Form 10QSB Home System Group

Quarterly report pursuant to section 13 and 15(d) for small business issuers

What is Form 10QSB?
  • Accession No.: 0001140361-05-009254 Act: 34 File No.: 000-49770 Film No.: 051188684
  • CIK: 0001172319
  • Submitted: 2005-11-09
  • Period of Report: 2005-09-30

SUPREME REALTY 10QSB 09-30-2005 HTML

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-QSB

(Mark One)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
   September 30, 2005



o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT  
For the transition period from
 
to
 
Commission file number
   000-49770

SUPREME REALTY INVESTMENTS, INC.
(Exact name of small business issuer as specified in its charter)

Nevada
 
43-1954776
(State or other jurisdiction of incorporation or organization)
 
(IRS Employer Identification No.)

P.O. Box 690578, Orlando, FL 32869-0578
(Address of principal executive offices)

(407) 965-0170
(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 x   No o
 
 
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 l2, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes o  No o
 
Not Applicable
 

 
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:
 
4,800,000 common shares issued and outstanding as of Septembe 30, 2005
 
Transitional Small Business Disclosure Format (Check one): Yes o   No x
 

 
SUPREME REALTY INVESTMENTS, INC.
 
INDEX
 
 
Page No.
4
5
Supreme Financial Statements September 30, 2005 and 2004
5
17
General
17
Nine months ended September 30, 2005 versus Nine months ended September 30, 2004
17
Results of Operations
17
Revenue
17
General and Administrative Expenses
17
Liquidity and Capital Resources
17
18
   
19
19
19
Changes in Securities
19
Recent Sales of Unregistered Securities
19
Recent Sales of Registered Securities
19
Use of Proceeds
19
19
19
19
19
a.  Exhibits
20
20

 

 
 
 
 
 
The information in this report is for the nine- month period ended Septembe 30, 2005, is unaudited but includes all adjustments (consisting only of normal recurring accruals, unless otherwise indicated) which Supreme Realty Investments, Inc. ("Supreme " or the "Company") considers necessary for a fair presentation of the financial position, results of operations, changes in stockholders' equity and cash flows for those periods.
 
The condensed consolidated financial statements should be read in conjunction with Supreme's financial statements and the notes thereto contained in Supreme's Audited Financial Statements for the year ended December 31, 2004, in the From 10-KSB as filed with the SEC on April 15, 2005, and amended on September 20, 2005 and October 7, 2005.
 
Interim results are not necessarily indicative of results for the full fiscal year.
 
 


SUPREME REALTY INVESTMENTS, INC.
UNAUDITED CONSOLIDATED BALANCE SHEET
As of September 30
 
   
 2005
 
2004
 
ASSETS:
      
 
 
Current Assets:
      
 
 
Cash & Cash Equivalents
 
$
179
   
21,270
 
Accounts Receivable
         
7,379
 
Less: Allowance for Doubtfull Accounts
             
Total Current Assets
 
179
   
28,649
 
Real Estate Investments: 
           
Existing Properties
   
880,000
   
1,966,000
 
New Property Acquisitions
   
-0-
   
-0-
 
Gross Properties
   
880,000
   
1,966,000
 
Less: Accumulated Deprec.-Property
   
(122,667
)
 
(166,947
)
Land & Other Non-Depreciable Properties
   
550,899
       
Total Real Estate Investments
   
1,308,232
   
1,799,053
 
Other Assets:
           
Furniture/Fixtures/Equipment
   
11,662
   
11,662
 
Less: Accumulated Deprec.-FF & E
   
(8,643
)
 
(6,540
)
Total Other Assets
   
3,019
   
5,122
 
 
           
TOTAL ASSETS
   
1,311,430
   
1,832,824
 
LIABILITIES:
           
Current Liabilities
   
211,446
   
171,840
 
Notes Payable
   
-0-
   
-0-
 
Mortgages Payable
   
835,000
   
1,235,000
 
Total Liabilities
   
1,046,446
   
1,406,840
 
STOCKHOLDER'S EQUITY:
           
Common Stock, $0.001 par, 200,000,000 authorized, 4,600,000 outstanding
   
4,800
   
30,000
 
Additional Paid In Capital
   
2,268,346
   
623,146
 
Retained Earnings (Deficit)
   
(440,377
)
 
(227,162
)
Less:      Treasury Stock
   
-0-
   
-0-
 
Stock Subscriptions Receivable
   
(1,567,785
)
 
-0-
 
Total Stockholder Equity
   
264,984
   
425,984
 
 
             
TOTAL LIABILITIES & EQUITY
   
1,311,430
   
1,832,824
 

 


SUPREME REALTY INVESTMENTS, INC.
UNAUDITED CONSOLIDATED STATEMENT OF EARNINGS
For the Fiscal Quarter ended September 30

           
   
2005
 
2004
 
REVENUES:
             
Revenues from Rental Properties
 
$
   
 
12,100
 
Revenues from Mortgage Banking
             
Revenues from Realty & Management
             
TOTAL REVENUES
   
-0-
   
12,100
 
               
PROPERTY OPERATING EXPENSES:
             
