<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[XX] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997 or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------------- -------------------
Commission File Number: 000-22691
UNITED STATES PROPERTIES, INC.
------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Pennsylvania 23-2846009
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Montage Mountain Road
Moosic, Pennsylvania 18507
----------------------------------------------------
(Address of principal executive offices)
(717) 348-1100
----------------------------------------------------
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 XX No
------ ------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court.
Yes 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: The number of shares of the
registrant's common stock outstanding as of August 4, 1997 was 4,395,000.
<PAGE>
UNITED STATES PROPERTIES, INC.
(A Development Stage Company)
Financial Statements
June 30, 1997 and the Period
May 28, 1996 (Inception) to June 30, 1997
1
<PAGE>
To the Shareholders of
United States Properties, Inc.
We have compiled the accompanying balance sheet of United States Properties,
Inc. (a development stage company) ("the Company") as of June 30, 1997 and the
related statements of operations, for three months ended June 30, 1997, for the
period from May 28, 1996 (Inception) to June 30, 1996, for the six months ended
June 30, 1997 and for the period from May 28, 1996 (Inception) to June 30, 1997,
the statement of stockholders' equity for the period from May 28, 1996
(Inception) to June 30, 1997, and the Statement of Cash Flows for the six months
ended June 30, 1997 and for the period from May 28, 1996 (Inception) to June 30,
1997, in accordance with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2, the Company
has experienced operating losses since inception. The Company's financial
position and operating results raise substantial doubt about its ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Marks Shron & Company LLP
----------------------------------------
Marks Shron & Company LLP
August 5, 1997
2
<PAGE>
UNITED STATES PROPERTIES, INC.
(A Development Stage Company)
Balance Sheet
June 30, 1997
ASSETS
CASH $ 129,362
INVENTORY 8,545
FIXED ASSETS
Furniture, fixtures and equipment 5,288
Less: Accumulated depreciation 691
---------
4,597
SECURITY DEPOSITS 3,483
CONTRACT DEPOSITS 90,011
ORGANIZATION COSTS - net of accumulated
amortization of $120 480
---------
$ 236,478
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts and accrued expenses payable $ 91,523
Payroll taxes payable 57,041
Loans from stockholders 10,000
---------
158,564
---------
STOCKHOLDERS' EQUITY
Common stock, .001 par value, authorized 20,000,000
shares, 4,395,000 shares issued and outstanding 4,395
Additional paid-in capital 600,768
Deficit accumulated during the development stage (527,249)
---------
77,914
---------
$ 236,478
=========
See accountant's compilation report and accompanying notes to the financial
statements.
3
<PAGE>
UNITED STATES PROPERTIES, INC.
(A Development Stage Company)
Statements of Operations
<TABLE>
<CAPTION>
Three Months May 28, 1996 Six Months May 28, 1996
Ended (Inception) to Ended (Inception) to
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES
Interest income $ 378 $ - $ 518 $ 518
--------- -------- --------- ---------
EXPENSES
Salaries 67,087 11,996 103,386 157,214
Consulting fees 23,047 10,038 42,423 83,943
Professional fees 29,982 2,250 27,134 103,353
Payroll taxes 4,589 918 7,203 11,312
Rent 11,075 2,000 25,075 36,075
Travel and Entertainment 15,706 724 26,211 42,966
Telephone 9,898 1,668 16,610 29,079
Postage and office 4,102 511 11,806 15,276
Filing fees - - 5,000 5,000
Miscellaneous 15,581 2,394 23,749 42,738
Depreciation 227 79 382 691
Amortization 30 60 60 120
--------- -------- --------- ---------
181,324 32,638 299,039 527,767
--------- -------- --------- ---------
NET LOSS $(180,946) $(32,638) $(298,521) $(527,249)
========= ======== ========= =========
LOSS PER SHARE $ (.04) $ (.14) $ (.07) $ (.15)
========= ======== ========= =========
</TABLE>
See accountant's compilation report and accompanying notes to the financial
statements.
4
<PAGE>
UNITED STATES PROPERTIES, INC.
