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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Amendment No. 1 to

FORM 10-K

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Year Ended December 31, 2011 Commission File No. 0-29627

 

Shearson American REIT, Inc.

(Formerly Known As PSA, INC.)

 

Nevada   88-0212662
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
     
1059 Redondo Drive, Los Angeles, CA   90019
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code:

(323) 937-6563

 

Securities registered pursuant to Section 12(b) of the Act:

None

 

Securities registered pursuant to Section 12(g) of the Act:

  Common Stock, $.001 par value

 

 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes [  ]  No [X]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes [  ]   No [X]

 

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.  Yes [X]  No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [  ]  No [X]

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer [  ] Accelerated filer [  ]

Non-accelerated filer [  ]

(Do not check if a smaller reporting company)

Smaller reporting company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [X]  No [  ]

 

The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2011 was $0 based on a closing bid quotation on the OTC Bulletin Board on that date of $.00 per share. For the sole purpose of making this calculation, the term “non-affiliate” has been interpreted to exclude directors, corporate officers and holders of 10% or more of the Company’s common stock. Determination of stock ownership by non-affiliates was made solely for the purpose of this requirement, and the registrant is not bound by these determinations for any other purpose.

 

As of April 14, 2012 a total of 52,518,999 of the registrant’s common stock was outstanding.

 

Documents Incorporated By Reference

None

 

 

 

 
 

 

SHEARSON AMERICAN REIT, INC.

ANNUAL REPORT ON FORM 10-K

FOR THE PERIOD FROM JANUARY 1, 2010 THROUGH DECEMBER 31, 2010

 

TABLE OF CONTENTS

 

    Page
     
  PART I  
     
Item 1. Business 4
Item 1A. Risk Factors 8
Item 1B. Unresolved Staff Comments 9
Item 2. Properties 9
Item 3. Legal Proceedings 9
Item 4. Mine Safety Procedures 10
     
PART II
     
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 10
Item 6. Selected Financial Data 11
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 11
Item 7A. Quantitative and Qualitative Disclosures About Market Risk  13
Item 8 Financial Statements and Supplementary Data F-1
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  14
Item 9A Controls and Procedures 14
Item 9B Other Information 15
     
PART III
     
Item 10 Directors, Executive Officers and Corporate Governance  16
Item 11 Executive Compensation  18
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 19
Item 13 Certain Relationships and Related Transactions, and Director Independence  20
Item 14 Principal Accountant Fees and Services  20
     
PART IV
     
Item 15 Exhibits and Financial Statement Schedules 21

 

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Special Note Regarding Forward Looking Statements

 

In addition to historical information, this Form 10-K contains certain “forward-looking statements”. All statements contained in this Form 10-K, other than statements of historical facts, that address future activities, events or developments are forward-looking statements, including, but not limited to, statements containing the words “believe,” “expect,” “anticipate,” “intends,” “estimate,” “forecast,” “project,” and similar expressions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new products, services, developments or industry rankings; any statements regarding future revenue, economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. These statements are based on certain assumptions and analyses made by us in light of our experience and our assessment of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate under the circumstances. However, whether actual results will conform to the expectations and predictions of management is subject to a number of risks and uncertainties described under Item 1A – Risk Factors below that may cause actual results to differ materially.

 

Consequently, all of the forward-looking statements made in this Form 10-K are qualified by these cautionary statements and there can be no assurance that the actual results anticipated by management will be realized or, even if substantially realized, that they will have the expected consequences to or effects on our business operations. Readers are cautioned not to place undue reliance on such forward-looking statements as they speak only of the Company’s views as of the date the statement was made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

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PART I

 

ITEM 1.Business

 

General

 

SHEARSON AMERICAN REIT, INC. (“SHEARSON” or “SART- I”) was originally incorporated as PSA, INC. (“PSA”), a California Corporation on May 27, 1994.

 

CHANGES IN CONTROL OF REGISTRANT

 

PSA, Inc. (“PSA” or the “Company”) became a publicly-held company upon completion of its merger in April 1998 with American Telecommunications Standard International, Inc. (“ASAT”), originally incorporated in Nevada in 1985. In connection with the merger, ASAT changed its trading symbol from ASAT to PSAZ. On September 22, 1998, the Company changed its trading symbol to PSAX and then back to PSAZ on July 31, 2001. The Company’s shares of common stock were traded on OTC Bulletin Board.

 

Upon effectiveness of the merger, pursuant to Rule12g-3(a) of the General Rules and Regulations of the Securities and Exchange Commission, PSA elected to change its name from ASAT to PSA, INC. for reporting purposes under the Securities Exchange Act of 1934 and elected to report under the Act effective February 18, 2000.

 

Subsequently, PSA, Inc., a Nevada Corporation, acquired all of the outstanding shares of Common stock of Canticle Corporation (“Canticle”), a Delaware Corporation, from the shareholders thereof in an exchange for an aggregate of 56,000 shares of common stock of PSA (the “Acquisition”). As a result, Canticle became a wholly-owned subsidiary of PSA.

 

The Acquisition of Canticle was approved by the unanimous consent of the Board of Directors of PSA on February 11, 2000. The Acquisition was effective February 18, 2000. The Acquisition was intended to qualify as a reorganization within the meaning of Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended.

 

PSA had 31,500,235 shares of common stock issued and outstanding prior to the Acquisition and 31,556,235 shares issued and outstanding following the Acquisition.

 

Upon effectiveness of the Acquisition, pursuant to Rule12g-3(a) of the General Rules and Regulations of the Securities and Exchange Commission, PSA elected to become the successor issuer to Canticle for reporting purposes under the Securities Exchange Act of 1934 and elected to report under the Act effective February 18, 2000.

 

Ownership control has not changed since the original incorporation of PSA, Inc. in California on May 27, 1994.

 

GENERAL BUSINESS PLAN

 

The Company commenced its development stage status and changed its name on October 16, 2009 to Shearson American REIT, Inc. with the sole purpose of becoming a Real Estate Investment Trust (REIT). The Company and its management have no experience in operating or creating a REIT, nor is there any assurance that we can acquire an existing REIT.

 

The Board of Directors authorized the development of a Business Plan and an implementation document to qualify as a Real Estate Investment Trust (REIT). The Board of Directors has not authorized the Company to combine with any entity or operating company which, once completed, would cause the Company to lose its REIT status or not be able to qualify as a REIT.

 

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For the Company to qualify as a REIT it must qualify under the Internal Revenue Code, Section 857 (IRS Code). The Company has not sought approval nor does it believe that it currently qualifies as a REIT. Under the IRS Code, the Company must have a minimum of 100 shareholders. We currently meet this requirement. Under the IRS Code, the Company may have no more than 50% of the shares held directly or indirectly by five or fewer individuals by the 2 nd year as a REIT. We do not currently meet this requirement. Management and the Board of Directors expect that this provision will be met within the time allocated, either by the divestiture of shares currently held by individual shareholders, understanding that we cannot direct an individual shareholder to divest his or her shareholdings and have no plans to acquire the shares of any shareholder, or through the issuance of additional shares by the Company. Under the IRS Code, the Company must have invested at least 75% of total assets in qualifying real estate assets. We expect to be compliant within the time allocated through investments made by the Company under its investment strategy. Under the IRS Code, the Company must derive at least 75% of gross income from rents from real property. We expect to be compliant within the time allocated once investment begins and operations commence.

