<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarter Ended September 30, 1997 Commission file number 0-16508
USA REAL ESTATE INVESTMENT TRUST
(Exact Name of Registrant as specified in its Charter)
California 68-0109347
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Scripps Avenue, Suite 303, Sacramento, California 95825
(Address of registrant's principal executive offices) (Zip Code)
(916) 564-4532
(Registrant's telephone number, including area code)
COMMONWEALTH EQUITY TRUST USA
(Former name)
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.
/ X/ Yes / / No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the close of the latest practical date.
Certificates of Beneficial Interest Outstanding at September 30, 1997
par value one dollar per share 3,989,159
<PAGE> 2
USA REAL ESTATE INVESTMENT TRUST
Index
Part I. Financial Information
Balance Sheets - September 30, 1997 and
December 31, 1996 ................................. 3
Statements of Income - For the Three Months
Ended September 30, 1997 and 1996 ................. 4
Statements of Income - For the Nine Months
Ended September 30, 1997 and 1996 ................. 5
Statements of Cash Flows - For the Nine
Months Ended September 30, 1997 and 1996 .......... 6
Notes to Financial Statements ....................... 7
Management's Discussion and Analysis of the
Financial Condition and Results of Operations ..... 8
Part II. Other Information ................................... 9
<PAGE> 3
PART I. FINANCIAL INFORMATION
USA REAL ESTATE INVESTMENT TRUST
Balance Sheets
September 30, December 31,
1997 1996
(Unaudited) (Audited)
----------- -----------
Assets
Investments:
Rental properties, less accumulated
depreciation of $2,721,650 at September 30,
1997 and $2,271,650 at December 31, 1996
and valuation allowances of $4,945,000
at September 30, 1997 and $5,060,000 at
December 31, 1996 $ 24,692,789 $ 17,939,415
Notes receivable 726,000 726,000
---------- -----------
25,418,789 18,665,415
Cash 675,644 3,909,665
Other assets 383,592 268,013
----------- -----------
Total assets $ 26,478,025 $ 22,843,093
=========== ===========
Liabilities and Shareholders' Equity
Liabilities:
Long-term notes payable $ 6,179,553 $ 2,047,333
Accounts payable and accrued expenses 70,909 40,638
Lease deposits 69,595 59,845
----------- -----------
Total liabilities 6,320,057 2,147,816
----------- -----------
Shareholders' Equity:
Shares of beneficial interest, par value
$1 a share; authorized 7,500,000 shares;
3,989,159 shares outstanding at September
30, 1997 and 4,042,904 at December 31, 1996 $ 3,989,159 $ 4,042,904
Additional paid-in capital 30,069,462 30,202,139
Distributions in excess of cumulative
net income (13,900,653) (13,549,766)
----------- -----------
Total shareholders' equity 20,157,968 20,695,277
----------- -----------
Total liabilities and shareholders' equity $ 26,478,025 $ 22,843,093
=========== ===========
See accompanying notes to financial statements.
<PAGE> 4
USA REAL ESTATE INVESTMENT TRUST
Statements of Income (Loss)
(Unaudited)
Three Months Ended
September 30,
1997 1996
---------- ----------
Revenues:
Rent $ 774,699 $ 611,200
Interest 20,156 54,384
---------- ----------
794,855 665,584
---------- ----------
Expenses:
Operating expenses 78,344 80,636
Property taxes 52,803 58,797
Property management fees 12,000 12,000
Interest 129,880 40,519
Depreciation and amortization 150,000 140,000
General and administative 60,267 62,396
---------- ----------
483,294 394,348
---------- ----------
Net income before gain on sale of properties $ 311,561 $ 271,236
Gain on sale of properties 103,946 0
---------- ----------
Net income $ 415,507 $ 271,236
========== ==========
Net income per share of beneficial interest $ 0.10 $ 0.07
========== ==========
See accompanying notes to financial statements.
<PAGE> 5
USA REAL ESTATE INVESTMENT TRUST
Statements of Income (Loss)
(Unaudited)
Nine Months Ended
September 30,
1997 1996
---------- ----------
Revenues:
Rent $ 2,028,463 $ 1,904,288
Interest 117,745 120,140
---------- ----------
2,146,208 2,024,428
---------- ----------
Expenses:
Operating expenses 232,043 228,526
Property taxes 158,409 188,010
Property management fees 36,000 36,000
Interest 252,350 122,286
Depreciation and amortization 450,000 448,000
General and administrative 222,855 293,366
---------- ----------
$ 1,351,657 $ 1,316,188
---------- ----------
Net income before gain on sale of properties 794,551 708,240
Gain on sale of properties 103,946 0
---------- ----------
Net income $ 898,497 $ 708,240
========== ==========
Net income per share of beneficial interest $ 0.22 $ 0.17
========== ==========
See accompanying notes to financial statements.