(A Development Stage Company)
Statement of Stockholders' Equity
For the Period from May 28, 1996 (Inception) to
June 30, 1997
<TABLE>
<CAPTION>
Number of Common Common Accumulated
Shares Stock Additional Deficit
Date Preferred Stock Issued at Par Value Paid in Capital Development Stage
- ----------------- --------------- ----------------- ------------ --------------- -----------------
<S> <C> <C> <C> <C> <C>
05/28/96 - 2,220,000 $ 2,220 $ -
05/28/96 - - - 350 (1)
06/27/96 - 160,000 160 39,840
05/28/96-6/30/96 (32,638)
08/08/96 - 1,000,000 1,000 -
08/20/96 - 50,000 50 -
09/25/96 - 25,000(2) 25 49,975
12/06/96 - 50,000 50 -
12/31/96 - - - (6,463)(3)
7/1/97-12/31/96 - - - - (196,090)
01/24/97 - 100,000 100 49,900 (5)
01/26/97 - 35,000 35 23,985 (4)
02/10/97 - 80,000 80 39,920 (5)
02/11/97 - 10,000 10 4,990 (5)
02/18/97 - 10,000 10 4,990 (5)
03/04/97 - 60,000 60 29,940 (5)
03/07/97 - 20,000 20 9,980 (5)
03/14/97 - 60,000 60 29,940 (5)
1/1/97-3/31/97 - - - - (117,575)
04/21/97 - 60,000 60 29,940 (5)
04/23/97 - 10,000 10 4,990 (5)
04/24/97 - 60,000 60 29,940 (5)
04/29/97 - 100,000 100 49,900 (5)
05/09/97 - 60,000 60 29,940 (5)
05/20/97 - 240,000 240 119,760 (5)
05/13/97 - 30,000 30 63,720 (6)
06/30/97 - (45,000) (45) 45 (7)
06/30/97 - - - (4,814)(3)
4/1/97-6/30/97 - - - - (180,946)
----------- ----------- ------------- ----------- -----------
06/30/97 - 4,395,000 $ 4,395 $600,768 $ (527,249)
=========== =========== ============= =========== ===========
</TABLE>
(1) Contribution of equipment
(2) Offering under SEC rule 504
(3) Expenses paid to raise capital
(4) Debt conversion
(5) Exercise of warrants
(6) Building purchased for 30,000 shares of restricted stock
(7) Return of restricted stock held in escrow
See accountant's compilation report and accompanying notes to the financial
statements.
5
<PAGE>
UNITED STATES PROPERTIES, INC.
(A Development Stage Company)
Statements of Cash Flows
For the Six Months Ended June 30, 1997 and
for the Period from May 28, 1996 (Inception) to June 30, 1997
<TABLE>
<CAPTION>
Six Months May 28, 1996
Ended (Inception) to
June 30, 1997 June 30, 1997
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (298,521) $ (528,249)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation 382 691
Amortization 60 120
Changes in operating assets and liabilities:
Increase in inventory - (8,545)
Increase in organization costs - (600)
(Decrease) Increase in accounts and
accrued expenses payable (19,463) 91,523
Increase in payroll taxes payable 37,454 57,041
Increase in security deposits (3,483) (3,483)
---------- ----------
Net Cash Used by Operating Activities (283,571) (390,502)
---------- ----------
INVESTING ACTIVITIES
Contract deposits (90,011) (90,011)
Furniture, fixtures and equipment (2,195) (5,288)
---------- ----------
Net Cash Used by Investing Activities (92,206) (95,299)
---------- ----------
FINANCING ACTIVITIES
Common stock issued 517,956 605,163
Loans from stockholders (14,000) 10,000
---------- ----------
Net Cash Provided by Financing Activities 503,956 615,163
---------- ----------
NET INCREASE IN CASH 128,179 129,362
CASH - at beginning of period 1,183 -
---------- ----------
CASH - at end of period $ 129,362 $ 129,362
========== ==========
</TABLE>
See accountant's compilation report and accompanying notes to the financial
statements.
6
<PAGE>
UNITED STATES PROPERTIES, INC.
(A Development Stage Company)
Notes to Financial Statements
June 30, 1997
NOTE 1: ORGANIZATION
United States Properties Inc. ("The Company") was organized in
Pennsylvania in May, 1996 for the purpose of using countertrade
(commercial barter transactions) as a vehicle for trading excesses in
corporate real estate, portfolios of bad debts and other, similar
non-performing assets held by major corporations. Corporate real estate
refers to commercial real property and commercial leases owned by major
corporations. Portfolios of bad debts refers to the accounts receivable
of major corporations, banks and credit card companies that are greater
than six months past due. The Company will derive revenue through the
generation of fees when transacting real estate and through a percentage
participation in bad debt collections. To date the Company has not yet
derived any fees from any countertrade transactions involving real
estate nor has it generated any revenues from participation in bad debt
collections.