 

The Company currently has no qualifying REIT assets. The Company believes that the lack of existing assets may provide a competitive advantage over existing REITs. The Company is not burdened with assets acquired prior to the current downturn in the real estate market. It is probable that an existing REIT may have assets that would be depressed in comparison to the original purchase price. It is also possible that the original cost of capital to the existing REIT may be higher than that available to the Company in the current market. Conversely, the Company has no history of acquiring properties that existing REITs may have. This lack of experience on the part of Company management in making acquisitions is a competitive disadvantage to the Company.

 

A REIT security sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages.

 

Equity REITs: Equity REITs invest in and own properties (thus responsible for the equity or value of their real estate assets). Their revenues come principally from their properties’ rents.

 

Mortgage REITs: Mortgage REITs deal in investment and ownership of property mortgages. These REITs loan money for mortgages to owners of real estate, or purchase existing mortgages or mortgage-backed securities. Their revenues are generated primarily by the interest that they earn on the mortgage loans.

 

Hybrid REITs: Hybrid REITs combine the investment strategies of equity REITs and mortgage REITs by investing in both properties and mortgages. Individuals can invest in REITs either by purchasing their shares directly on an open exchange or by investing in a mutual fund that specializes in public real estate. An additional benefit to investing in REITs is the fact that many are accompanied by dividend reinvestment plans (DRIPs). Among other things, REITs invest in shopping malls, office buildings, apartments, warehouses and hotels. Some REITs will invest specifically in one area of real estate - shopping malls, for example - or in one specific region, state or country. Investing in REITs is a liquid, dividend-paying means of participating in the real estate market. The Company has no intention of becoming a mortgage REIT or investing in mortgage REITs.

 

When and if SHEARSON completes qualification as a REIT it may later locate another company to acquire. The acquisition would most likely take the form of a merger, stock-for-stock exchange or stock-for-assets exchange. It is probable that the target company will wish to structure the business combination to be within the definition of a tax-free reorganization under Section 351 or Section 368 of the Internal Revenue Code of 1986, as amended. SHEARSON has had no discussion or negotiations with any candidates with respect to possible corporate acquisitions, mergers or similar transactions.

 

No assurances can be given that if SHEARSON elects to acquire a target company that it will be successful in locating or negotiating with one.

 

ASPECTS OF A REPORTING COMPANY:

 

There are certain perceived benefits to being a reporting company. These are commonly thought to include the following:

 

increased visibility in the financial community;

 

provision of information required under Rule 144 for trading of eligible securities;

 

compliance with a requirement for admission to quotation on the OTC Bulletin Board or on the NASDAQ Capital Market;

 

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the facilitation of borrowing from financial institutions;

 

increased valuation;

 

greater ease in raising capital;

 

compensation of key employees through stock options for which there may be a market valuation;

 

enhanced corporate image.

 

There are also certain perceived disadvantages to being a reporting company. These are commonly thought to include the following:

 

requirement for audited financial statements;

 

required publication of corporate information;

 

required filings of periodic and episodic reports with the Securities and Exchange Commission;

 

increased rules and regulations governing management, corporate activities and shareholder relations.

 

COMPARISON WITH INITIAL PUBLIC OFFERING

 

Certain private companies may find a business combination more attractive than an initial public offering of their securities. Reasons for this may include the following:

 

inability to obtain an underwriter;

 

possible larger costs, fees and expenses of a public offering;

 

possible delays in the public offering process;

 

greater dilution of outstanding securities.

 

Certain private companies may find a business combination less attractive than an initial public offering of their securities. Reasons for this may include the following:

 

no investment capital raised through a business combination;

 

no underwriter support of trading.

 

POTENTIAL TARGET COMPANIES

 

Business entities, if any, which may be interested in a combination with SHEARSON, may include the following:

 

a company for which a primary purpose of becoming public is the use of its securities for the acquisition of assets or businesses;

 

a company which is unable to find an underwriter of its securities or is unable to find an underwriter of securities on terms acceptable to it;

 

a company which wishes to become public with less dilution of its securities than would occur upon an underwriting;

 

a company which believes that it will be able to obtain investment capital on more favorable terms after it has become public;

 

a foreign company which may wish an initial entry into the United States securities market;

 

a special situation company, such as a company seeking a public market to satisfy redemption requirements under a qualified Employee Stock Option Plan;

 

a company seeking one or more of the other perceived benefits of becoming a public company.

 

No assurances can be given that if SHEARSON so elects to acquire a target company or REIT that it will be able to enter into any business combination, as to the terms of a business combination, or as to the nature of a target company.

 

SHEARSON has voluntarily filed a registration statement on Form 10 with the Securities and Exchange Commission and was under no obligation to do so under the Exchange Act. SHEARSON will continue to file all reports required of it under the Exchange Act until a business combination has occurred. A business combination may result in a change in control and management of SHEARSON. Since a principal benefit of a business combination with SHEARSON would normally be considered its status as a reporting company, it is anticipated that SHEARSON will continue to file reports under the Exchange Act following a business combination. No assurance can be given that this will occur or, if it does, for how long.

 

6
 

 

We presently have no employees apart from our management. All of our officers and directors are engaged in outside business activities and anticipate that they will devote very limited time to our business until the acquisition of a successful business opportunity has been identified. We expect no significant changes in the number of our employees other than as a direct result, if any, incident to a business combination. The Company’s CEO, President, COO and CFO are expected to work full time, at no less than 40 hours per week, once the Company has commenced substantial operations.

 

On January 26, 2010, the Company received notice from the U.S. Securities and Exchange Commission in connection with its Order Instituting Administrative Proceedings (“IAP”) pursuant to Section 12(J) of the Securities and Exchange Act of 1934, as amended (“the Exchange Act”). The IAP was instituted since the Company had been deficient in complying with the Company’s obligations under Exchange Act for several years. Specifically, the Company failed to file Form 10-Ks for the years ended December 31, 2000 through December 31, 2007. In addition, the Form 10-Ks for the years ended December 31, 2008 and 2009 were not filed timely. In addition, the Form 10-Qs for 2001 through 2009 were not filed. As a consequence of the Company’s failure to file these reports, all of the Company’s securities were involuntarily deregistered pursuant to 12(j) of the Exchange Act, which in part prohibits broker dealers from effecting transactions in the Company’s securities until the securities are registered. Accordingly, the Company has filed a registration statement Form 10 with the Securities and Exchange Commission.

 

Prior to September 11, 2001, PSA, Inc. (PSA) was a holding company for entities that were developing interactive television format with the emerging digital broadcast and interactive technologies, and digital video production and post product services, as well as international tour, travel and entertainment products and services, including an e-commerce platform for purchasing travel services.

 

PSA has been inactive since 2001. The events of September 11, 2001 caused significant damage to the ability of PSA and its subsidiaries to continue in business beyond that date; as the Company derived all of its revenue from the Travel Industry. The Company’s largest asset, an investment in its subsidiary S.M.A. Real Time Inc., was located blocks from ground zero and filed for bankruptcy in 2003 and was ultimately liquidated in 2005 without any recovery to PSA.

 

PSA’s operations in the international tour and travel business were closed or sold. The subsidiaries, Royal International Tours, Inc., Travel Treasures, Inc., Jet Vacations, PSAZZ Travel, Inc., PSA Europe AG, PSAZZ TV, Inc., PSAZZ Network, Inc., and PSA Air, Inc. were closed down without any benefit realized by the Company.

