<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 June 30, 1998 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 Drive, 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 June 30, 1998
par value one dollar per share 3,919,525
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USA REAL ESTATE INVESTMENT TRUST
Index
Part I. Financial Information
Balance Sheets - June 30, 1998 and
December 31, 1997 ................................. 3
Statements of Income - For the Three Months
Ended June 30, 1998 and 1997 ...................... 4
Statements of Income - For the Six Months
Ended June 30, 1998 and 1997 ...................... 5
Statements of Cash Flows - For the Six
Months Ended June 30, 1998 and 1997 ............... 6
Notes to Financial Statements ....................... 7
Management's Discussion and Analysis of the
Financial Condition and Results of Operations ..... 8
Part II. Other Information ................................... 8
<PAGE> 3
PART I. FINANCIAL INFORMATION
USA REAL ESTATE INVESTMENT TRUST
Balance Sheets
June 30, December 31,
1998 1997
(Unaudited) (Audited)
----------- -----------
Assets
Investments:
Rental properties, less accumulated
depreciation of $3,179,316 at June 30,
1998 and $2,859,213 at December 31, 1997 $ 24,693,060 $ 24,939,462
Notes receivable 726,000 726,000
---------- -----------
25,419,060 25,665,462
Cash 7,991 168,236
Other assets 341,794 263,728
----------- -----------
Total assets $ 25,768,845 $ 26,097,426
=========== ===========
Liabilities and Shareholders' Equity
Liabilities:
Long-term notes payable $ 6,074,468 $ 6,145,044
Line of credit 155,000 0
Accounts payable and accrued expenses 24,025 30,688
Lease deposits 67,157 67,157
----------- -----------
Total liabilities 6,320,650 6,242,889
----------- -----------
Shareholders' Equity:
Shares of beneficial interest, par value
$1 a share; authorized 7,500,000 shares;
3,919,525 shares outstanding at June 30,
1998 and 3,960,855 at December 31, 1997 $ 3,919,525 $ 3,960,855
Additional paid-in capital 29,895,580 29,998,871
Distributions in excess of cumulative
net income (14,366,910) (14,105,189)
----------- -----------
Total shareholders' equity 19,448,195 19,854,537
----------- -----------
Total liabilities and shareholders' equity $ 25,768,845 $ 26,097,426
=========== ===========
See accompanying notes to financial statements.
<PAGE> 4
USA REAL ESTATE INVESTMENT TRUST
Statements of Income
(Unaudited)
Three Months Ended
June 30,
1998 1997
---------- ----------
Revenues:
Rent $ 793,573 $ 660,230
Interest 15,763 35,801
---------- ----------
809,336 696,031
---------- ----------
Expenses:
Operating expenses 73,366 76,229
Property taxes 47,913 52,803
Property management fees 12,800 12,000
Interest 130,125 82,175
Depreciation and amortization 162,000 150,000
General and administative 69,165 69,691
---------- ----------
495,369 442,898
---------- ----------
Net income $ 313,967 $ 253,133
========== ==========
Net income per share of beneficial interest $ 0.08 $ 0.06
========== ==========
See accompanying notes to financial statements.
<PAGE> 5
USA REAL ESTATE INVESTMENT TRUST
Statements of Income
(Unaudited)
Six Months Ended
June 30,
1998 1997
---------- ----------
Revenues:
Rent $ 1,620,340 $ 1,253,764
Interest 33,678 97,589
---------- ----------
1,654,018 1,351,353
---------- ----------
Expenses:
Operating expenses 145,045 153,699
Property taxes 95,826 105,606
Property management fees 24,800 24,000
Interest 260,229 122,470
Depreciation and amortization 324,000 300,000
General and administrative 162,797 162,588
---------- ----------
$ 1,012,697 $ 868,363
---------- ----------
Net income 641,321 482,990
========== ==========
Net income per share of beneficial interest $ 0.16 $ 0.12
========== ==========
See accompanying notes to financial statements.