Since its organization, the Company has established its business
offices, developed a network of agents to discover excesses in corporate
real estate and bad debt portfolios and related assets and is
negotiating a number of real estate transactions.
On June 12, 1996 the Company entered into an agreement ("Agreement")
with Active Asset Recovery, Inc. ("Active") a wholly owned subsidiary of
Active International, Inc. Active International, Inc. is a global
trading company that develops programs of countertrade for clients
through the issuance of trade credits redeemable by such clients. The
Agreement stipulates that the Company will be engaged as an independent
contractor to act as a finder to locate potential clients to enter into
countertrade with Active. Countertrade in this Agreement refers to a
transaction in which real property, interests in real property or other
assets are sold or leased to Active or the designee of Active in return
for, in whole or in part, trade credits issued and redeemed by Active.
The Agreement provides, among other things, that Active shall have the
right to pre-approve whether it desires to enter into a proposed
countertrade transaction with any potential client at the time the
Company first proposes a transaction with such client. In the event that
Active closes a corporate trading transaction with a pre-approved
client, as a direct result of meetings caused by the Company, the
Company will receive a finders fee.
On June 27, 1996, the Company entered into an Agreement with Capital
Credit Corporation ("CCC"). CCC is a wholly owned subsidiary of the
Union Corporation which provides accounts receivable management and
related services to institutional, commercial and government clients.
7
<PAGE>
UNITED STATES PROPERTIES, INC.
(A Development Stage Company)
Notes to Financial Statements
June 30, 1997
NOTE 1: ORGANIZATION (continued)
The agreement between the Company and CCC provides for the Company to
contact the chief financial officers of Fortune 1000 companies to
ascertain the extent of their bad debt portfolios and to determine if
any of these companies have an interest in selling the portfolios, or
portions thereof, in a countertrade transaction involving full or
partial consideration for the debts in trade credits. CCC will evaluate
the portfolios of debt, or portions thereof, and advise the Company of
the bid that should be offered for the portfolios or portions thereof.
If such a countertrade proposal is accepted CCC will agree to the
collection of such debt. CCC will receive 30% and the Company will
receive 70% of the funds. Should the Company be successful in
negotiating a countertrade transaction for portfolios of bad debt after
they have been reviewed and priced by CCC it would be contingent on the
Company to have Active or another trading company enter into such a
negotiation to issue and redeem for merchandise any trade credits that
may be exchanged in consideration for the purchase of the bad debts.
Currently such a contingency is not part of the Agreement between the
Company and Active nor is it known if the Agreement can be amended or a
new agreement developed between the Company and Active, nor is it known
if the Company can establish such a relation with another company to
effect such a transaction.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Reporting
------------------
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. Since inception, the
Company has sustained operating losses. Management is continuing its
efforts to negotiate and consummate countertrade transactions. The
ability of management to successfully complete these transactions will
significantly affect the Company's ability to continue as a going
concern. At this time, it cannot be determined if these efforts will be
successful. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Recognition of Revenue
----------------------
The Company will recognize revenue when the transactions it participates
in are completed.
Fixed Assets
------------
Fixed assets are stated at cost. Deprecation is provided using the
straight-line method over the estimated useful lives.
Use of Estimates
----------------
Management uses estimates and assumptions in preparing financial
statements. Those estimates and assumptions affect the reported amounts
of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses.
8
<PAGE>
UNITED STATES PROPERTIES, INC.
(A Development Stage Company)
Notes to Financial Statements
June 30, 1997
NOTE 3: RELATED PARTY TRANSACTIONS
Consulting Fees
---------------
The Company has engaged Keough-Kirkbide as a real estate consultant. The
firm will attempt to solicit real estate sellers' interested in barter
transactions at an annual retainer of $72,000, and may be canceled at
any time by either party. Keough-Kirkbride is wholly owned by Kathryn
Berman, a principal shareholder of the Company.
Loans from Stockholders
-----------------------
Various stockholders have advanced funds to the Company. $10,000 of this
debt bears interest at 9.25% per annum payable monthly, with the
principal due on December 5, 1997. On January 26, 1997, $24,020 of the
debt was converted to 35,000 shares of common stock.