 

The Company had a pending contract with New York Network, LLC which would have included ten low power television licenses under the call sign WBVT-TV, another with Victory Entertainment Corp. and finally a contract with U.S. Dental, Inc. The Company was unable to complete these acquisitions and any contract cost or advances made towards the acquisitions were lost. None of the Company’s common stock that was planned as part of the consideration for the purchase was issued.

 

The Company has previously reported that it had completed the sale of 80% of the issued and outstanding stock of PSAZZ Air, Inc. (“PSAZZ Air”) formerly known as Pacific Southwest Airlines, Inc., an inactive airline majority-owned subsidiary. The purchaser of PSAZZ Air was John D. Williams, who at the time of purchase was a former Board Member of PSA. Pursuant to the agreement, PSA was to receive a $1,000,000 note payable within 18 months and to be secured by 312,500 shares of the Company’s Common Stock otherwise issuable to Mr. Williams for the purchase by the Company of 100% of Pacific Southwest Airline Services, Inc. Once the full effect of the events of

 

September 11, 2001 were fully understood the Company unwound this transaction, including the issuance of the Company’s 312,500 shares of the Company’s Common Stock previously noted.

 

Employees

 

As of December 31, 2011, the Company had three employees, Richard Orcutt, President, John Williams, Chairman and Chief Financial Officer, and Jonathon Schatz, Treasurer. Each of the employees devote a portion of their time to their duties with SART I while devoting their remaining time to their other affairs.

 

7
 

 

ITEM 1A.Risk Factors

 

We have no assets and no source of revenue.

 

We have no assets and have had no revenue since 2001, nor will we receive any operating revenues until we complete an acquisition, reorganization, merger or successfully develop our REIT business. We can provide no assurance that any acquired business or property will produce any material revenues for the Company or its stockholders or that any such business or property will operate on a profitable basis. We can provide no assurance that we can obtain a REIT tax status.

 

There is an absence of substantive disclosure relating to our prospective new businesses.

 

Because we have not yet identified any assets, property or business that we may acquire or develop, our current stockholders and potential investors in the Company have virtually no substantive information about any such new business upon which to base a decision whether to invest in the company. We can provide no assurance that any investment in the Company will ultimately prove to be favorable. In any event, stockholders and potential investors will not have access to any information about any new business until such time as a transaction is completed and we have filed a report with the SEC disclosing the nature of such transaction and/or business.

 

Although the Company has not identified specific properties to purchase, it anticipates making real estate investments. After the Company has made investments in 15 projects, we intend to limit the percentage of investment made in an individual project to 10% of the Company’s assets. Exceptions to these investment limitations will be considered only following authorization by the Board of Directors.

 

If an acquisition is consummated, stockholders will not know its structure and will likely suffer dilution.

 

Our management has no arrangements to acquire any specific assets, property or business. Accordingly, it is unclear whether further acquisitions would take the form of an exchange of capital stock, a merger or an asset acquisition. However, because we have limited resources as of the date hereof, such acquisition is more likely to involve the issuance of our Company stock.

 

We had 75,000,000 authorized shares of common stock as of December 31, 2011. As of April 14, 2012, we had 52,518,999 shares of common stock outstanding. We will not be able to issue significant amounts of additional shares of common stock without obtaining stockholder approval, provided we comply with the rules and regulations of any exchange or national market system on which our shares are then listed. As of the date of this report, we are not subject to the rules of any exchange that would require stockholder approval. To the extent we issue additional common stock in the future, existing stockholders will experience dilution in percentage ownership.

 

Management devotes insignificant time to activities of the Company.

 

The Company’s sole manager is not required to and does not devote his full time to the affairs of the Company. Because of his time commitments to SART-I as well as the fact that we have no business operations, our manager anticipates that he will not devote a significant amount of time to the activities of the Company, except in connection with identifying a suitable acquisition target business or property to acquire or develop.

 

SART I’s beneficial owners or their affiliates may have conflicts of interest.

 

Although we have not identified any potential acquisition target property or new business opportunities, the possibility exists that we may acquire or merge with a business or company in which the beneficial owners or their affiliates may have an existing ownership interest. A transaction of this nature would present a conflict of interest for those parties with an ownership interest in both the Company and entity to be acquired. An independent appraisal of the acquired company may or may not be obtained in the event a related party transaction is contemplated.

 

8
 

 

There is significant competition for acquisition candidates.

 

Our management believes that there are numerous companies, most of which have greater resources than the Company does, that are also seeking merger or acquisition transactions. These entities will present competition to SART I in its search for a suitable transaction candidate, and we make no assurance that we will be successful in that search.

 

There is no assurance of continued public trading market and being a low priced security may affect the market value of stock.

 

To date, there has been only a limited public market for our common stock. Our common stock was quoted on the OTCBB as of December 31, 2011. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations as to the market value of our stock.

 

ITEM 1B.Unresolved Staff Comments

 

The Company has filed a Form 10, General Form for Registration of Securities, with the Securities and Exchange Commission. The SEC has sent comments to the Company concerning this filing. The Company has not conformed its answers into an amended Form 10 as of this filing, but anticipates completing that amendment as soon as this filing is made.

 

ITEM 2.Description of Property

 

None

 

ITEM 3.Legal Proceedings

 

At the time in 2001 when SART I became inactive, the Company was involved in the following legal proceedings:

 

With liability to the Company:

 

Meyer Group Ltd., et al., v. Douglas T. Beaver, et al. Superior Court of Orange County, California, Case No. 775680. Defendant Robert E. Thompson filed a cross-complaint against the Company and others, including American Telecommunications Standards International, Inc. (“ATSI”), with whom the Company entered into a stock exchange agreement and plan of reorganization on March 13, 1998. Mr. Thompson alleges that he was fraudulently induced by ATSI and others to invest money in various ventures, both related and unrelated to the Company. The Company believes the claims against ATSI to be without merit, and is vigorously defending the cross-complaint. Mr. Thompson settled all claims against all other defendants except for the claim of breach of contract and conversion against ATSI, predecessor in interest to the Company. A jury trial was conducted in December 2001 and a judgment entered against the Company for $100,501. As of the date of this filing the judgment remains unpaid. The Company has recorded the liability and the interest accrued thereon. A judgment may be executed upon for 10 years from the date of entry. This time may be extended if the judgment creditor refiles the judgment in the county it was originally issued in.

 

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As of April 14, 2012 the Company has no outstanding or pending litigation matters.

 

ITEM 4.Mine Safety Procedures

 

N/A

 

PART II

 

ITEM 5.Market for the Registrant’s Common Equity and Related Stockholder Matters

 

(a) General. As of December 31, 2011, SART I had an authorized capitalization of 75,000,000 shares of common stock, $.001 par value per share, of which 52,518,999 shares had been issued and 52,514,749 shares were outstanding as of December 31, 2011. No preferred stock has been authorized.

 

(b) Market Information. The common stock of SART I is traded in the over-the-counter (“OTC”) market and quoted through the NASD OTC Bulletin Board under the symbol “PSAZ.” Historically, the level of trading in Shearson’s common stock has been sporadic and limited and there is no assurance that a stable trading market will develop for its stock or that an active trading market will be sustained.