<PAGE> 6
Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30,
1998 1997
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 641,321 482,990
---------- ----------
Adjustments to reconcile net income
to net cash used by operating activities:
Depreciation and amortization 324,000 300,000
Changes in other assets and liabilities:
Increase (decrease) in other assets (78,066) (220,373)
Increase (decrease) in accounts
payable and accrued expenses (6,663) (25,280)
---------- ----------
Total adjustments to income 239,271 54,347
---------- ----------
Net cash provided by
operating activities 880,592 537,337
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of and improvements to
rental properties (77,598) (7,603,147)
---------- ----------
Net cash provided by
investing activities (77,598) (7,603,147)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term notes payable 0 4,200,000
Line of credit 155,000 0
Redemption of shares (144,621) (116,269)
Principal payments on long-term notes payable (70,576) (33,772)
Distributions paid (903,042) (806,221)
---------- ----------
Net cash used by
financing activities (963,239) 3,243,738
---------- ----------
Net increase (decrease) in cash (160,245) (3,822,072)
Cash and cash equivalents, beginning of period 168,236 (3,909,665)
---------- ----------
Cash and cash equivalents, end of period $ 7,991 $ 87,593
========== ==========
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 June 30, 1998, and the results of its operations
for the six months ended June 30, 1998 and 1997 and cash flows for the six
months ended June 30, 1998 and 1997.
The accounting policies followed by the Trust are set forth in Note 1 to
the Trust's financial statements in the 1997 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 $133,343 and $366,576 for the three months and six
months ended June 30, 1998, respectively, compared to the same periods in
1997 primarily due to the purchase of 1590 Sycamore Drive in Hercules,
California in May, 1997.
Interest revenues decreased $20,038 and $63,911 for the three months and six
months ended June 30, 1998, respectively, compared to the same periods in
1997 due to lower average cash balances.
Interest expense increased $47,950 and $137,759 for the three months and six
months ended June 30, 1998, respectively, compared to the same periods in
1997. This increase is attributed to the debt associated with the purchase
of 1590 Sycamore Drive in Hercules, California in May, 1997.
Net income was 8 cents and 16 cents per share for the three months and six
months ended in June 30, 1998, respectively, compared to 6 cents and 12 cents
for the three months and six months ended June 30, 1997, respectively.
CAPITAL RESOURCES AND LIQUIDITY
The Trust anticipates that operating income, proceeds from the sale of
properties, collections on notes receivable, and borrowings collateralized by
specific properties will provide for its future liquidity and capital
resource needs.
PART II. OTHER INFORMATION
USA REAL ESTATE INVESTMENT TRUST
ITEM 5: OTHER INFORMATION:
On May 11, 1998, the Annual Meeting of the Shareholders of the Trust was held
in Sacramento, California. Three trustees were elected: Gregory E. Crissman,
Benjamin A. Diaz and Joyce A. Marks.
On May 19, 1998, the trustees adopted resolutions pursuant to which the
outstanding shares of the Trust will undergo a reverse share split of thirty
shares into one share and a concurrent elimination of all fractional shares
less than one when the shareholder account holds less than one share. These
actions will go into effect on July 1, 1998.
ITEM 6: REPORTS ON FORM 8-K
None.
<PAGE> 9
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
----------------------------------------
August 7, 1998 Gregory Crissman
-------------------- ----------------------------------------
Date Gregory Crissman
Chairman
August 7, 1998 Benjamin Diaz
-------------------- ----------------------------------------
Date Benjamin Diaz
Trustee
<PAGE> 10
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 June 30, 1998 (Unaudited) and the
Statement of Income for the Six Months Ended June 30, 1998 (Unaudited)
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 7,991
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,991
<PP&E> 27,872,376
<DEPRECIATION> 3,179,316
<TOTAL-ASSETS> 24,693,060
<CURRENT-LIABILITIES> 91,182
<BONDS> 0
<COMMON> 3,919,525
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 25,768,845
<SALES> 1,654,018
<TOTAL-REVENUES> 1,654,018
<CGS> 0
<TOTAL-COSTS> 1,012,697
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 260,229
<INCOME-PRETAX> 641,321
<INCOME-TAX> 0
<INCOME-CONTINUING> 641,321
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 641,321
<EPS-PRIMARY> 0.160
<EPS-DILUTED> 0.160
</TABLE>
