Attached files

file filename
EX-31 - EXHIBIT 31.1 - USA REAL ESTATE INVESTMENT TRUST /CAex31-1.htm
EX-32 - EXHIBIT 32.1 - USA REAL ESTATE INVESTMENT TRUST /CAex32-1.htm
EXCEL - IDEA: XBRL DOCUMENT - USA REAL ESTATE INVESTMENT TRUST /CAFinancial_Report.xls
EX-31 - EXHIBIT 31.2 - USA REAL ESTATE INVESTMENT TRUST /CAex31-2.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION 

WASHINGTON, D.C. 20549 

 

FORM 10-Q 

(Mark One)

 

 

 

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended September 30, 2013 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 0-16508

 

USA REAL ESTATE INVESTMENT TRUST

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

California 

 

68-0420085

(State or Other Jurisdiction of Incorporation or

 

(I.R.S. Employer Identification No.)

Organization)

 

 

 

650 Howe Avenue, Suite 730

Sacramento, CA 95825
(Address of Principal Executive Offices, Including Zip Code)

 

(916) 761-4992
(Registrant’s Telephone Number, Including Area Code)

 

     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     ☐ No

 

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).      

Yes     ☐ No

 

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

 

 

 

Large accelerated filer ☐

 

Accelerated filer ☐ 

 

Non-accelerated filer ☐ 

 

Smaller reporting company ☑

  

 

     

 

 

    

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes     ☑ No

 

     As of December 9, 2013, 15,788 shares of beneficial interest of the registrant were outstanding.

 

 
Page 1 of 10

 

 

PART I. FINANCIAL INFORMATION

 

USA REAL ESTATE INVESTMENT TRUST

Condensed Balance Sheets

 

 

 

   

September 30,

2013

   

December 31,

2012

 
   

(Unaudited)

         

Assets

               
                 

Real estate loan

  $ --     $ --  

Cash

    905,991       788,469  

Other assets

    --       230,000  

Total assets

  $ 905,991     $ 1,018,469  
                 

Liabilities and Shareholders' Equity

               
                 

Liabilities:

               

Accounts payable

  $ 3,462     $ 1,303  

Total liabilities

    3,462       1,303  
                 

Shareholders' equity:

               

Shares of beneficial interest, par value $1 per share; 62,500 shares authorized; 15,788 and 15,798 shares outstanding at September 30, 2013 and December 31, 2012, respectively

    15,788       15,798  

Additional paid-in capital

    26,172,711       26,173534  

Distributions in excess of cumulative net income

    (25,285,970

)

    (25,172,166

)

Total shareholders’ equity

    902,529       1,017,166  
                 

Total liabilities and shareholders’ equity

  $ 905,991     $ 1,018,469  

 

 

 

See notes to financial statements.

 

 
Page 2 of 10

 

 

 

USA REAL ESTATE INVESTMENT TRUST

Condensed Statements of Operations

(Unaudited)

 

 

 

 

   

Three Months Ended

September 30,

 
   

2013

   

2012

 
                 
                 

Revenues:

               

Interest income

  $ 166     $ --  
                 

Expenses:

               

General and administrative

    25,919       36,080  

Total expenses

    25,919       36,080  
                 

Net loss

  $ (25,753

)

  $ (36,080

)

                 

Net loss per share

  $ (1.63

)

  $ (2.26

)

                 

Weighted-average number of shares outstanding

    15,788       15,998  

 

 

 

See notes to financial statements.

 

 

 
Page 3 of 10

 

 

USA REAL ESTATE INVESTMENT TRUST

Condensed Statements of Operations

(Unaudited)

 

 

 

 

   

Nine Months Ended

September 30,

 
   

2013

   

2012

 
                 
                 

Revenues:

               

Interest income

  $ 1,010     $ --  
                 

Expenses:

               

Operating

    --       4,745  

Impairment of receivables

    8,652       --  

General and administrative

    106,162       157,019  

Total expenses

    114,814       161,764  
                 

Net loss

  $ (113,804

)

  $ ( 161,764

)

                 

Net loss per share

  $ ( 7.21

)

  $ ( 9.45

)

                 

Weighted-average number of shares outstanding

    15,792       17,114  

 

 

 

See notes to financial statements.