NOTE 4: INVENTORY
On August 8, 1996, the Company entered into an agreement with Active
whereby (1) the Company acquired 100% of the issued and outstanding
shares of United States Properties Ten, Inc. (formerly Bull and Bear
Properties, Inc.), a wholly owned subsidiary of Bull and Bear, Inc. (the
Seller) and (2) Active supplied the Seller with $120,000 in trade
credits. The principal purpose of the acquisition was to acquire control
of the corporation's major asset, a commercial building located in
Middletown, Ohio. The agreement provides for the Company and Active to
share equally in the proceeds to be derived from the sale of the stock,
and the Company has pledged all the shares to collateralize Active's 50%
interest in these proceeds.
NOTE 5: CAPITAL STOCK
Common Stock
- ------------
On December 3, 1996 the Board of Directors authorized and issued
warrants to purchase 1,000,000 shares of the Company's common stock. The
warrants carry an exercise price of .50 per share and expire December 1,
1997. On May 20, 1997, the Board of Directors cancelled 130,000 of the
outstanding warrants. At June 30, 1997, all 870,000 warrants had been
exercised.
9
<PAGE>
UNITED STATES PROPERTIES, INC.
(A Development Stage Company)
Notes to Financial Statements
June 30, 1997
NOTE 6: CAPITAL STOCK (continued)
Preferred Stock
---------------
The Company is authorized to issue up to 5,000,000 shares of Preferred
Stock, no par value. The Preferred Stock may be issued in series, each
of which may vary, as determined by the Board of Directors, as to the
designation and number of shares in each series, voting power of the
holders thereof, dividend rate, redemption terms and prices, voluntary
and involuntary liquidation preferences, and conversion rights and
sinking fund requirements, if any, of each series.
OTC Bulletin Board
------------------
On January 13, 1997 the Company received clearance of quotations on the
OTC Bulletin Board.
NOTE 7: INCOME TAXES
At December 31, 1996, the Company has net operating loss carry forwards
of approximately $228,000 available to reduce Federal income taxes in
years through 2011. The Company will not record a tax benefit until
realized.
NOTE 8: CONTRACT DEPOSITS
Contract deposits consist of the following:
Deposit on Minnesota property $ 63,750
Deposit on Highpoint Country Club 26,261
--------
$ 90,011
========
On April 17, 1997, the Company entered into an agreement with Merle
Larson as A.A. Johnson Tool Co., Inc. (a Minnesota corporation) ("the
seller") to purchase a commercial building and land located in Todd
County, Clarisse, Minnesota. The purchase price is in the form of 30,000
shares of the Company's restricted common stock which was issued and
held in escrow, and was valued at $63,750 at June 30, 1997. The Company
obtained title to the real estate on August 5, 1997.
The Company has entered into a Letter of Intent with Highpoint Country
Club Golf Association, Inc. and Chubb Construction Company, Inc. ("the
seller") to acquire 259 residential building lots, a developable 79 acre
parcel and 3 existing homes in a residential community known as
Highpoint Country Club located in Sussex County, New Jersey. The
purchase price is $6,496,250 of which $2,608,362 is in the form of the
assumption and/or payoff by the Company of existing notes and/or
obligations, $1,514,138 is in the form of a second mortgage to be held
by the seller, and the balance of $2,373,750 is in the form of
approximately 396,000 shares of the Company's restricted common stock.
The Company expects to close the purchase in September 1997.
10
<PAGE>
Item 2. MANAGEMENT DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
During the Second Quarter, 1997 United States Properties, Inc. ("the Company")
focused its business solely on acquisition of surplus commercial real estate
properties and terminated its efforts to acquire portfolios of accounts
receivable (generally bad debts). In that regard, the Company has:
1. Expanded its working relationships with New America Network, Inc. ("New
America") and Active International ("Active") to create a nationwide
capability to purchase surplus commercial properties.
2. More precisely focused its efforts on those types of commercial properties
best suited for purchase.
3. Created the capability to develop selected properties it has acquired to
maximize its revenue.
4. Planned the expansion of its business through the potential acquisition of
New America member commercial real estate brokerage firms (as well as
other, non-member brokerage firms) and the potential merger with New
America itself.
The Company acquires surplus commercial real estate properties from major
corporations at their full book value or listing price by utilizing a
combination of: 1.) Countertrade (a non-cash form of payment); 2.) its own or
borrowed cash where necessary; and, 3.) the common stock of the Company, as the
form of payment. The actual payment structure is based on the characteristics of
the real estate, its book vs. cash value and the financial goals of the seller.
