security Holders.

Not Applicable

Item 5. Other Information.

None

Item 6. Exhibits.

31.1 Certification of Chief Executive Officer pursuant to Item 601(b)(31) of Regulation S-B (Filed herewith).

31.2 Certification of Chief Financial Officer pursuant to Item 601(b)(31) of Regulation S-B (Filed herewith).

32.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Item 601(b)(32) of

Regulation S-B. (Filed herewith).

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.

ARIZONA LAND INCOME CORPORATION

May 15, 2007

Date



/S/ Thomas R. HislopThomas R. Hislop Vice President and Chief Financial Officer




12