Real Estate Taxes
   
-0-
   
5,739
 
Mortgage Interest
   
19,331
   
19,331
 
Operations and Maintenance
   
-0-
   
6,692
 
Depreciation and Amortization
   
8,000
   
17,873
 
Total Property Expenses
   
27,331
   
49,635
 
GENERAL EXPENSES:
             
Salaries, Commissions, & Employee Benefits
   
8,770
   
8,354
 
General & Administrative Expenses
   
7,087
   
11,937
 
Interest Expense
   
-0-
   
-0-
 
Depreciation & Amortization
   
547
   
548
 
Total General Expenses
   
16,404
   
20,839
 
TOTAL EXPENSES
   
43,735
   
70,474
 
               
NET INCOME(LOSS) Before Taxes & Extraordinary Items
   
(43,735
)
 
(58,374
)
Gain(Loss)-on Sale of Assets
   
-0-
   
4,200
 
Provision for Income Taxes
   
-0-
   
-0-
 
NET INCOME(LOSS)
   
(43,735
)
 
(54,174
)
               
Weighted Average Common Shares Outstanding
   
3,992,000
   
3,800,000
 
               
EARNINGS per Common Share- Basic
   
($0.01
)
 
($0.01
)
EARNINGS per Common Share- Diluted
   
($0.01
)
 
($0.01
)

 

 
SUPREME REALTY INVESTMENTS, INC.
UNAUDITED CONSOLIDATED STATEMENT OF EARNINGS
For the 9-month period ended September 30

           
   
2005
 
2004
 
REVENUES:
         
Revenues from Rental Properties
 
$
1,273
   
36,300
 
Revenues from Mortgage Banking
             
Revenues from Realty & Management
             
TOTAL REVENUES
   
1,273
   
36,300
 
               
PROPERTY OPERATING EXPENSES:
             
Real Estate Taxes
   
-0-
   
5,739
 
Mortgage Interest
   
57,993
   
57,993
 
Operations and Maintenance
   
7,379
   
23,825
 
Depreciation and Amortization
   
24,000
   
53,619
 
Total Property Expenses
   
89,372
   
141,176
 
GENERAL EXPENSES:
             
Salaries, Commissions, & Employee Benefits
   
31,671
   
25,062
 
General & Administrative Expenses
   
35,763
   
37,137
 
Interest Expense
   
-0-
   
-0-
 
Depreciation & Amortization
   
1,642
   
1,644
 
Total General Expenses
   
69,076
   
63,843
 
TOTAL EXPENSES
   
158,448
   
205,019
 
               
NET INCOME(LOSS) Before Taxes & Extraordinary Items
   
(157,175
)
 
(168,719
)
Gain(Loss)-on Sale of Assets
   
-0-
   
4,200
 
Provision for Income Taxes
   
-0-
   
-0-
 
NET INCOME(LOSS)
   
(157,175
)
 
(164,519
)
               
Weighted Average Common Shares Outstanding
   
4,198,000
   
3,800,000
 
 
             
EARNINGS per Common Share- Basic
 
 
($0.04
)
 
($ 0.04
)
EARNINGS per Common Share- Diluted
 
 
($0.04
)
 
($0.04
)

 


SUPREME REALTY INVESTMENTS, INC.
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOW
For the Nine months ended September 30

   
2005
 
2004
 
CASH FLOW FROM OPERATING ACTIVITIES:
         
Net Income
   
(157,175
)
 
(164,519
)
Adjustments to reconcile net income to cash providedby Operating Activities
             
Depreciation and Amortization
   
25,642
   
55,807
 
Provision for Income Taxes
   
-0-
   
-0-
 
(Increase) Decrease in Receivables
   
-0-
   
-0-
 
(Increase) Decrease in Prepaid Expenses
   
-0-
   
-0-
 
Increase (Decrease) in Current Liabilities
   
67,993
   
143,680
 
Net Cash from Operating Activities
   
(63,540
)
 
34,968
 
               
CASH FLOW FROM INVESTING ACTIVITIES:
             
Purchases of Furniture, Fixtures, & Equipment
   
-0-
   
-0-
 
               
Proceeds from the Sale of:
             
Furniture, Fixtures, & Equipment
   
-0-
   
4,200
 
Real Estate Improvements
   
-0-
   
-0-
 
Net Cash from Investing Activities
   
-0-
   
4,200
 
               
CASH FLOW FROM FINANCING ACTIVITIES:
             
Proceeds from:
             
Borrowings-Mortgages
   
-0-
   
-0-
 
Issuance of Common Stock
   
61,000
   
-0-
 
Payments for:
             
Debt Repayment
   
-0-
   
(21,291
)
               
Net Cash from Financing Activities
   
61,000
   
(21,291
)
               
Net Change In Cash
   
(2,540
)
 
17,877
 
Cash Balance, January 1
   
2,719
   
3,393
 
               
Cash Balance, September 30
   
179
   
21,270
 

 

 
SUPREME REALTY INVESTMENTS, INC
Statement of Changes in Stockholders' Equity
As of September 30, 2005
 
   
Common Stock
 
Additional
paid in
 
Retained
 
Treasury
 
Common
Stock
 
Total
Stockholders
 
   
Shares
 
Amount
 
Capital
 
Earnings
 
(common)
 
Subscribed
 
Equity
 
Balance, January 1, 2004
   
19,338,827
   
64,356
   
623,146
   
(81,064
)
 