The Company will typically use cash and Countertrade for its acquisitions of
surplus commercial real estate and cash and the Company's stock for the
acquisition of real estate developments and real estate-related businesses.
Depending on the characteristics of the real estate, the Company may develop
certain surplus commercial real estate properties it has acquired to maximize
its revenue.
The Company utilizes cash and Countertrade to purchase surplus properties
because most of the eligible properties have a book value or listing price
substantially in excess of the property's current cash market value. The
Company's primary revenue is the difference between the cash part of the
purchase price and the actual selling price of the property. In a typical
transaction, the cash provided by the Company is less than one-half of the
property's estimated selling price. From this revenue, the Company pays the
operating expenses, closing costs, real estate transfer taxes and commissions
and the cost of the Countertrade. The Company's expected revenue, net of such
expenses, will range from $150,000 to $500,000 per transaction, depending on the
characteristics of the real estate purchased, the amount of cash provided to the
purchase by the Company etc.
The Company estimates that there is in excess of $5 Billion of such properties
currently for sale in the United States of which $2 Billion meets the Company's
purchasing criteria. While the Company will typically sell the properties it
acquires at the earliest opportunity, in certain instances the Company may hold
and develop a property it has acquired or purchase a property specifically for
development.
11
<PAGE>
Eligible Properties
The following are the Company's purchasing criteria:
1. The current market value of the surplus property will be approximately half
of its book value and/or the seller believes that the current market value
will be significantly lower than the property's listing price.
2. The book value or listing price of the property will typically be $5 MM or
less and generally will not exceed $10 MM.
3. While all types of commercial real estate properties are eligible for
purchase by the Company, most of the properties identified from its
sourcing activities are the following types:
* Unimproved Land
* Vacant Industrial
* Vacant retail
4. The corporate seller will have in excess of $500 MM in annual sales in
order to be able to effectively use Trade Credits as partial payment for
normal corporate operating, cost of sales and capital expenses and to
qualify for Trade Credit insurance, if applicable.
The Company has no direct competitors known to it and provides significant
financial advantages to corporate sellers of surplus properties as compared to
other available methods of disposal.
Working and Contractual Agreements with New America
New America is a 166 member, international commercial real estate brokerage
network with 145 members in the United States and is staffed with over 3,000
real estate professionals. New America has been in the commercial real estate
network business for approximately twenty years and has developed a clientele of
national and international companies.
The Company has executed a Corporate Services Agreement with New America which
specifies the terms and conditions under which New America and its member firms
provide certain real estate-related brokerage services to the Company. As part
of the implementation of this Agreement, the Company has established a working
relationship with New America whereby:
1. New America will provide its own resources to: a.) source properties
eligible for purchase by the Company; b.) perform certain due diligence
functions relating to the potential purchase of individual properties or
portfolios; and, c.) assist the Company in selling its unique financial
structure to acquire properties to corporate sellers.
2. The Company will (wherever possible) contract with a New America member
commercial real estate broker to: a.) represent the Company in the
acquisition of a property; and, b.) list and sell the property if the
Company is successful in its acquisition.
12
<PAGE>
3. The Company will use its best efforts to maximize the real estate
commissions paid to New America and/or its member brokers up to a level of
6% on improved properties and 10% on vacant land.
The Company has also executed a Letter of Business Understanding with New
America whereby:
1. The Company, at its own expense, will inaugurate a marketing campaign to
create a general market awareness and to introduce its surplus commercial
property purchasing capabilities to New America member commercial real
estate brokerage firms and their corporate clients.
2. The Company, at its own expense, will determine the feasibility of
purchasing certain New America member firms. If any such firm is purchased
by the Company, New America will be granted an option to own an equity
interest in such firm under terms and conditions to be agreed to by the
Company and New America.
3. The Company will also grant to New America an option to own an equity
interest in the Company under terms and conditions to be agreed to by the
Company and New America.
Working and Contractual Agreement with Active
Active is the largest international trading company headquartered in the United
States and the leader in its industry with 300 employees located in 8 offices
throughout the world. Active has been in the Countertrade business for
approximately 20 years and has developed a clientele of many Fortune 500
companies.
The Company has executed a contract with Active which provides a minimum revenue
to the Company for those transactions for which the Company secures the
Countertrade portion of its purchase consideration from Active. As part of the
implementation of this contract, the Company has established a working
relationship with Active whereby Active will:
1. Provide all of the Trade Credits in the Company's transactions involving
Trade Credits. In part, the Company's decision to select Active as its sole
supplier of Trade Credits is based on Active's ability to: a.) insure its
Trade Credits (which is unique in the Countertrade industry); and, b.) make
available to sellers a Trade Credit liquidity facility which arranges a
cash advance against a seller's expected savings to be realized from
utilizing insured Trade Credits.