 

The following table sets forth the range of high and low bid quotation per share for the Common Stock as reported by the OTC Bulletin Board for the quarterly periods of the calendar years indicated. The bid price reflects inter-dealer prices and does not include retail mark-up, markdown, or commission.

 

   High  Low
2010      
First Quarter  $.01   $.01 
Second Quarter  $.01   $.01 
Third Quarter  $.01   $.01 
Fourth Quarter  $.0001   $.0001 
           
2011          
First Quarter  $.000   $.000 
Second Quarter  $.000   $.000 
Third Quarter  $.000   $.000 
Fourth Quarter  $.000   $.000 

 

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Shareholders

 

As of December 31, 2011 SART I had 52,514,749 shares of common stock outstanding held by approximately 643 shareholders of record.

 

Dividends

 

SART I has never declared or paid cash dividends on its Common Stock and anticipates that future earnings, if any, will be retained for development of its business.

 

ITEM 6.Selected Financial Data

 

Not applicable.

 

ITEM 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Overview

 

Since SART I became inactive after the events of September 11, 2001, the Company has had no business operations. On October 16, 2009 PSA changed its name to Shearson American REIT, Inc. (SART I) and became a development stage company. SART I hopes to become a real estate investment trust, or “REIT,” that will invest primarily in institutional-quality properties located in the United States. In addition, we may invest in other real estate investments including, but not limited to, properties located outside of the United States, mortgage loans and ground leases. We wish to be a fully integrated global Real Estate Investment Trust and management firm that will acquire, develop, own, operate and sell real estate.

 

SHEARSON intends to acquire properties for cash, stock, a combination of cash and stock and finance the acquisitions, when possible, with traditional financing sources. In implementing our investment strategy, we will use our management teams’ expertise to identify and evaluate attractive real estate investment opportunities. We expect that our management team will make decisions based on a variety of factors, including expected risk-adjusted return, credit fundamentals, liquidity, availability and cost of financing, market-specific conditions and macroeconomic conditions. In addition, all investment decisions will be made with a view to maintaining our qualification as a REIT. Financing is not expected to exceed 90% of the value of any one project. The Company will limit mortgages on any one property to a single first mortgage. Although the Company has not identified specific properties to purchase, it anticipates making real estate investments. After the Company has made investments in 15 projects, we intend to limit the percentage of investment made in an individual project to 10% of the Company’s assets. Exceptions to these investment limitations will be considered only following authorization by the Board of Directors.

 

SHEARSON intends to invest primarily in institutional-quality multi-use and multi-family properties located in the United States. In addition, we may invest in other real estate investments including, but not limited to, ground leases and leasehold interests in other types of real property. We have not established a specific investment strategy but may become a fully integrated Real Estate Investment Trust that will acquire, develop, own, operate and monetize real estate. We do not plan on investing in mortgages or securities.

 

We have no plans to change our investment objectives. The process by which we decide to make a real estate investment will benefit from the experience, resources and relationships of our senior management team and from our operation-ready, in-house investment and asset management platform, including its full spectrum of real estate and finance professionals. This process initially will involve:

 

identifying opportunities for real estate investment consistent with our investment objectives;

 

assessing the opportunities to ensure that they meet preliminary screening criteria; and

 

reviewing the opportunities to determine whether to incur costs associated with more in-depth diligence.

 

11
 

 

if the decision is made to proceed with full-scale diligence, the next phase of our investment process will involve assessing the risk-reward profile of the investment through, among other things:

 

°intensive data collection by our in-house investment and asset management team and third-party providers, including, as appropriate, financial, physical, legal and environmental due diligence of investment opportunities;

 

°data consolidation and comprehensive analysis of the key drivers affecting value, such as cash flows, asset capitalization and asset performance;

 

°assessment of the general economic and demographic characteristics of the market;

 

°thorough review of the investment capital structure, borrower and tenant analysis, legal structure and deal documentation;

 

°evaluation of existing financing or new financing;

 

°intensive evaluation and credit analysis of the rent stream; and

 

°review of entitlements and zoning.

 

In assessing the suitability of a particular investment for our portfolio, we will evaluate the expected risk-adjusted return relative to the expected returns available from comparable investments. Our in-house investment and asset management team will also identify opportunities to enhance the asset’s value through, among other things, competitive repositioning, development and targeted physical enhancements. The in-house investment and asset management team will also consider our ability to extract excess value from the investment through active post-acquisition asset management, including regular leasing and operating reviews. Based on the foregoing criteria, among others, we will make an investment decision and, if the decision is made to proceed with an investment, will utilize our extensive knowledge of the market for our target assets, comprehensive investment return analysis and proprietary modeling systems to establish an appropriate price for such assets. Any changes in investment objectives will require the approval of the Board of Directors.

 

The following discussion of the financial condition and results of operations of SART I should be read in conjunction with the financial statements and notes thereto included elsewhere in this report. This discussion contains forward-looking statements which involve risks and uncertainties. The Company’s actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth under “Part 1 — Item 1A. Risk Factors.”

 

Results of Operations

 

For the year ended December 31, 2011 as compared to the year ended December 31, 2010.

 

Revenues and Cost of revenues. Since becoming inactive after the events of September 11, 2001, PSA has not generated any revenue and has not incurred any cost of revenues.

 

General and administrative expenses. General and administrative expenses for the year ended December 31, 2011 were $30,589 as compared to $94,599 in 2010 and consist primarily of filing costs and travel and entertainment costs and professional fees in both years. The decrease in 2011 results principally from a decrease in professional fees.

 

12
 

 

Other (expense) income. Interest expense of $17,637 and $22,544 was incurred for the years ended December 31, 2011 and 2010. The interest expense incurred was principally accrued on an outstanding judgment of $100,501 against the Company. Refer to Item 3, Legal Proceedings for further details.

 

Liquidity and Capital Resources

 

SART I has not generated any revenue since the events of September 11, 2001. As a result, the Company’s primary source of liquidity prospectively will be from equity or debt sources. There is no assurance that any such equity or debt sources will be available or available on the terms favorable or acceptable to the Company. Additionally, our ability to obtain such funds may be made more difficult due to the current global financial crisis and its effect on the capital markets.

 

On January 26, 2010, the Company received notice from the U.S. Securities and Exchange Commission in connection with an Order Instituting Administrative Proceedings (“IAP”) pursuant to Section 12(J) of the Securities and Exchange Act of 1934, as amended (“the Exchange Act”). The IAP was instituted since the Company had been deficient in complying with the Company’s obligations under the Exchange Act for several years. Specifically, the Company failed to file Form 10-Ks for the years ended December 31, 2000 through December 31, 2007. In addition, the Form 10-Ks for the year ended December 31, 2009 was not filed timely. In addition, the Form 10-Qs for 2001 through 2009 were not filed. As a consequence of the Company’s failure to file these reports, all of the Company’s securities were involuntarily deregistered pursuant to 12(j) of the Exchange Act which, in part, prohibits broker dealers from effecting transactions in the Company’s securities until the securities are registered. Since the Company has not been active and has not attempted to raise capital, the deregistration has had no current impact on the Company’s liquidity or capital resources. However, the deregistration will have negative impact on the future liquidity and the Company’s ability to access capital resources. Accordingly, the Company has filed a Form 10, General Form for Registration of Securities, with the Securities and Exchange Commission.