(17,500
)
       
588,938
 
Common Stock Issued In Merger
   
10,661,173
   
(16,856
)
                         
(16,856
)
Treasury Stock Reissued
         
(17,500
)
             
17,500
         
-
 
Net Income
                     
(202,138
)
             
(202,138
)
Balance, December 31, 2004
   
30,000,000
   
30,000
   
623,146
   
(283,202
)
 
-
   
-
   
369,944
 
Common Stock Subscribed
   
16,000,000
   
16,000
   
1,584,000
               
(1,600,000
)
 
-
 
Net Income
                     
(157,175
)
             
(157,175
)
1-10 Reverse Stock Split
   
(41,400,000
)
 
(41,400
)
 
41,400
                     
-
 
Common StockSubscribed
   
200,000
   
200
   
19,800
               
(20,000
)
 
-
 
Payments for Subscribed Stock
                                 
52,215
   
52,215
 
Balance, September 30, 2005
   
4,800,000
   
4,800
   
2,268,346
   
(440,377
)
 
-
   
(1,567,785
)
 
264,984
 

 

 
NOTES TO FINANCIAL STATEMENTS
 
1.
Summary of Significant Accounting Policies
 
Basis of Presentation
 
A summary of the significant accounting policies of Supreme Realty Investments, Inc. ("the Company") is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management which is responsible for their integrity and objectivity. The accounting policies used conform to generally accepted accounting principles which have been consistently applied in the preparation of these financial statements. The financial statements herein are presented using the accrual basis of accounting.
 
Nature of Operations
 
Supreme Realty Investments, Inc. is a real estate operating company primarily engaged in the acquisition, operation, and disposition of real properties.
 
The Company acquires hotel properties either directly in fee simple, or indirectly through ownership of beneficial interests in land trusts or partnerships that hold title to the real property. The Company believes that, in some cases acquiring indirect interests in real property is advantageous because it gives us flexibility in addressing the financial and risk management considerations presented by the particular property when debt financing may not be appropriate or when the Company is trying to avoid exposing its entire portfolio to litigation as the result of personal injuries resulting from environmental hazards or other unforeseen conditions on the property.
 
The Company's policy is to acquire properties primarily for current income. However, income from, and appreciation of its properties may be adversely affected by general and local economic conditions, neighborhood values, competitive overbuilding, weather, casualty losses, and other factors beyond its control. The value of real properties may also be affected by the cost of compliance with regulations and liability under applicable environmental laws, changes in interest rates, and the availability of financing. Income properties are also adversely affected if a significant number of tenants are unable to pay rent or if available space cannot be rented on favorable terms.
 
Investments in Real Estate Securities or other Passive Interests
 
From time to time, Supreme will also invest in the interests of others primarily engaged in real estate activities. The Company will invest in the common stock of other public and private real estate operating companies, real estate investment trusts, partnerships, or joint ventures. The primary opportunities the Company will consider are combination hotel/residential housing developments.
 
In some cases, particularly land development (or redevelopment), the Company's Acquisition Committee will apply the same underwriting criteria as applied in its direct investments to make direct loans to developers for the construction and sale of multi-family housing or commercial properties.
 
 

 
2.
Principles of Consolidation and Estimates
 
The accompanying Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation.
 
Generally accepted accounting principles ("GAAP") requires the Company's management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during a reporting period. The most significant assumptions and estimates relate to the valuation of real estate, depreciable lives, revenue recognition, and the recoverability of trade accounts receivable. The application of these estimates requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates.
 
3.
Real Estate Investments
 
Supreme currently holds interests in the following properties:

·
12-unit apartment building in Chicago, Illinois, acquired by Installment Agreement for Warranty Deed at a cost of $600,000, which carries a non-recourse mortgage note in the amount of $480,000, which bears interest at a rate of 7%, and is due on December 15, 2005. Property is currently 92% occupied and stable. The company leases the residential apartments pursuant to a Section 8-Housing Assistance Payments contract with the U.S. Dept. of Housing and Urban Development(HUD).

·
4-unit apartment building in Chicago, Illinois acquired by Installment Agreement for Warranty Deed at a cost of $280,000, which carries a non-recourse mortgage note in the amount of $224,000, which bears interest at a rate of 7% and is due on December 15, 2005. Property is currently 100% occupied and stable, but each of the tenants receives rental assistance from HUD in the form of a Section 8 Housing Voucher.

·
6-vacant lots in Chicago, Illinois, acquired by Installment Agreement for Warranty Deed at a cost of $586,000, which carries a non-recourse first mortgage note in the amount of $131,000, which bears interest at a rate of 7% and is due on February 1, 2031. The property is currently vacant and being prepared for demolition and site preparation for the development of 6 townhouses.