2. Provide its own resources to: a.) source properties eligible for purchase
by the Company; b.) assist the Company in structuring its purchase
proposals; and, c.) assist the Company in selling its unique financial
structure to acquire properties to corporate sellers.
As a result of the expansion of the relationships with New America and Active,
the Company now has a nationwide ability to: 1.) source eligible properties; 2.)
perform the required due diligence to determine whether or not the property
meets the Company's purchasing criteria; 3.) precisely structure transactions to
meet the requirements of the corporate sellers; and, 4.) enlist sales expertise
to accelerate the closing of transactions, substantially in excess of the
time-related capabilities of its current staff and at a cost substantially lower
than otherwise achieveable.
13
<PAGE>
Revenue
The Company's primary revenue is the difference between the cash part of the
purchase price and the selling price of the property. In a typical transaction,
the cash provided by the Company is less than one-half of the property's
estimated selling price. The amount of cash the Company provides is used to
enhance the closing potential of the transaction and (depending on the
characteristics of an individual property) may be used to:
1. Provide cash to the seller as part of the purchase consideration which
helps to assure that the Trade Credits (paid as the remaining part of the
purchase consideration) conform to the amount and characteristics of the
seller's recurring corporate expenses which are to be met (in part) by the
use of the Trade Credits. Conforming the amount of the Trade Credits to the
seller's expense characteristics results in a more rapid expected use of
the Trade Credits, which enhances the ability of the Company to close its
transactions using Trade Credits.
2. Provide a reserve to pay for the operating expenses of the property during
the interim period between the acquisition of the property by the Company
and its subsequent re-sale.
3. Provide cash to Active to pay for the Trade Credits (in whole or in part)
and/or the insurance premium, if the Trade Credits are to be insured.
From its primary revenue, the Company pays the operating expenses, closing
costs, real estate transfer taxes and commissions and the cost of the
Countertrade. The Company's expected revenue, net of such expenses, will range
from $150,000 to $500,000 per transaction, depending on the characteristics of
the real estate purchased, the amount of cash provided to the purchase by the
Company etc.
To date USPI has not yet derived any revenue from real estate transactions
involving Countertrade (although it has acquired one property in a Countertrade
transaction which has not yet been disposed of).
Real Estate Investment Fund
Based on the characteristics of the real estate properties acquired and the cash
basis of its purchase, the Company may now elect to maximize its revenue by
developing eligible properties to a positive cash-flow status. Once this status
is achieved, the Company may elect to sell the property or hold the property as
an investment.
The Company is presently determining the feasibility of alternate financial
structures for those properties which could be held as investments. Among other
alternatives, the Company is presently exploring the creation of a real estate
investment fund utilizing Countertrade (in a form different from Trade Credits)
to minimize its financing cost. This use of Countertrade for such a fund is
expected to be in the form of the pledging of surplus commodities while in their
natural state (such as petroleum or natural gas reserves) by their corporate
owners to credit enhance or eliminate the risks typically associated with equity
investments in real estate. The Company's efforts in regard to this potential
application of Countertrade are being coordinated with Active and selected
corporate owners of such surplus commodities.
14
<PAGE>
Competitive Advantage
The Company has an advantage in competing for a corporate seller's surplus real
estate as a result of the combination of the following factors:
1. Structuring a cash and Countertrade transaction for a surplus real estate
property enables the seller to avoid an economic and cash flow loss it
would otherwise incur.
2. Providing cash to the sellers of surplus commercial real estate as part of
the purchase consideration, helps assure that the Trade Credits (paid as
the remaining part of the purchase consideration) conform to the amount and
characteristics of the seller's recurring corporate expenses.
3. Taking title to the real estate property pending final re-sale eliminates
the on-going cost of property ownership to the seller.
4. Bidding on property types for which there is a significant supply while
generally less competition for purchase.
5. Its relationships with:
a.) New America and its nationwide member network to identify a
significant source of surplus commercial real estate properties for
potential acquisition by the Company while providing the on-site real
estate due diligence for those properties the Company contemplates for
purchase.
b.) Active to provide Trade Credits for the Company's proposed
transactions, assistance in structuring and selling transactions and
sourcing of potential transactions. This working relationship is
enhanced in that Andreas V. Kissal, President/CEO of the Company was
employed at Active from December, 1993 to February, 1997 as Senior
Vice President Trade -- Finance and has personal, working
relationships with key executives and salesman at Active.