 

Working capital during 2011 has been provided by affiliates of the Company.

 

Recent Accounting Pronouncements

 

The Company does not believe that other recently issued accounting pronouncements will have a material impact on its financial statements.

 

Critical Accounting Policies and Estimates

 

Critical accounting estimates are those that management deems to be most important to the portrayal of our financial condition and results of operations, and that require management’s most difficult, subjective or complex judgments, due to the need to make estimates about the effects of matters that are inherently uncertain. We have identified our critical accounting estimates which are discussed in note 2 to the financial statements.

 

Going Concern

 

The Company’s financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

 

The Company is in the development stage and has experienced a loss from operations as a result of its investment necessary to achieve its operating plan, which is long-range in nature. The Company incurred net losses from inception to December 31, 2011, aggregating $175,440 and has working capital and stockholder deficits of $383,532 at December 31, 2011. In addition, the Company has no full time employees and during 2011 an officer contributed $3,000 in services to the Company.

 

The Company’s ability to continue as a going concern is contingent upon its ability to secure additional financing, increase ownership equity and develop profitable operations. In addition, the Company’s ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered by entrance into established markets and the competitive environment in which the Company operates.

 

The Company is pursuing financing for its operations and seeking additional private investments. In addition, the Company is seeking to expand its revenue base and product distribution. Failure to secure such financing or to raise additional equity capital and to expand its revenue base and product distribution may result in the Company depleting its available funds and not being able pay its obligations.

 

The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

 

ITEM 7A.Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable.

 

13
 

 

ITEM 8.Financial Statements

 

Report of Independent Registered Public Accounting Firm

 

To the Board of Directors and Stockholders of

Shearson American REIT, Inc. (formerly known as PSA, Inc.)

(a development stage company)

 

We have audited the accompanying balance sheets of Shearson American REIT, Inc. (formerly known as PSA, Inc.) (a development stage company) as of December 31, 2011 and 2010, and the related statements of operations, changes in stockholders’ equity/(deficit), and cash flows for the years ended December 31, 2011 and 2010, and the period from October 16, 2009 (inception) to December 31, 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Shearson American REIT, Inc. (formerly known as PSA, Inc.) (a development stage company) as of December 31, 2011 and 2010, and the results of its operations, changes in stockholders’ equity/(deficit) and its cash flows for the years ended December 31, 2011 and 2010, and the period from October 16, 2009 (inception) to December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company is in the development stage, has suffered operating losses and has negative working capital which raises 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/ Kingery & Crouse, P.A.

Certified Public Accountants

 

Tampa, Florida

April 16, 2012

 

F-1
 

 

SHEARSON AMERICAN REIT, INC.

(Formerly Known As PSA, INC.)

(A Development Stage Company)

BALANCE SHEETS

December 31, 2011 and 2010

 

   2011   2010 
       (Restated) 
ASSETS          
Current Assets          
Total current assets  $-   $- 
Total Assets  $-   $- 
           
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)          
Current Liabilities:          
Accounts Payable  $27,598   $25,598 
Bank Overdraft   -    311 
Loans payable   102,769    75,247 
Accrued Liabilities   253,165    237,150 
Total Liabilities   383,532    338,306 
           
Commitments and Contingencies          
           
Stockholders' Equity (Deficit)          
Common Stock-$.001 par value, 75,000,000 shares authorized; 52,518,999 shares issued and 52,514,749 shares outstanding   52,519    52,519 
Paid-in Capital   25,442,953    25,439,953 
Retained deficit- Prior to Development Stage   (25,689,281)   (25,689,281)
Deficit accumulated during the development stage   (175,440)   (127,214)
Less Treasury Stock 4,250 shares, at cost   (14,283)   (14,283)
Total Stockholders' Equity (Deficit)   (383,532)   (338,306)
Total Liabilities and Stockholders' Equity (Deficit)  $-   $- 

 

The accompanying notes are an integral part of the financial statements.

 

F-2
 

  

SHEARSON AMERICAN REIT, INC.

(Formerly Known As PSA, INC.)

(A Development Stage Company)

STATEMENTS OF OPERATIONS

Years Ended December 31, 2011 and 2010, and

Period From Inception (October 16, 2009) through December 31, 2011

 

   Year Ended   Year Ended   Inception to 
   December 31,   December 31,   December 31, 
   2011   2010   2011 
       (Restated)   (Restated) 
             
Revenue  $-   $-   $- 
                
Operating costs:               
General and administrative   30,589    94,599    131,132 
                
Operating loss   (30,589)   (94,599)   (131,132)
                
Other expense:               
Interest   (17,637)   (22,544)   (44,308)
                
Loss before income taxes   (48,226)   (117,143)   (175,440)
                
Income taxes   -    -    - 
                
Net loss  $(48,226)  $(117,143)  $(175,440)
                
Per share information: Basic and Diluted               
Net loss per share  $(0.00)  $(0.00)     
Weighted average shares outstanding   52,514,749    52,514,749      

 

The accompanying notes are an integral part of the financial statements.

 

F-3
 

 

SHEARSON AMERICAN REIT, INC.

(Formerly Known As PSA, INC.)

(A Development Stage Company)

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

For the Period From October 16, 2009 (Inception) through December 31, 2011

 

                   Deficit         
                   Accumulated         
               Accumulated   During the         
   Common Stock   Paid-in   Deficit Prior to the   Development   Treasury     
   Shares   Amount   Capital   Development  Stage   Stage   Stock   Total 
Balance at October 16, 2009   52,518,999   $52,519   $25,439,953   $(25,689,281)  $-   $(14,283)  $(211,092)
                                    
Net loss for the period ended December 31, 2009   -    -    -    -    (10,071)   -    (10,071)
                                    
Balance at December 31, 2009 (Restated)   52,518,999    52,519    25,439,953    (25,689,281)   (10,071)   (14,283)   (221,163)
                                    
Net loss for the year ended December 31, 2010   -    -    -    -    (117,143)   -    (117,143)
                                    
Balance December 31, 2010 (Restated)   52,518,999    52,519    25,439,953    (25,689,281)   (127,214)   (14,283)   (338,306)
                                    
Contributed services   -    -    3,000    -    -    -    3,000 
Net loss for the year ended December 31, 2011   -    -    -    -    (48,226)   -    (48,226)
                                    
Balance December 31, 2011   52,518,999   $52,519   $25,442,953   $(25,689,281)  $(175,440)  $(14,283)  $(383,532)

 

The accompanying notes are an integral part of the financial statements.

 

F-4
 

  

SHEARSON AMERICAN REIT, INC.

(Formerly Known As PSA, INC.)