 
 
Description
 
 
 
Encumbrances
 
 
 
Initial Cost
 
 
 
Cost Capitalized
 
Gross amount
carried at
close of period
 
 
Accumulated Depreciation
 
 
Date of 
Construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12-Unit Apartment Bldg(1)
 
$
480,000
 
$
600,000
   
-0-
 
$
600,000
 
$
83,637
   
N/A
 
6-Vacant Lots(3)
 
$
131,000
 
$
586,000
   
-0-
 
$
550,899
 
$
-0-
   
N/A
 
4-Unit Apartment Bldg(4)
 
$
224,000
 
$
280,000
   
-0-
 
$
280,000
 
$
39,029
   
N/A
 
TOTALS
 
$
835,000
 
$
1,466,000
   
0
 
$
1,430,899
 
$
122,666
       

 

 
Real Estate Investments are recorded at cost, less accumulated depreciation. If there is an event or change of circumstances that indicates that the basis of a property may not be recoverable, then management will assess any impairment in value by making a comparison of (i) the current and projected operating cash flows (undiscounted and without interest charges) of the property over its remaining useful life and (ii) the net carrying amount of the property. If the current and projected operating cash flows are less than the carrying value of the property, the carrying value would be written down to an amount to reflect the fair value of the property. At the time of the preparation of these financial statements, we have tested each of our real estate assets for impairment. The following table describes our net carrying costs and projected cash flows associated with each property:

 
 
 
 
 
 
 
 
Estimated Fair Value(1)
 
Description
 
Gross amount carried at close of period
 
Accumulated Depreciation
 
Net Carrying Cost
 
Land(2)
 
Building
 
Cost to Sell(3)
 
Estimated Fair Value
 
12-Unit Apartment Bldg(
 
$
600,000
   
($83,637
)
 
516,363
   
250,000
   
400,000
   
($19,500
)
$
624,000
 
6-Vacant Lots
 
$
550,899
 
$
-0-
   
550,899
   
468,750
   
100,000
   
($11,375
)
$
557,375
 
4-Unit Apartment Bldg
 
$
280,000
   
($39,029
)
 
240,971
   
93,750
   
256,250
   
($10,500
)
$
336,000
 
TOTALS
 
$
1,430,899
   
($122,666
)
$
1,067,262
 
$
812,500
 
$
756,250
   
($41,375
)
$
1,517,375
 

 
1.
SFAS 144 defines “fair value” as the amount at which an asset could be sold in a current transaction between willing parties, other than in a forced or liquidation sale. When auoted market prices in active markets are not available, the estimate of fair value shall be the based on the best information available, including recent sales of similar assets. Our estimates are based on recent sales of comparable properties quoted by the Chicago Association of Realtors, Multiple Listing Service(MLS).
 
2.
Local vacant land values range from $15-$25/sf.
 
3.
Includes legal fees, broker’s commissions, etc.

Depreciation has been computed using the straight-line method over the estimated useful lives of 27.5 years. SFAS 144 states that a long-lived asset is considered abandoned when it ceases to be used. SFAS 144 further requires that when a company commits to a plan to abandon an asset before the end of its previously estimated useful life, depreciation estimates must be revised in accordance with SFAS 154 to reflect the use of the asset over its shortened useful life. Therefore, we have revised our estimated useful life of the the vacant six-unit apartment building listed above to -0-, reclassified it as non-depreciable property, and revised our depreciation estimates for this period and future periods.

Expenses for maintenance and repairs are charged to operations as incurred. Significant renovations are capitalized.

During the fourth quarter of the past fiscal year, the company sold all of its interests in one of its residential properties. A tabular summary of that transaction follows.

Description
 
Gross amount carried at time of sale
 
Encumbrances
 
Accumulated Depreciation
 
Sale Price
 
Gain(Loss) on Sale
 
 
 
 
 
 
             
6-Unit Apartment Bldg(2)
   
500,000
   
400,000
   
43,939
   
450,000
 
$
6,061
 

 

 
4.
Proposed Real Estate Acquisitions
 
The Company has entered into a formal Letter of Intent to acquire the following portfolio of hotel properties from CITY HOTELS, NV, of Brussels, Belgium:
 
 
·
263-room, full service hotel in Detroit, Michigan (DoubleTree Hotel)
 
·
197-room, full service hotel in St. Louis, Missouri (DoubleTree Hotel)
 
·
185-room, full service hotel in Dayton, Ohio (DoubleTree Hotel); and
 
·
283-room, full service hotel in Tulsa, Oklahoma (Hilton Hotel)
 
SFAS 5 requires the disclosure of contingencies involving uncertainty that may result in a gain or loss to the Company that will ultimately be resolved when one or more future events occur or fail to occur. For purposes of this statement, the likelihood that a future event will occur can range from remote, to reasonably possible, to probable. SFAS 5 further states that, in the event of a gain contingency, care must be exercised to avoid misleading implications as to the likelihood of realization. At this time, management considers it remote that these proposed acquisitions are likely to occur.
 
5.
Revenue Recognition
 
Rental revenues are recognized in the month they are earned. Revenues from fees include brokerage commissions, management fees, development fees, origination fees, administration fees, and document processing fees and referral fees. All fee-base revenues are recognized when the service has been performed and the fee is due and payable. In cases where there is a significant degree of uncertainty surrounding collection of the fee, revenue is not recognized until the cash is collected.
 
6.
Income Taxes
 
The Company and its subsidiary file a consolidated federal income tax return.
 
7.
Deferred Tax Assets, Liabilities, and Valuation Allowances
 
Management has provided for tax loss carry-forwards of $15,691 for 2002, and $74,299 for 2004, and $114,793 for 2004. The tax loss carry-forwards expire in 2022, 2023, and 2024 respectively.
 