In addition, the Company believes that Active's ability to insure its
Trade Credits and to provide a liquidity facility secured by its
insured Trade Credits has substantial financial value to sellers of
surplus real estate and will enhance the Company's ability to close
its transactions.
6. Creating a cost advantage in bidding on properties by minimizing its
staffing requirements through effectively utilizing the significant
resources available at New America, New America's member commercial real
estate brokers and Active.
Real Estate Development
The Company has entered into a Letter of Intent to acquire 259 residential
building lots, a developable 79-acre parcel and 3 existing homes in a
residential community known as Highpoint Country Club. The community includes a
150 acre lake, an 18 hole golf course, tennis courts, Olympic-sized swimming
pool, softball field, club house with two restaurants and a golf pro shop. The
purchase price is $6,496,250 of which $2,608,362 is cash, $1,514,138 is in the
form of a second mortgage to be held by the seller, and the balance of
$2,373,750 in the Company's common stock. The Company expects to close the
purchase in September 1997.
15
<PAGE>
The Company plans to develop the residential building lots by offering to
construct residential housing on the lots to prospective purchasers. The
prospective purchasers will select their homes from available plans which have
been pre-selected by the Company. The builder or builders who will construct the
homes will also be pre-approved by the Company. The Company will construct a
home on an individual building lot only after the prospective purchaser has been
qualified for permanent mortgage financing by a third-party mortgage lender. The
Company plans to sell all of the residential building lots with housing
constructed on them. The first phase of the development (approximately 90 homes)
will be sold through an auction process.
The Company estimates that the build-out of the development will generate gross
revenues in excess of $30 MM and gross profits in excess of $6 MM.
Cash Requirements for the Next Twelve Months
The Company forecasts that 23 proposed real estate transactions will close in
the next 12 months which will generate an estimated minimum profit (net of
direct transaction expenses) of $6,700,000. Of these 23 projected transactions,
the Company forecasts a minimum of one-half of these will close within a 6 month
period which will generate an estimated minimum profit (net of direct
transaction expenses) of $2,800,000.
The Company forecasts that a minimum of 4 of the forecasted transactions will
close by the end of the fourth quarter, 1997. These 4 closed transactions are
forecasted to generate $1,000,000 in profits (net of direct transaction
expenses). Forecasted profits, however, are realized only when the acquired real
estate is re-sold to a third party purchaser and the costs of the transaction
are paid. Such costs include: 1.) real estate taxes, operating expenses and
commissions; 2.) the cost of the Trade Credit; and, 3.) repayment of any funds
borrowed to enhance the closing of the transaction. In this regard, the Company
anticipates that the $1,000,000 in profits forecasted pursuant to the 4 real
estate transactions will not be realized until a minimum of 3 months after the
closing of the acquisition transactions.
In addition, the Company also forecasts the closing of its acquisition of the
259 residential building lots, 3 homes and a 79 acre developable parcel in the
community known as Highpoint Country Club. Assuming such closing, the Company
forecasts in the next 12 months that a minimum of 80 of the 259 residential
building lots with the homes erected by the Company on the lots will be sold to
qualified purchasers. The Company forecasts that the sale of these 80 lots all
with completed homes will generate a minimum of $800,000 in gross profits.
16
<PAGE>
Management's forecasts are forward-looking, based upon current negotiations and
conditions, and should not be relied upon as a guarantee or assurance that such
results will be achieved. There is no assurance that all or any of such
contracts will close as scheduled or at all, or that the contract terms and
conditions as closed will permit the Company to realize a gross profit equal to
that forecasted, or that the ultimate dispositions of the properties, if any,
will result in the gross profits forecast. Costs and expenses of the
acquisitions and the subsequent dispositions will affect the gross and net
profits from the transactions.
As of August 14, 1997, the Company has sufficient operating capital to fund its
current business operations for approximately 2 months or through the end of the
third quarter, 1997. The Company is presently in negotiations to raise
additional working capital to meet the cash requirements of its current business
operations, pending the closing of the forecasted real estate transactions.
While the company does forecast the acquisition of 4 surplus commercial real
estate properties (by December 31, 1997) pursuant to proposed transactions
currently in negotiation, there is no assurance that the Company will be able to
either close the forecasted transactions or re-sell the respective real estate
properties (if the forecasted transactions are closed) in a time frame
sufficient for the Company to continue its operations.