<PAGE> 6
Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
1997 1996
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 898,497 708,240
---------- ----------
Adjustments to reconcile net income
to net cash used by operating activities:
Depreciation and amortization 450,000 448,000
Gain on disposition of properties (103,946) 0
Changes in other assets and liabilities:
(Increase) decrease in other assets (115,579) 12,457
Increase in accounts payable and
accrued expenses 30,271 62,045
Increase (decrease) in lease deposits 9,750 (13,579)
---------- ----------
Total adjustments to income 270,496 508,923
---------- ----------
Net cash provided by
operating activities 1,168,993 1,217,163
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of and improvements to rental
properties (7,872,817) (381,160)
Proceeds from the sale of properties 773,389 3,102,044
Collections on note receivable 0 92,869
---------- ----------
Net cash (used) provided by
investing activities (7,099,428) 2,813,753
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term notes payable 4,200,000 0
Redemption of shares (186,422) (235,390)
Principal payments on long-term notes payable (67,780) (38,339)
Distributions paid (1,249,384) (1,143,572)
---------- ----------
Net cash used by
financing activities 2,696,414 (1,417,301)
---------- ----------
Net (decrease) increase in cash (3,234,021) 2,613,615
Cash, beginning of period 3,909,665 1,487,661
---------- ----------
Cash, end of period $ 675,644 $ 4,101,276
========== ==========
See accompanying notes to financial statements.
<PAGE> 7
USA REAL ESTATE INVESTMENT TRUST
Notes to Financial Statements
1. In the opinion of the Trust, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly
the Trust's financial position as of September 30, 1997, and the
results of its operations for the nine months ended September 30,
1997 and 1996 and cash flows for the nine months ended September 30,
1997 and 1996.
The accounting policies followed by the Trust are set forth in
Note 1 to the Trust's financial statements in the 1996 Form 10-K,
which are incorporated herein by reference.
2. In 1987, the Trust elected to be taxed as a real estate investment
trust and, as such, will not be taxed on that portion of its
taxable income which is distributed to shareholders provided that
at least 95% of its real estate investment trust taxable income
is distributed.
The Trust intends to continue to qualify as a real estate
investment trust and, accordingly, no provision for income taxes
has been made in the financial statements.
<PAGE> 8
USA REAL ESTATE INVESTMENT TRUST
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
Rent revenues increased $163,499 and $124,175 for the three months
and nine months ended September 30, 1997, respectively, compared
to the same periods in 1996, primarily due to the purchase of
1590 Sycamore Drive in Hercules, California in May, 1997.
Property tax expense decreased $29,601 for the nine months ended
September 30, 1997, compared to the same period in 1996, primarily
due to the sale of Keystone Square in Reno, Nevada in August, 1996.
Interest expense increased $89,361 and $130,064 for the three
months and nine months ended September 30, 1997, respectively,
compared to the same periods in 1996. This increase is attributed
to the debt associated with the purchase of 1590 Sycamore Drive in
Hercules, California in May, 1997.
General and adminstrative expense decreased $70,511 for the nine
months ended September 30, 1997, compared to the same period in
1996, primarily as a result of fewer professional fees in 1997.
The gain on sale of properties of $103,946 for the three months
and nine months ended September 30, 1997 was attributed to the sale
of 1056 Harbor Boulevard in West Sacramento, California in August,
1997.
CAPITAL RESOURCES AND LIQUIDITY
The Trust expects that income, cash in the bank, proceeds from the
sale of properties and borrowings collateralized by properties will
adequately meet its liquidity and capital resource requirements in
the future.
<PAGE> 9
PART II. OTHER INFORMATION
USA REAL ESTATE INVESTMENT TRUST
ITEM 6: REPORTS ON FORM 8-K
The Trust filed no reports on Form 8-K during the quarter ended
September 30, 1997.
<PAGE> 10
USA REAL ESTATE INVESTMENT TRUST
Signatures
Pursuant to the requirement 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.
USA Real Estate Investment Trust
----------------------------------------
November 7, 1997 Gregory E. Crissman
-------------------- ----------------------------------------
Date Gregory E. Crissman
Chairman
November 7, 1997 Benjamin A. Diaz
-------------------- ----------------------------------------
Date Benjamin A. Diaz
Trustee
<PAGE> 11
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Statement of Financial Condition at September 30, 1997 (Unaudited) and
the Statement of Income for the Nine Months Ended September 30, 1997
(Unaudited) and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 675,644
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,059,236
<PP&E> 24,692,789
<DEPRECIATION> 2,721,650
<TOTAL-ASSETS> 26,478,025
<CURRENT-LIABILITIES> 70,909
<BONDS> 0
<COMMON> 3,989,159
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 26,478,025
<SALES> 2,146,208
<TOTAL-REVENUES> 2,146,208
<CGS> 0
<TOTAL-COSTS> 1,351,657
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 252,350
<INCOME-PRETAX> 898,497
<INCOME-TAX> 0
<INCOME-CONTINUING> 898,497
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 898,497
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