8.
Investment in Affiliates
 
In June, 2005, the Company formed one wholly-owned subsidiary, Supreme Hotel Properties Inc., a Delaware corporation of which it owns 100% of the outstanding common stock, to hold its hotel assets. SFAS 94 requires investments in companies in which the parent company has the ability to influence operations and finances to be accounted for by the consolidation method.
 
9.
Recent Accounting Pronouncements
 
In August 2001, the FASB issued Financial Accounting Standard No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 establishes a model for measurement and reporting the impairment of assets to be disposed of by sale and addresses accounting for a segment of a business accounted for as a discontinued operation. SFAS 144 is effective for fiscal years beginning after December 15, 2001. SFAS 144 supersedes SFAS 121 and thereby removes Goodwill from its scope and eliminates the requirement to allocate Goodwill to long-lived assets to be tested for impairment in business segments that are discontinued. Supreme has accounted for the write down of the Goodwill associated with its discontinued property management segment in accordance with SFAS 144.
 
 

 
In December 2002, the FASB issued Financial Accounting Standard No. 148, "Accounting for Stock-Based Compensation -Transition and Disclosure" ("FAS 148"), an Amendment of Financial Accounting Standard No. 123, "Accounting for Stock-Based Compensation" ("FAS 123"). FAS 148 amends FAS 123 to provide alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation. It also amends the disclosure provisions of that Statement to require prominent disclosure about the effects on reported net income of an entity's accounting policy decisions with respect to stock-based employee compensation.
 
In December 1999, the SEC issued SAB 101, "Revenue Recognition in Financial Statements." SAB 101 summarizes certain aspects of the staff's views in applying generally accepted accounting principles to revenue recognition in financial statements. On March 24, 2000 and September 26, 2000, the SEC issued Staff Accounting Bulletin No. 101A and No. 101B, respectively, which extend the transition provisions of SAB 101 until no later than the fourth quarter of fiscal years beginning after December 15, 1999, which would be December 31, 2004 for us.
 
In March 2000, the FASB issued FIN 44, Accounting for Certain Transactions Involving Stock Compensation - an Interpretation of APB No. 25, Accounting for Stock Issued to Employees". This Interpretation clarifies (a) the definition of employee for purposes of applying Opinion 25, (b) the criteria for determining whether a plan qualifies as a non-compensatory plan, (c) the accounting consequences of various modifications to the terms of a previously fixed stock option or award, and (d) the accounting for an exchange of stock compensation awards in a business combination. This Interpretation is effective July 1, 2000, but certain conclusions in this Interpretation cover specific events that occur after either December 15, 1998, or January 12, 2000. To the extent that this Interpretation covers events occurring during the period after December 15, 1998, or January 12, 2000, but before the effective date of July 1, 2000, the effects of applying this Interpretation are recognized on a prospective basis from July 1, 2000.
 
Management believes that any other newly required pronouncements are not applicable.
 
10.
Current Liabilities and Notes Payable
 
Current Liabilities include $10,000 in trade payables and $201,446for the accrued interest on the mortgages payable.
 
11.
Mortgages Payable
 
Three(3) parcels of property are being purchased by Installment Agreement for Warranty Deed, over a term of thirty(30) years. The notes bear interest at the rate of 7% per annum. Interest only payments are payable in quarterly installments, with balloon payments of the outstanding principal on maturity dates in December, of 2005.
 
   
Principal Payments Each Year
 
 
 
2005
 
2006
 
2007
 
2008
 
                   
12-Unit Apartment Bldg(1)
   
480,000
   
-0-
   
-0-
   
-0-
 
6-Unit Apartment Bldg(3)
   
131,000
   
-0-
   
-0-
   
-0-
 
4-Unit Apartment Bldg(4)
   
224,000
   
-0-
   
-0-
   
-0-
 
TOTALS
   
835,000
   
-0-
   
-0-
   
-0-
 

 

 
12.
Common Stock Transactions
 
On July 5, 2005, the Company affected a 1-10 reverse stock split, reducing the number of common shares outstanding to 4,600,000.
 
13.
Market for Common Equity and Related Stockholder Matters
 
The Company’s common stock is currently traded on the Over-the-Counter Bulletin Board(OTCBB) under the symbol “SRLT”.
 
14.
Equity Compensation Plan
 
On August 28, 2004, the Board of Directors adopted and the shareholders approved a Stock Option and Restricted Stock Plan. The purpose of the plan is to advance the interests of the Corporation by enhancing the ability of the Corporation and its subsidiaries to attract and retain officers, employees and non-employee directors to the Corporation, to reward such individuals for their contributions and to encourage them to take into account the long-term interests of the Corporation through interests in the Corporation's Common Stock. The Plan provides for the grant of options to acquire Stock ("Options"), which may be non-qualified stock options ("NQSOs") within the meaning of the Internal Revenue Code of 1986, as amended (the "Code"), and awards of Stock subject to certain restrictions ("Restricted Stock"). Under the Plan, Restricted Stock consists exclusively of (i) Stock subject to performance-based restrictions intended to comply with the provisions of Section 162(m) of the Code ("Performance-Based Restricted Stock) and (ii) Stock awarded to non-employee directors in lieu of some or all of the cash compensation such directors would otherwise receive for their service as directors ("Non-employee Director Restricted Stock").
 