 

 

 
Page 4 of 10

 

 

USA REAL ESTATE INVESTMENT TRUST

Condensed Statements of Cash Flows

(Unaudited)

 

   

Nine Months Ended

September, 30,

 
   

2013

   

2012

 

CASH FLOWS FROM OPERATING ACTIVITIES:

               

Net loss

  $ (113,804

)

  $ (161,764

)

Adjustments to reconcile net loss to net cash used in operating activities

               

Impairment charge

    8,652          

Changes in operating assets and liabilities:

               

Increase (decrease) in accounts payable

    2,159       (95,416

)

                 

Net cash used in operating activities

    (102,993

)

    (257,180

)

                 

CASH FLOWS FROM INVESTING ACTIVITIES:

               

Net proceeds from the sale of real estate owned

    --       1,786,000  

Advance to related party

    (8,652

)

    (604,252

)

Reimbursement from related party

    230,000       --  
                 

Net cash provided by investing activities

    221,348       1,181,748  
                 

CASH FLOWS FROM FINANCING ACTIVITIES:

               

Payment of note payable

    --       (500,000

)

Repurchase of shares of beneficial interest

    (833

)

    (167,351

)

                 

Net cash used in financing activities

    (833

)

    (667,351

)

                 
                 

NET INCREASE IN CASH

    117,522       257,217  
                 

CASH AT BEGINNING OF PERIOD

    788,469       718,198  
                 

CASH AT END OF PERIOD

  $ 905,991     $ 975,415  
                 

Supplemental cash flow disclosures:

               

Cash paid for interest

    --     $ 85,911  

 

 

 

See notes to financial statements.

 

 

 
Page 5 of 10

 

 

 

USA REAL ESTATE INVESTMENT TRUST

Notes to Financial Statements

 

1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

GENERAL: USA Real Estate Investment Trust (the "Trust") was organized under the laws of the State of California pursuant to a Declaration of Trust dated October 7, 1986. The Trust commenced operations on October 19, 1987, upon the sale of the minimum offering amount of shares of beneficial interest. The Trust is a self-administered, self-managed, real estate investment trust. The interim unaudited financial statements of the Trust have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. The Trust believes that the disclosures are adequate to make the information presented not misleading. These interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Trust’s 2012 Annual Report on Form 10-K. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Trust’s financial position at September 30, 2013 and December 31, 2012, and the results of its operations for the three month and nine month interim periods ended September 30, 2013 and September 30, 2012 and its cash flows for the nine month interim periods ended September 30, 2012 and September 30, 2012 have been included. The results of operations for interim periods are not necessarily indicative of results for the full year.

 

2.   SHAREHOLDERS’ EQUITY

 

In May 2013, the Trust repurchased 10 of its shares of beneficial interest for $833.

 

3.   COMMITMENTS AND CONTINGENCIES

 

The Trust is involved in claims and legal proceedings and it may become involved in other legal matters arising in the ordinary course of business. The Trust evaluates these claims and legal matters on a case-by-case basis to make a determination as to the impact, if any, on its business, liquidity, results of operations, financial condition or cash flows. The Trust currently believes that the ultimate outcome of these claims and proceedings, individually and in the aggregate, will not have a material adverse impact on its financial position, results of operations or cash flows. The Trust’s evaluation of the potential impact of these claims and legal proceedings on its business, liquidity, results of operations, financial condition and cash flows could change in the future.

 

4.   FAIR VALUE MEASUREMENTS AND OTHER FINANCIAL INSTRUMENTS

 

The Trust has no financial instruments accounted for at fair value on a recurring or non-recurring basis. Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

 

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity can access as of the measurement date.

 

Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

 

 

 
Page 6 of 10

 

 

 

The carrying values and fair values of the Trust’s other financial instruments were as follows:

  

             

September 30, 2013

   

December 31, 2012

 
   

Level

   

Carrying
value

   

Fair
value

   

Carrying
value

   

Fair
value

 

Cash

    1       $ 905,991     $ 905,991     $ 788,469     $ 788,469  

Accounts payable

    2         3,462       3,462       1,303       1,303  

 

There were no transfers between Level 1 and Level 2 during 2013 or 2012. 

 

Cash and accounts payable. The carrying amounts approximate fair value because of the short maturity of the instruments.

 

5.   RELATED PARTY

 

During the nine months ended September 30, 2013, the Trust advanced $8,652 to West Coast Realty Trust, Inc., a related party (“WCRT”). As of September 30, 2013, the Trust has advanced a total of $825,934 to WCRT in connection with WCRT’s formation and proposed initial public offering and is expected to be repaid without interest at the closing of WCRT’s proposed initial public offering. Of this advance, $230,000 relates to fees paid to Aviva Life and Annuity Company for a planned mortgage refinance. The mortgage refinance was completed and WCRT remitted $230,000 to the Trust in June 2013. WCRT’s proposed initial public offering has been delayed and collection of the advance is uncertain. As such, the Trust recorded impairment charges of $8,652 and $587,282 in the statement of operations for the nine months ended September 30, 2013 and the year ended December 31, 2012, respectively. The advance is reflected as “Other assets” on the accompanying balance sheet and recorded at $0 and $230,000 at September 30, 2013 and December 31, 2012, respectively.

 

 

ITEM 2       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

CRITICAL ACCOUNTING POLICIES

 

The Trust’s critical accounting policies govern real estate owned and real estate loans. These policies are described in the “Critical Accounting Estimates” section within Item 7 in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2012.