(A Development Stage Company)

STATEMENTS OF CASH FLOWS

Year Ended December 31, 2011 and 2010, and

Period From Inception (October 16, 2009) through December 31, 2011

 

   Year Ended   Year Ended   Inception to 
   December 31,   December 31,   December 31, 
   2011   2010   2011 
Cash flows from operating activities:               
Net loss  $(48,226)  $(117,143)  $(175,440)
Adjustments to reconcile net loss to net cash used in operating activities:               
Direct payment of operating expenses   25,898    30,940    56,838 
Interest added to loans payable   1,624    612    2,236 
Contributed services   3,000    -    3,000 
Changes in assets and liabilities               
Accounts payable   2,000    25,598    27,598 
Accrued liabilities   16,015    21,931    48,017 
Net cash provided by (used in) operating activities   311    (38,062)   (37,751)
                
Cash flows from investing activities   -    -    - 
                
Cash flows from financing activities               
Proceeds from loans payable   -    74,600    74,600 
Repayments of loans payable   -    (36,849)   (36,849)
Bank overdraft   (311)   311    - 
Net cash provided by (used in) financing activities   (311)   38,062    37,751 
                
Net increase (decrease) in cash   -    -    - 
Cash beginning of period   -    -    - 
Cash end of period  $-   $-   $- 
                
Cash paid for interest  $-   $-   $- 
Cash paid for income taxes  $-   $-   $- 

 

The accompanying notes are an integral part of the financial statements.

 

F-5
 

 

SHEARSON AMERICAN REIT, INC.

(Formerly Known As PSA, INC.)

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

December 31, 2011 and 2010

 

Note 1. Organization

 

Nature of the Company:

 

The Company changed its name on October 16, 2009 to Shearson American REIT, Inc. with the purpose of creating a Real Estate Investment Trust. On October 16, 2009 the Company became a development stage company. The Company wishes to be a fully integrated Real Estate Investment Trust and management firm that will acquire, develop, own, operate and sell real estate. We intend to invest primarily in institutional-quality multi-use and multi-family properties located throughout the United States. The Company contemplates utilizing HUD/GNMA securities backed financing for most of its projects.

 

Prior to the terrorist attack on the World Trade Centers in New York City on September 11, 2001, SART I, formerly, PSA, Inc., was a holding company for entities that were developing interactive television format with the emerging digital broadcast and interactive technologies, and digital video production and post product services, as well as international tour, travel and entertainment products and services, including an e-commerce platform for purchasing travel services. Most of the operations of the subsidiaries of the Company were located near the World Trade Center. As a result of the damage done to the Company’s subsidiaries and because of the decimation to the travel industry in general as a result of the event, the Company discontinued its operations near the end of 2001. The subsidiaries ultimately either were liquidated through bankruptcy or closed without any return to the Company of its investment in these subsidiaries.

 

The largest subsidiary held by the company at the end of 2001, S.M.A. Real Time, Inc., declared bankruptcy in 2003 and was liquidated without any benefit to the Company in 2005. The subsidiaries, Royal International Tours, Inc., Travel Treasures, Inc. and Jet Vacations were closed down without any benefit realized by the Company.

 

The Company had a pending contract with New York Network, LLC which would have included ten low power television licenses under the call sign WBVT-TV, another with Victory Entertainment Corp. and finally a contract with U.S. Dental, Inc. The Company was unable to complete these acquisitions and any contract cost or advances made towards the acquisitions were lost.

 

Note 2. Summary of Significant Accounting Polices and Use of Estimates

 

Accounting Estimates:

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could materially differ from those estimates.

 

Development Stage:

 

On October 16, 2009 the Company became a development stage company as defined in Accounting Standards Codification 915, “Development Stage Entities” and has accounted for operations in accordance with those standards commencing on October 16, 2009. The Company had been dormant since September, 2001 until the commencement of the development stage period on October 16, 2009. No revenue was earned during the dormant period. Expenses, comprising of $110,591 in interest, was accrued on a litigation judgment during the dormant period.

 

Revenue Recognition

 

In general, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured.

 

Cash

 

For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.

 

F-6
 

 

Net Loss per Share:

 

Accounting Standards Codification (“ASC”) 260, “Earnings per Share,” provides for the calculation of basic and diluted earnings per share. Basic earnings per share includes no dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. Dilutive securities are not included in the weighted average number of shares when inclusion would be anti-dilutive.

 

Fair value of financial instruments

 

The Company has adopted FASB ASC 820-10-50, Fair Value Measurements. This guidance defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follows:

 

Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

 

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

 

Level 3 inputs to valuation methodology are unobservable and significant to the fair measurement.

 

The Company’s financial instruments include cash, accounts payable and accrued liabilities. The carrying amount of this financial instrument approximates fair value, due to the short-term nature of this item.

 

The Company does not hold or issue financial instruments for trading purposes nor does it hold or issue interest rate or leveraged derivative financial instruments.

 

Income taxes:

 

We compute income taxes in accordance with FASB ASC Topic 740, Income Taxes. Under ASC 740, provisions for income taxes are based on taxes payable or refundable during each reporting period and changes in deferred taxes. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. Also, the effect on deferred taxes of a change in tax rates is recognized in income in the period that included the enactment date. Deferred taxes are classified as current or non-current depending on the classifications of the assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.

 

We follow the guidance in FASB ASC Topic 740-10, Accounting for Uncertainty in Income Taxes, which prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement.

 

Going Concern

 

The Company’s financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

 

The Company is in the development stage and has experienced a loss from operations as a result of its investment necessary to achieve its operating plan, which is long-range in nature. The Company incurred net losses from inception to December 31, 2011, aggregating $175,440 and has working capital and stockholder deficits of $383,532 at December 31, 2011. In addition, the Company has no full time employees and during 2011 an officer contributed $3,000 in services to the Company.

 

The Company’s ability to continue as a going concern is contingent upon its ability to secure additional financing, increase ownership equity and develop profitable operations. In addition, the Company’s ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered by entrance into established markets and the competitive environment in which the Company operates.

 

F-7
 

 

The Company is pursuing financing for its operations and seeking additional private investments. In addition, the Company is seeking to expand its revenue base and product distribution. Failure to secure such financing or to raise additional equity capital and to expand its revenue base and product distribution may result in the Company depleting its available funds and not being able pay its obligations.

 

The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

 

Recent Accounting Pronouncements:

 

There have been no recent accounting pronouncements or changes in accounting pronouncements during the year ended December 31, 2011 or subsequent thereto which would have a material impact on our financial statements.

 

Reclassifications

 

Certain amounts in the December 31, 2009 and 2010 financial statements have been reclassified to conform to current year presentation.

 

Note 3. Accrued Liabilities

 

Accrued liabilities consist of the following:

   December 31, 
   2011 
Litigation judgment  $100,501 
Accrued interest on litigation judgment   152,664 
Total accrued liabilities  $253,165 

 

   December 31, 
   2010 
Litigation judgment  $100,501 
Accrued interest on litigation judgment   136,649 
Total accrued liabilities  $237,150 

 

A judgment was entered against the Company in 2002 for $100,501. As of the date of this filing the judgment remains unpaid. The Company has recorded the liability and the interest accrued thereon at a rate of 10% per annum. A judgment may be executed upon for 10 years from the date of entry. This time may be extended if the judgment creditor re-files the judgment in the county it was originally issued in. The Company disputes the judgment and has a continuing effort to settle this claim.

 

Note 4. Loans Payable

 

Through December 31, 2009, an affiliate had paid expenses on behalf of the Company aggregating $5,944. During 2010 this affiliate paid an additional $14,284 of expenses on behalf of the Company. In addition, during 2010 $20,193 of these loans was repaid by the Company.

 

During 2010 an affiliate paid expenses on behalf of the Company of $16,656 which was repaid during the year.

 

During 2010 two affiliates advanced the Company an aggregate of $74,600 for working capital purposes. The Company accrued interest of $612 on one of these advances at a rate of 3.25% per annum, which is included in the loan balance at December 31, 2010.