EQUITY COMPENSATION PLAN INFORMATION
 
Plan Category
Number of securities to be issued upon exercise of outstanding options, warrants and rights
Weighted average exercise price of outstanding options, warrants and rights
Number of securities remaining available for future issuance
 
(a)
(b)
(c)
Equity compensation plans approved by security holders
16,000,000
0.10
34,000,000
Equity compensation plans not approved by security holders
-0-
-0-
-0-
Total
16,000,000
0.10
34,000,000
 
On August 28, 2004, (“Grant Date” and “Measurement Date”) the Company granted options to purchase 16,000,000 shares of common stock to officers and non-employee consultants in recognition of past services rendered, at an exercise price of $0.10 per share. Under the provisions of APB 25, the Company estimated the “fair market value” of the shares to be equal to the book value of $0.02 per share. Since the exercise price was greater than the fair market value as of the measurement date, no compensation cost was incurred by the Company. Since the stock has not been paid for yet, in accordance with Staff Accounting Bulletin Topic 4E, we have recorded the issuance of these shares in Stockholders Equity as Stock Subscribed, with a corresponding reduction in Stock Subscriptions Receivable.

 

 
15.
Commitments
 
None
 
16.
Contingencies
 
The company leases 16 of its residential apartments pursuant to a Section 8-Housing Assistance Payments contract with the U.S. Dept. of Housing and Urban Development(HUD). Payments have been suspended under the terms of that contract pending the completion of mandated repairs. There is no assurance that the contracts will be renewed or past due payments will ever be recovered.
 
17.
Material Subsequent Events
 
Halter Financial Investments, L.P. of Dallas, Texas has entered into a Letter of Intent with the Company setting forth the terms and conditions pursuant to which it will acquire a controlling interest, estimated to be approximately 81%, of the Company’s outstanding common stock (hereafter, “Share Purchase Transaction”). The Share Purchase Transaction is subject to the following conditions: (1) the Company transferring all of its assets and liabilities to its wholly-owned subsidiary, Supreme Hotel Properties, Inc.; (2) the Company then transferring its interest in Supreme Hotel Properties, Inc. to the Company’s existing shareholders of record, on a pro rata basis, to effectively spin-off Supreme Hotel Properties, Inc. as a separate entity; and (3) the spin-off transaction being approved by a majority of the Company’s shareholders entitled to vote thereon.
 
The proposed Share Purchase Transaction will necessitate the issuance of approximately 2,000,000 new shares of common stock to Halter Financial Investments, L.P. The number of shares to be issued is based on the completion of a proposed 1 for 10 reverse stock split. In addition, once the Share Purchase Transaction is concluded, all existing officers and directors of the Company will resign and nominees of Halter Financial Investments will be appointed to fill such vacancies. Following consummation of the Share Purchase Transaction, new management of the Company, using its reputation, experience, and international contacts, will seek to complete a merger or similar transaction with an operating business that will qualify the Company to have its securities listed on a major national exchange or quotation medium like the New York Stock Exchange, the American Stock Exchange, or NASDAQ.
 
Proceeds from the sale of the shares to Halter Financial Investments will be transferred to Supreme Hotel Properties, Inc. to be used to pay expenses related to the acquisition of hotel properties and to maintain the Company’s current business operations as assumed by Supreme Hotel Properties, Inc. The shares of Supreme Hotel Properties, Inc. distributed to the shareholders of the Company as part of the spin off will have attendant registration rights and the management of Supreme Hotel Properties, Inc. will seek to file a registration statement with the SEC to register those shares. Upon that registration becoming effective, management will then apply for listing the company’s securities on a national exchange or quotation medium.

 


 
Results of Operations
 
Stockholders’ equity at September 30, 2005 was approximately $264,984. Our loss for the 9-month period ending September 30, 2005 was ($157,175).
 
Revenue.    Rental revenue from or residential properties decreased to $1,273 for the 9-month period ended September 30, 2005 compared to $36,300 for the 9-month period ended September 30, 2004. The decrease in rental revenue in 2004 can be attributed to the fact that rental payments have been suspended under the terms of the HUD Rental Assistance contract pending mandated repairs. Management has determined that costs associated with making the major structural and architectural changes required to provide handicap-accessible units in the property to comply with the HUD contract were prohibitive, so we adopted a plan to sell the property when the contract expires in February, 2006.

Expenses from Continuing Operations

Total expenses from continuing operations decreased from $205,019 for the 9-month period ended September 30, 2004 to $158,448 for the 9-month period ended September 30, 2005, a net decrease of $46,571.

 
1.
Property operating expenses decreased by $51,804 for the 9-month period ended September 30, 2005 compared to the 9-month period ended September 30, 2004. This expense decrease is primarily attributable to the fact that we have restructured the terms of purchase agreements so that we are no longer obligated to pay the property operating expenses.
 
2.
Property Depreciation and Amortization decreased by $29,619 for the for 9-month period ending September 30, 2005 compared to the same period ending September 30, 2004. This reflects the fact we now have two apartment buildings in service and the other development land is non-depreciable.
 