As part of its sole focus on the acquisition of surplus commercial property, the
Company will consolidate its Moosic, PA operations office into its New York City
office and will hire a chief financial officer, 2 senior real estate
professionals and a marketing professional to: 1.) assist in the management of
the relationship with the senior executives at New America and Active; 2.)
expand the working relationships with New America member brokers; 3.) quality
control the purchase proposals made by the Company to assure that the Company
can realize its targeted revenues; 4.) enhance the Company's ability to
effectively sell its products and services to senior executives at the corporate
sellers; and, 5.) manage the financial evaluations and acquisitions of those
properties, developments or businesses which significantly enhance the value
and/or revenues of the Company.
Based on the requirement for operating funds and the planned expansion of its
business, the Company anticipates an additional public offering will be filed
pursuant to Form SB-2 to generate additional funds for operating capital. The
investment will primarily be used to: 1.) introduce the Company and its business
through a national marketing and advertising campaign; 2.) hire professional
staff necessary to manage the Company's business expansion; and, 3.) determine
the feasibility and, as appropriate, make strategic investments in or acquire
real estate-related businesses. The initial focus of any strategic investments
or acquisitions will be New America member commercial real estate brokerage
firms pursuant to the Letter of Business Understanding executed with New
America.
17
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
NONE
Item 2. Changes in Securities
NONE
Item 3. Defaults Upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of the Stockholders was held in Scranton,
Pennsylvania on June 4, 1997 at 10:00 a.m. pursuant to written call and notice.
The total number of shares outstanding on the record date (April 30, 1997) was
4,110,000; a total of 2,531,010 shares were present in person or by proxy. Three
matters were voted upon:
1. The Board of Directors was set at three and Mr. Pirhalla, Mrs.
Berman, and Mr. Bell were unanimously elected as the Directors;
2. The appointment of Marks Shron & Company LLP as the auditors for the
Company was approved, with 2,523,510 votes for, no shares against, and
17,500 abstaining; and
3. The Key Employees Incentive Stock Option Plan was approved, with
2,513,000 votes for, 510 votes against, and 17,500 shares abstaining.
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
Exhibits
NONE
Reports
NONE
18
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
UNITED STATES PROPERTIES, INC.
Date: August 14, 1997 /s/ Andreas V. Kissal
---------------- -----------------------------------
Andreas V. Kissal, President/CEO
Date: August 14, 1997 /s/ Jeffrey R. Pirhalla
---------------- ------------------------------------
Jeffrey R. Pirhalla, Treasurer, CFO
19
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from United
States Properties, Inc. (A Development Stage Company) June 30, 1997 and the
Period May 28, 1996 (inception) to June 30, 1997, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS OTHER 6-MOS OTHER
<PERIOD-START> APR-01-1997 MAY-28-1996 JAN-01-1997 MAY-28-1996
<PERIOD-END> JUN-30-1997 JUN-30-1996 JUN-30-1997 JUN-30-1997
<CASH> 129,362 0 0 0
<SECURITIES> 0 0 0 0
<RECEIVABLES> 0 0 0 0
<ALLOWANCES> 0 0 0 0
<INVENTORY> 8,545 0 0 0
<CURRENT-ASSETS> 0 0 0 0
<PP&E> 5,288 0 0 0
<DEPRECIATION> 691 0 0 0
<TOTAL-ASSETS> 236,478 0 0 0
<CURRENT-LIABILITIES> 158,564 0 0 0
<BONDS> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 4,395 0 0 0
<OTHER-SE> 73,519 0 0 0
<TOTAL-LIABILITY-AND-EQUITY> 236,478 0 0 0
<SALES> 0 0 0 0
<TOTAL-REVENUES> 378 0 518 518
<CGS> 0 0 0 0
<TOTAL-COSTS> 0 0 0 0
<OTHER-EXPENSES> 181,324 32,638 299,039 527,767
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 0 0 0 0
<INCOME-PRETAX> (180,946) (32,638) (298,521) (527,249)
<INCOME-TAX> 0 0 0 0
<INCOME-CONTINUING> 0 0 0 0
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (180,946) (32,638) (298,521) (527,249)
<EPS-PRIMARY> (.04) (.14) (.07) (.15)
<EPS-DILUTED> 0 0 0 0
</TABLE>