 

During 2011 two affiliates advanced the Company an aggregate of $25,898 for the direct payment of expenses.

 

Note 5. Income Taxes

 

Deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences. Deferred tax assets and liabilities at the end of each period are determined using the currently enacted tax rates applied to taxable income in the periods in which the deferred tax assets and liabilities are expected to be settled or realized.

 

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before provision for income taxes for the years ended December 31, 2011 and 2010. The sources and tax effects of the differences are as follows:

 

F-8
 

 

Income tax provision at the federal statutory rate   34%
Effect of operating losses   (34)%
    0%

 

As a result of net operating losses, the Company has not recorded a provision for income taxes. The components of the deferred tax assets and related valuation allowance at December 31, 2011 and 2010, are as follows:

 

   December 31,
2011
 
Deferred tax assets:     
Net operating loss carryforwards  $1,750,000 
Total deferred tax assets   1,750,000 
Less: valuation allowance   (1,750,000)
Net deferred taxes  $ 

 

   December 31,
2010
 
Deferred tax assets:     
Net operating loss carryforwards  $1,720,000 
Total deferred tax assets   1,720,000 
Less: valuation allowance   (1,720,000)
Net deferred taxes  $ 

 

As of December 31, 2011, the Company has net operating loss carryforwards of approximately $4,380,000 expiring through 2031. The Company believes sufficient uncertainty exists regarding the realizability of the deferred tax assets such that a full valuation allowance is required. The utilization of the net operating loss will be limited should a change in control of the Company occur. The Company’s income tax returns from its original inception are subject to audit as a result of the Company’s net operating losses.

 

Note 6. Correction of an Error

 

During 2009 and 2010, the Company had previously restated its issued share balance from the balance previously reported of 43,543,541 to 74,518,999 shares. Subsequently the Company determined that 22,000,000 shares issued by the transfer agent in 2000 had not paid for nor transferred to the listed shareholder. The initial correcting entry increased the common stock account and reduced the paid in capital account by $30,975 and the subsequent correcting entry reduced the common stock account and increased the paid in capital account by $22,000. There was no effect on the net loss or the net loss per share.

 

F-9
 

 

ITEM 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

Not Applicable

 

ITEM 9A.Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Our management, including our Chief Executive Officer (the CEO) and Chief Financial Officer (the CFO), reviewed and evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act) as of the end of the period covered by this annual report. Based on that review and evaluation, the Company’s CEO and CFO concluded that because of the material weakness described below the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

 

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Our internal control system was designed to, in general, provide reasonable assurance to the Company’s management and board regarding the preparation and fair presentation of published financial statements, but because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

 

14
 

 

Management’s Report on Internal Control Over Financial Reporting

 

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company, as such term is defined in Exchange Act Rule 13a-15(f). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only with proper authorizations; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

  

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. These inherent limitations are an intrinsic part of the financial reporting process. Therefore, although the Company’s management is unable to eliminate this risk, it is possible to develop safeguards to reduce it. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

The Company’s management, under the supervision of and with the participation of the Chief Executive Officer and the Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2010 based on criteria for effective control over financial reporting described in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

 

Based on that assessment, our management has determined that as of December 31, 2011, the Company’s internal control over financial reporting was not effective for the purposes for which it is intended based on the following material weakness:

 

We lack a functioning audit committee and our board lacks a recognized financial expert. We did not have adequate segregation of duties within accounting and management functions.

 

In addition, for the year ended December 31, 2010, we filed a Form 10-K without audited financial statements. We have put in place procedures that ensure that this error will not occur in the future.

 

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

 

Changes in Internal Control Over Financial Reporting

 

There have not been changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 9B.OTHER INFORMATION.

 

None

 

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PART III

 

ITEM 10. Directors, Executive Officers, Promoters and Control Persons, Compliance with Section 16(a) of the Exchange Act

 

As of December 31, 2010, the officers and directors of the Company were:

 

Name:   Age   Position
         
John Williams   88   Chairman of the Board of Directors, CEO and CFO
Richard Orcutt   56   President, Secretary and Director
         
Jonathan Schatz   50   Independent Director

 

John Williams has served as a Director of the Company since its inception and as Chairman and CFO since 2002. Mr. Williams has served as the Company’s CEO since December, 2000. He is also Managing Director of John Williams and Partners, an architectural, civil engineering and construction management firm and has been with the firm since 1958. The firm has been certified as a minority business enterprise with the Department of Transportation, the City of Los Angeles, the L.A. Unified School District, Caltrans and the Department of Airports. Mr. Williams, AIA/NOMA, graduated from the University of Southern California with a Bachelor of Architecture Degree in 1955. He has been a member of the American Institute of Architects since 1958. Among his most noteworthy design accomplishments have been The Bradley International Terminal (LAX), The Willowbrook Shopping Center, and more than one hundred other projects from redevelopment projects to master planned communities; which included working drawings for mid-rise to high-rise residential and commercial, schools, government and public buildings. As a result of these and other professional experiences, Mr. Williams possesses particular knowledge and experience in key aspects of the real estate business, public company management and strategic planning that strengthen the Company and the Board’s collective qualifications, skills and experience.

 

Richard Orcutt has served as President and Chief Operating Officer of the Company since October, 2009. For 22 years Mr. Orcutt built and managed sales organizations opening offices both domestically and internationally. From 2004 to present Mr. Orcutt has served as Director of Sales with the startup Iovation, Inc. where he is directly responsible for generating all sales revenue. Iovation, Inc.’s products for Intel and SAP Software have been very successfully marketed to financial institutions. He graduated from Northern Illinois University with a B.S. degree in Education in 1973. Mr. Orcutt was employed from 1983 to 1997 and was Director of Sales for a startup company, Inacom, Inc., that grew to four billion dollars in revenue. Mr. Orcutt created sales management models, directed sales efforts, and business development activities and strategies that built Inacom into a $4 billion company. Mr. Orcutt possesses particular knowledge and experience in business development, strategic planning and team building that strengthen the Company and Board’s collective qualifications, skills and experience.

 

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Jonathan Shatz has served as an independent director since October 2009. Mr. Shatz has been a Principal from 2009 through 2010 in Jonathan Shatz P.A., a consulting practice performing forensic, accounting, tax and general consulting to both private and public companies. In 2007 he served as a Chief Financial Officer for Bonds.com, an on-line trading firm that went public on the OTC Bulletin Board. Mr. Shatz served as the Practice Director for Accume Partner, an internal audit risk management and SOX compliance firm, from 2006 to 2007. From 2004 to 2006 Mr. Shatz worked for Resource Global Professionals as a consultant. He is a chartered accountant with extensive Big-4 accounting firm experience and tax lawyer with international accounting and tax compliance expertise. For the last 6 years Mr. Shatz has been a consultant. He is a former Senior Manager in the Ernst & Young Banking Group (from 1995 to 1998) and a Senior Manager at Pricewaterhouse External Audit and Tax Group (from 1982 to 1995). His experience includes preparation of SEC filings (10Qs, 10Ks, 8Ks) for Fortune 100 companies in advertising, healthcare, technology, and fire and security industries. As a result of these and other experiences, Mr. Shatz possesses particular knowledge and experience in key aspects of public company management that strengthen the Board’s collective qualifications, skills and experience.