3.
Salaries, commissions and employees benefits remained stable.
 
4.
General and administrative expenses decreased by $1,374 for the for 9-month period ending September 30, 2005 compared to the same period ending September 30, 2004.
 
5.
Interest Expense reflects that fact that the only notes we have outstanding are non-interest bearing notes.
 
6.
Other Depreciation and Amortization reflects the depreciation on Office Furniture, Fixtures, and Equipment.

Net Income/Loss from Operations 

Net loss from operations for the 9-month period ended September 30, 2005 was $ 157,175 versus net loss of $168,719 for the 9-month period ended September 30, 2004. The net loss in 2004 is attributed primarily to expenses associated with the corporate move to Orlando, Florida and reclassified accrued mortgage interest expenses.

Liquidity and Capital Resources

For the 9-month periods ended September 30, 2005 and September 30, 2004, Supreme's net cash provided by operating activities totaled ($63,540) and $34,968, respectively.

As of the 9-month period ended September 30, 2005, Supreme's unrestricted cash resources were $179 as compared to $21,270 as of the 9-month period ended September 30, 2004. The cash flow from our existing properties will not fund our future liquidity requirements. The principal source of Supreme's capital has been from funds received from operations, the issuance of common stock, and the use of non-recourse debt in association with the acquisition of its real properties.

 


Supreme intends to use its future capital to pay for non-recurring expenses related to the preparation of an equity or debt offering and to acquire hotel properties. Supreme also intends to increase its liquidity by issuing different classes of convertible preferred stock or convertible bonds and debentures to institutional investors in future offerings.

Supreme intends to use the proceeds of any debt or equity offerings to acquire more properties and to pay off the existing long-term liabilities, namely the balloon mortgage payments coming due in December, 2005. Further, from time to time the Board of Directors may elect to distribute some of its taxable income in the form of dividends to our stockholders. That could limit the amount of cash Supreme will have available for other business purposes or to grow through the use of retained earnings. Much of Supreme's ability to raise capital is dependent upon the relative attractiveness of its shares, and the supply of shares of competitive real estate entities currently trading in the marketplace.

Cash provided by operations, equity transactions, and borrowings from lending institutions have generally provided the primary sources of liquidity to Supreme. Historically, Supreme has used these sources to fund operating expenses and to satisfy its debt service obligations.

With respect to the interim financial statements, management believes that there are no material trends, events, or uncertainties that have, occurred since the end of the last fiscal period that have, or are reasonably likely to have, a material impact on the company's short-term or long-term liquidity or significant items of income or loss arising from continued operations. Likewise, there are no material changes in any line items on the financial statements or seasonal aspects that have had a material effect on the company's financial condition or the results of operations.

Off-balance sheet arrangements

Supreme does not have any significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to its stockholders.

ITEM 3. CONTROLS AND PROCEDURES

 
Evaluation of Disclosure Controls and Procedures.
 
Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934, as amended) as of the fiscal quarter ended Septembe 30, 2005. Based upon their evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective.
 
Changes in internal controls.
 
There were no significant changes in Supreme's internal controls or in any factors that could significantly affect internal controls subsequent to the date of the Chief Executive Officer and the Chief Financial Officer's evaluation.
 
 
 
To Supreme's knowledge, no lawsuits were commenced against Supreme during the 9-months ended September 30, 2005, nor did Supreme commence any lawsuits during the same period. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
 
 

 
 
Changes in Securities
 
On July 5, 2005, the Company affected a 1-10 reverse stock split, reducing the number of common shares outstanding to 4,600,000. The effect and timing of the reverse split changes our weighted average common shares outstanding to 3,800,000.
 
Recent Sales of Unregistered Securities
 
None.
 
Recent Sales of Registered Securities
 
None.
 
Use of Proceeds
 
Not applicable.
 
 
Not applicable.
 
 
Not Applicable
 
 
Halter Financial Investments, L.P. of Dallas, Texas has entered into a Letter of Intent with the Company setting forth the terms and conditions pursuant to which it will acquire a controlling interest, estimated to be approximately 81%, of the Company’s outstanding common stock (hereafter, “Share Purchase Transaction”). The Share Purchase Transaction is subject to the following conditions: (1) the Company transferring all of its assets and liabilities to its wholly-owned subsidiary, Supreme Hotel Properties, Inc.; (2) the Company then transferring its interest in Supreme Hotel Properties, Inc. to the Company’s existing shareholders of record, on a pro rata basis, to effectively spin-off Supreme Hotel Properties, Inc. as a separate entity; and (3) the spin-off transaction being approved by a majority of the Company’s shareholders entitled to vote thereon.
 
The proposed Share Purchase Transaction will necessitate the issuance of approximately 2,000,000 new shares of common stock to Halter Financial Investments, L.P. The number of shares to be issued is based on the completion of a proposed 1 for 10 reverse stock split. In addition, once the Share Purchase Transaction is concluded, all existing officers and directors of the Company will resign and nominees of Halter Financial Investments will be appointed to fill such vacancies. Following consummation of the Share Purchase Transaction, new management of the Company, using its reputation, experience, and international contacts, will seek to complete a merger or similar transaction with an operating business that will qualify the Company to have its securities listed on a major national exchange or quotation medium like the New York Stock Exchange, the American Stock Exchange, or NASDAQ.