 

RESULTS OF OPERATIONS AND FINANCIAL POSITION

 

The Trust has no continuing operating income, but has continuing expenses. During the nine months ended September 30, 2013, the Trust advanced $8,652 to West Coast Realty Trust, Inc., a related party (“WCRT”). As of September 30, 2013, the Trust has advanced a total of $825,934 to WCRT in connection with WCRT’s formation and proposed initial public offering and is expected to be repaid without interest at the closing of WCRT’s proposed initial public offering. Of this advance, $230,000 relates to fees paid to Aviva Life and Annuity Company for a planned mortgage refinance. The mortgage refinance was completed and WCRT remitted $230,000 to the Trust in June 2013. WCRT’s proposed initial public offering has been delayed and collection of the advance is uncertain. As such, the Trust recorded impairment charges of $8,652 and $587,282 in thestatement of operations for the nine months ended September 30, 2013 and the year ended December 31, 2012, respectively. The advance is reflected as “Other assets” on the accompanying balance sheet and recorded at $0 and $230,000 atSeptember 30, 2013 and December 31, 2012, respectively.

 

 
Page 7 of 10

 

 

LIQUIDITY AND CAPITAL RESOURCES

 

The Trust has no continuing operating income, but has continuing expenses. As a result, the Trustees have suspended distributions at this time. The Trust expects to meet its short-term liquidity requirements from cash on hand.

 

In May 2013, the Trust repurchased 10 of its shares of beneficial interest for $833.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

The Trust has no off-balance sheet arrangements.

 

IMPACT OF INFLATION

 

The Trust's operations have not been materially affected by inflation.  The rate of inflation has been relatively low since the Trust commenced operations in October 1987.

 

 

ITEM 3       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable for smaller reporting companies.

 

 

ITEM 4       CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

      The Trust's management, including its Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of the Trust's disclosure controls and procedures as of September 30, 2013. Based on that evaluation, they concluded that the Trust's disclosure controls and procedures were not effective as of September 30, 2013 as the Trust did not submit reports under the Exchange Act within the time periods specified in the SEC’s rules and forms.

 

Changes in Internal Controls over Financial Reporting

 

      There have been no changes in the Trust’s internal controls over financial reporting that occurred during the quarter ended September 30, 2013, that have materially affected, or are reasonably likely to materially affect, the Trust’s internal control over financial reporting.

 

Limitations on Effectiveness of Controls and Procedures

 

      In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

 

 

 
Page 8 of 10

 

 

 

 

PART II. OTHER INFORMATION

 

 

ITEM 1       LEGAL PROCEEDINGS

 

None.

 

ITEM 1A    RISK FACTORS

 

Not applicable for smaller reporting companies.

 

ITEM 2       UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None. 

 

ITEM 3       DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4       MINE SAFTY DISCLOSURES

 

None.

 

ITEM 5       OTHER INFORMATION

 

None.

 

ITEM 6       EXHIBITS

 

 

3.1

 

Amended and Restated Declaration of Trust of USA Real Estate Investment Trust (included as Exhibit 3.2 to Form S-11 (File No. 33-9315) and incorporated herein by reference).

     

3.2

 

Bylaws of the Trust (included as Exhibit 3.2 to Form S-11 (File No. 33-9315) and incorporated herein by reference).

 

 

 
Page 9 of 10

 

 

3.4

 

Amendments to Sections 2.3.1, 2.3.7, 2.3.8, 2.4.2 and 2.4.3 of the Amended and Restated Declaration of Trust of USA Real Estate Investment Trust (included at Exhibit 3.4 to Form 10-K for the year ended December 31, 1987 and incorporated herein by reference).

     

4.1

 

Article VIII of Exhibit 3.1(included as Exhibit 4.1 to Form S-11 (File No. 33-9315) and incorporated herein by reference).

     

4.2

 

Form of Share Certificate (included as Exhibit 4.2 to Form S-11 (File No. 33-9315) and incorporated herein by reference).

     

31.1

 

Certification of the Principal Executive Officer Pursuant to Rule 13-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

     

31.2

 

Certification of the Principal Financial Officer Pursuant to Rule 13-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

   

32.1

 

Certifications of the Principal Executive Officer and the Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

     

101.INS

*

XBRL Instance Document

     

101.SCH

*

XBRL Taxonomy Extension Schema

     

101.CAL

*

XBRL Taxonomy Extension Calculation

     

101.DEF

*

XBRL Taxonomy Extension Definition

     

101.LAB

*

XBRL Taxonomy Extension Labels

     

101.PRE

*

XBRL Taxonomy Extension Presentation

 

 

*

XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of section 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section of 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

 

USA REAL ESTATE INVESTMENT TRUST

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.

 

 

December 9, 2013

USA REAL ESTATE INVESTMENT TRUST

 

By: /s/ Jeffrey B. Berger

 

Jeffrey B. Berger, Chief Executive Officer

 

 

December 9, 2013

USA REAL ESTATE INVESTMENT TRUST

 

By: /s/ Gregory E. Crissman

 

Gregory E. Crissman, Chief Financial Officer

 

 

Page 10 of 10