 

All directors hold office until the next annual meeting of stockholders and until their successors have been duly elected and qualified. The executive officers serve at the pleasure of the Board of Directors.

 

There are no agreements with respect to electing directors or selecting officers. There are no agreements or understandings for any officer or director to resign at the request of another person, and none of the officers or directors are acting on behalf of, or will act at the direction of, any other person. There are no family relationships among our executive officers and directors.

 

We do not have an audit, nominating or compensation committee. The Company has been inactive since September 11, 2001. Consequently, management has determined that the establishment of these committees is unnecessary until such time that full operations commence as further detailed under ITEM 1. Description of Business.

 

We intend, however, to establish an audit, nominating and a compensation committee of our Board of Directors in the future, once we have sufficient independent directors. We envision that the audit committee will be primarily responsible for reviewing the services performed by our independent auditor, evaluating our accounting policies and our system of internal controls. The compensation committee will be primarily responsible for reviewing and approving our salary and benefits policies (including stock options) and other compensation of our executive officers.

 

CODE OF ETHICS

 

Our Board of Directors has not yet adopted a Code of Business Conduct and Ethics due to our small size.

 

Shareholder Nominations

 

There have been no material changes to the procedures by which our shareholders may recommend nominees to the Board of Directors during our 2010 fiscal year.

 

Compliance with Section16(a) of the Exchange Act

 

Section 16(a) of the Securities Exchange Act of 1934 as amended (the “Exchange Act”) requires SART I’s officers and directors, and persons who own more than ten percent (10%) of its Common Stock to file reports of ownership and changes of ownership with the Securities and Exchange Commission. Such persons are also required to furnish SART I with copies of all Section 16(a) forms they file.

 

Based solely on SART I review of the copies of those forms received by PSA, or written representations from such persons that no forms were required to be filed, it appears that all reports due were timely filed except as follows – Richard Orcutt (one Form 3), and Jonathan Shatz (one Form 3). To our knowledge, these forms have not been filed as of the date of this report.

 

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ITEM 11.Executive Compensation

 

The following summary compensation table sets forth information concerning compensation for services rendered in all capacities during our past two fiscal years awarded to, earned by or paid to each of the following individuals. Salary and other compensation for these officers were set by the Board of Directors. No other officers or employees received any compensation during either of the last two fiscal years.

 

SUMMARY COMPENSATION TABLE

 

Name and
Principal Position
(a)
  Year
(b)
  Salary
($)
(c)
  Bonus
($)
(d)
  Stock
Awards
($)
(e)
  Option
Awards
($)
(f)
  Non-Equity
Incentive
Plan
Compen-
sation
($)
(g)
  All Other
Compen-
sation
($)
(i)
  Total
($)
(j)
John Williams, CEO & CFO   2010   $-0-   $-0-   $-0-   $-0-   $-0-   $-0-   $-0- 
    2011   $-0-   $-0-   $-0-   $-0-   $-0-   $-0-   $-0- 

 

Outstanding Equity Awards at Fiscal Year End

 

None.

 

Equity Compensation, Pension or Retirement Plans

 

No retirement, pension, profit sharing, stock option or insurance programs or other similar programs have been adopted by the Company for the benefit of its employees.

 

Options/SARS Grants During Year

 

None.

 

Long-term Incentive Plan Awards in Last Year

 

None

 

Employment Agreements

 

None.

 

COMPENSATION OF DIRECTORS

 

At this time, the Company’s directors receive no remuneration for their services, nor does the Company reimburse directors for expenses incurred in their service to the Board of Directors.

 

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ITEM 12.Security Ownership of Certain Beneficial Owners and Management

 

The following table contains information regarding the shareholdings, as of December 31, 2011, of SART I’s current directors and executive officers and those persons or entities who beneficially own more than 5% of its common stock (giving effect to the exercise of any warrants held by each such person or entity which are currently exercisable or may be exercised within 60 days of December 31, 2011):

 

Name and Title  Number of Shares of
Common Stock
Beneficially Owned
   Percent of
Common Stock
Beneficially Owned (1)
 
           

Walsh Family Irrevocable Trust

540 Brickell Drive, #1024

Miami, Florida 33131

   49,967,562    95.14%
           
John Williams
CEO, CFO and Board of Directors Chairman
5777 W. Century Blvd. #1188
Los Angeles, California 90045
   -0-    -0- 
           
Richard Orcutt
President, Chief Operating Officer and Director
2509 Dakota Rock Drive,
Ruskin Florida 33570
   -0-    -0- 
           
Jonathan Shatz
Director
11007 Long Boat Drive
Cooper City, Florida 33026
   -0-    -0- 
           
    -0-    -0- 
           
All Officers and Directors as a Group (4 persons)   -0-    -0- 

 


 

(1) Percentages based upon 52,518,999 shares of the Company’s common stock outstanding as of December 31, 2011.

 

(2) Ownership control has not changed since the last Form 10-Q was filed with the SEC for the Second Quarter of 2001.

 

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ITEM 13.Certain Relationships and Related Transactions and Director Independence

 

John Williams, CEO, CFO and Chairman of the Board of Directors provided a $10,000 retainer to the Company’s audit firm in November, 2009. Subsequently, in 2010 this retainer was applied to the 2008 and 2009 audit fees and Mr. Williams was repaid the $10,000.

 

Director Independence

 

Using the standards of the NYSE Amex, which the Company is not subject to, the Company’s Board has determined that Mr. Shatz qualifies under such standards as an independent director. No other directors are independent under these standards. The Company did not consider any relationship or transaction between itself and the directors not already disclosed in this report in making this determination.

 

ITEM 14.Principal Accounting Fees and Services

 

The Company paid or accrued the following fees in each of the prior two fiscal years to its principal accountants, Semple, Marchal & Cooper, LLP and Kingery & Crouse P.A.:

 

   Year ended   Year ended 
   December 31,   December 31, 
   2011   2010 
         
Audit fees  $-20,000-    -0- 
Audit-related fees   -0-    -0- 
Tax fees   -0-    -0- 
All other fees   -0-    -0- 
 Totals  $20,000-   $-0- 

 

No fees were paid or accrued during either of the fiscal years listed above. Instead, the audit expenses for the audits performed for these fiscal years were incurred and paid in a subsequent fiscal year.

 

As part of its responsibility for oversight of the independent registered public accountants, the Board of Directors has established a pre-approval policy for engaging audit and permitted non-audit services provided by our independent registered public accountants, Kingery & Crouse, P.A.. In accordance with this policy, each type of audit, audit-related, tax and other permitted service to be provided by the independent auditors is specifically described and each such service, together with a fee level or budgeted amount for such service, is pre-approved by the Board.

 

The Company’s principal accountant, Kingery & Crouse, P.A, did not engage any other persons or firms other than the principal accountant’s full-time, permanent employees.

 

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ITEM 15. Exhibits

 

Exhibits

 

  Exhibit No. 31 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934

 

  Exhibit No. 32 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

SIGNATURES

 

Pursuant to the requirements of Section 13 of 15(d) 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.

 

Shearson American REIT, Inc.   Date
       
By: /s/ John Williams   April 16, 2012
  John Williams    
  CEO and CFO    

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Name   Title Date
       
/s/ John Williams   Chairman of the Board April 16, 2012
John Williams      
       
/s/ Patrick Galvin   Director April 16, 2012
Patrick Galvin      

 

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