<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, 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)
P.O. Box 255427-314, 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, 1998
par value one dollar per share 129,004
<PAGE> 2
USA REAL ESTATE INVESTMENT TRUST
Index
Part I. Financial Information
Balance Sheets - September 30, 1998 and
December 31, 1997 ................................. 3
Statements of Income - For the Nine Months
Ended September 30, 1998 and 1997 ................. 4
Statements of Income - For the Nine Months
Ended September 30, 1998 and 1997 ................. 5
Statements of Cash Flows - For the Nine
Months Ended September 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
September 30, December 31,
1998 1997
(Unaudited) (Audited)
----------- -----------
Assets
Investments:
Rental properties, less accumulated
depreciation of $3,341,316 at September 30,
1998 and $2,859,213 at December 31, 1997 $ 24,608,157 $ 24,939,462
Notes receivable 726,000 726,000
---------- -----------
25,334,157 25,665,462
Cash 11,119 168,236
Other assets 399,388 263,728
----------- -----------
Total assets $ 25,744,664 $ 26,097,426
=========== ===========
Liabilities and Shareholders' Equity
Liabilities:
Long-term notes payable $ 6,038,062 $ 6,145,044
Line of credit 440,000 0
Accounts payable and accrued expenses 101,313 30,688
Lease deposits 62,282 67,157
----------- -----------
Total liabilities 6,641,657 6,242,889
----------- -----------
Shareholders' Equity:
Shares of beneficial interest, par value
$1 a share; authorized 250,000 shares;
129,004 shares outstanding at September 30,
1998 and 132,029 at December 31, 1997 $ 129,004 $ 132,029
Additional paid-in capital 33,476,653 33,827,697
Distributions in excess of cumulative
net income (14,502,650) (14,105,189)
----------- -----------
Total shareholders' equity 19,103,007 19,854,537
----------- -----------
Total liabilities and shareholders' equity $ 25,744,664 $ 26,097,426
=========== ===========
See accompanying notes to financial statements.
<PAGE> 4
USA REAL ESTATE INVESTMENT TRUST
Statements of Income
(Unaudited)
Three Months Ended
September 30,
1998 1997
---------- ----------
Revenues:
Rent $ 801,852 $ 774,699
Interest 14,773 20,156
---------- ----------
816,625 794,855
---------- ----------
Expenses:
Operating expenses 76,369 78,344
Property taxes 47,913 52,803
Property management fees 13,200 12,000
Interest 131,088 129,880
Depreciation and amortization 162,000 150,000
General and administative 51,908 60,267
---------- ----------
482,478 483,294
---------- ----------
Net income before gain on sale of properties 334,147 311,561
Gain on sale of properties 0 103,946
---------- ----------
Net income $ 334,147 $ 415,507
========== ==========
Net income per share of beneficial interest $ 2.59 $ 3.12
========== ==========
See accompanying notes to financial statements.
<PAGE> 5
USA REAL ESTATE INVESTMENT TRUST
Statements of Income
(Unaudited)
Nine Months Ended
September 30,
1998 1997
---------- ----------
Revenues:
Rent $ 2,422,192 $ 2,028,463
Interest 48,451 117,745
---------- ----------
2,470,643 2,146,208
---------- ----------
Expenses:
Operating expenses 221,414 232,043
Property taxes 143,739 158,409
Property management fees 38,000 36,000
Interest 391,317 252,350
Depreciation and amortization 486,000 450,000
General and administrative 214,705 222,855
---------- ----------
1,495,175 1,351,657
---------- ----------
Net income before gain on sale of properties 975,468 794,551
Gain on sale of properties 0 103,946
---------- ----------
Net income $ 975,468 $ 898,497
========== ==========
Net income per share of beneficial interest $ 7.56 $ 6.75
========== ==========
See accompanying notes to financial statements.
<PAGE> 6
Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
1998 1997
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 975,468 898,497
---------- ----------
Adjustments to reconcile net income
to net cash used by operating activities:
Depreciation and amortization 486,000 450,000
Gain on disposition of properties 0 (103,946)
Changes in other assets and liabilities:
Increase (decrease) in other assets (135,660) (115,579)
Increase (decrease) in accounts
payable and accrued expenses 70,625 30,271
Increase (decrease) in lease deposits (4,875) 9,750
---------- ----------
Total adjustments to income 416,090 270,496
---------- ----------
Net cash provided by
operating activities 1,391,558 1,168,993
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of and improvements to
rental properties (154,695) (7,872,817)
Proceeds from the sale of properties 0 773,389
---------- ----------
Net cash provided by
investing activities (154,695) (7,099,428)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term notes payable 0 4,200,000
Line of credit 440,000 0
Redemption of shares (354,069) (186,422)
Principal payments on long-term notes payable (106,982) (67,780)
Distributions paid (1,372,929) (1,249,384)
---------- ----------
Net cash used by
financing activities (1.393,980) 2,696,414
---------- ----------
Net increase (decrease) in cash (157,117) (3,234,021)
Cash and cash equivalents, beginning of period 168,236 3,909,665
---------- ----------
Cash and cash equivalents, end of period $ 11,119 $ 675,644
========== ==========
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, 1998, and the results of its
operations for the nine months ended September 30, 1998 and 1997 and cash
flows for the nine months ended September 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.
3. On July 1, 1998, the Trust executed a one for thirty reverse share split
and a concurrent elimination of all fractional shares less than one when
the shareholder account held less than one share. All references to the
number of shares and per share amounts have been restated to reflect the
impact of the reverse share split.
<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 $393,729 for the nine months ended September 30,
1998, compared to the same period in 1997 primarily due to the purchase of
1590 Sycamore Drive in Hercules, California in May, 1997.
Interest revenues decreased $69,294 for the nine months ended September 30,
1998, compared to the same period in 1997 due to lower average cash balances.
Interest expense increased $138,967 for the nine months ended September 30,
1998, compared to the same period 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 $7.56 per share for the nine months ended September 30, 1998,
compared to $6.75 per share for the same period in 1997.
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:
None.
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
----------------------------------------
November 12, 1998 Gregory Crissman
-------------------- ----------------------------------------
Date Gregory Crissman
Chairman
November 12, 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 September 30, 1998 (Unaudited) and the
Statement of Income for the Nine Months Ended September 30, 1998
(Unaudited) and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 11,119
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,119
<PP&E> 27,949,473
<DEPRECIATION> 3,341,316
<TOTAL-ASSETS> 24,608,157
<CURRENT-LIABILITIES> 101,313
<BONDS> 0
<COMMON> 129,004
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 25,699,664
<SALES> 2,422,192
<TOTAL-REVENUES> 2,422,192
<CGS> 0
<TOTAL-COSTS> 1,495,175
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 391,317
<INCOME-PRETAX> 975,468
<INCOME-TAX> 0
<INCOME-CONTINUING> 975,468
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 975,468
<EPS-PRIMARY> 7.56
<EPS-DILUTED> 7.56
</TABLE>