 


Proceeds from the sale of the shares to Halter Financial Investments will be transferred to Supreme Hotel Properties, Inc. to be used to pay expenses related to the acquisition of hotel properties and to maintain the Company’s current business operations as assumed by Supreme Hotel Properties, Inc. The shares of Supreme Hotel Properties, Inc. distributed to the shareholders of the Company as part of the spin off will have attendant registration rights and the management of Supreme Hotel Properties, Inc. will seek to file a registration statement with the SEC to register those shares. Upon that registration becoming effective, management will then apply for listing the company’s securities on a national exchange or quotation medium.
 
ITEM 6. EXHIBITS
 
a. Exhibits
 
Exhibit
Number
 
Exhibit Title
3.0
Articles of Merger, filed with the Nevada Secretary of State on October 21, 2004 (incorporated by reference from our Form S-4 A/12, filed August 18, 2004)
3.1
Articles of Incorporation, (incorporated by reference from our Form S-4 A/12, filed August 18, 2004)
3.2
Articles of Amendment (incorporated by reference from our Form S-4 A/12, filed August 18, 2004)
3.2
Bylaws (incorporated by reference from our Form S-4 A/12 Registration Statement, filed August 18, 2004)
Certificate of CEO/CFO as Required by Rule 13a-14(a)/15d-14
Certificate of CEO/CFO as Required by Rule Rule 13a-14(b) and Rule 15d-14(b) (17 CFR 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code
Certificate of CEO as Required by Rule Rule 13a-14(b) and Rule 15d-14(b) (17 CFR 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code
 
b. Reports of Form 8-K.
 
None.
 
 

 
 
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.
 
 
SUPREME REALTY INVESTMENTS, INC.
Date: November 8, 2005
 
   
   
By: 
  /s/ Thomas Elliott
 
Thomas Elliott, Chief Executive Officer
   
 
  /s/ Jean LeRoy
 
Jean LeRoy, President, Chief Financial Officer

 


EXHIBIT 31.1 HTML

ex31_1.htm


 
 
CERTIFICATION
 
I, Jean LeRoy, certify that:
 
 
1.
I have reviewed this quaterly report on Form 10-QSB of Supreme Realty Investments, Inc.;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the fiscal quarter ending Septembe 30, 2005;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the fiscal quarter ended Septembe 30, 2005;
 
4.
The company's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 and 15d-15) for the company and have:
 
 
a.
Designed such disclosure controls and procedures to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the fiscal quarter ended Septembe 30, 2005;
 
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c.
Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the fiscal quarter ended Septembe 30, 2005, based on such evaluation; and
 
d.
Disclosed in this report any change in the company's internal control over financial reporting that occurred during the company's fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and
 
 
5.
The company's other certifying officers and I have disclosed, based on our most recent evaluation, to the company's auditors and the audit committee of company's board of directors (or persons performing the equivalent functions):
 
 
a.
All significant deficiencies in the design or operation of internal controls which could adversely affect the company's ability to record, process, summarize and report financial data and have identified for the company's auditors any material weaknesses in internal controls; and
 
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal controls; and
 
 
6.
The company's other certifying officers and I have indicated in this report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
 
Date: November 8, 2005
/s/ Jean LeRoy
 
Jean LeRoy, Chief Financial Officer
 
 


EXHIBIT 31.2 HTML

ex31_2.htm


 
 
CERTIFICATION
 
I, Thomas Elliott, certify that:
 
 
1.
I have reviewed this annual report on Form 10-QSB of Supreme Realty Investments, Inc.;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the fiscal quarter ending Septembe 30, 2005;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the fiscal quarter ended Septembe 30, 2005;
 
4.
The company's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 and 15d-15) for the company and have:
 
 
a.
Designed such disclosure controls and procedures to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the fiscal quarter ended Septembe 30, 2005;
 
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c.
Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the fiscal quarter ended Septembe 30, 2005, based on such evaluation; and
 
d.
Disclosed in this report any change in the company's internal control over financial reporting that occurred during the company's fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and
 
 
5.
The company's other certifying officers and I have disclosed, based on our most recent evaluation, to the company's auditors and the audit committee of company's board of directors (or persons performing the equivalent functions):
 
 
a.
All significant deficiencies in the design or operation of internal controls which could adversely affect the company's ability to record, process, summarize and report financial data and have identified for the company's auditors any material weaknesses in internal controls; and
 
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal controls; and
 
 
6.
The company's other certifying officers and I have indicated in this report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 8, 2005
/s/ Thomas Elliott
 
Thomas Elliott, Chief Executive Officer
 
 


EXHIBIT 32.1 HTML

ex32_1.htm


 
 
CERTIFICATION PURSUANT TO
 
18 U.S.C. 1350,
 
AS ADOPTED PURSUANT TO
 
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
 
In connection with the Annual Report of Supreme Realty Investments, Inc. (the "Company") on Form 10-QSB for the year ended Septembe 30, 2005, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Thomas Elliott, in my capacity as Chief Executive Officer, and I, Jean LeRoy, in my capacity as Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
 
 
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
 
Date: November 8, 2005
/s/ Thomas Elliott
 
Thomas Elliot
Chief Executive Officer
 
 
 
/s/ Jean LeRoy
 
Jean LeRoy
Chief Financial Officer