U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10
AMENDMENT NO 5
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR 12(G) OF
THE SECURITIES EXCHANGE ACT OF 1934
UC ASSET LP
(Exact Name of Registrant as Specified in
its charter)
Delaware
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024-10802
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30-0912782
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(State or other jurisdiction of
incorporation or organization)
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(Commission File Number)
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(IRS Employer
Identification No.)
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2299 Perimeter Park Drive, Suite 120
Atlanta, Georgia 30341
(Address of principal executive offices)
Registrant’s telephone number: (470)
475-1035
Registrant’s fax number:
Copies to:
Richard W. Jones, Esq.
Jones & Haley, P.C.
750 Hammond Drive
Building 12, Suite 100
Atlanta, Georgia 30328
(770) 804-0500
www.corplaw.net
Securities to be registered under Section
12(b) of the Act: None
Securities to be registered under Section
12(g) of the Act: Common Units
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
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Accelerated filer ☐
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Non-accelerated filer ☐
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Smaller reporting company ☒
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Emerging growth company ☐
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If an emerging growth company, indicate
by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
TABLE OF CONTENTS
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This document contains
forward-looking statements. All statements other than statements of historical facts contained in this document, including statements
regarding our future results of operations and financial position, business strategy, and likelihood of success and other plans
and objectives of management for future operations, and future results of current and anticipated products are forward-looking
statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual
results, performance or achievements to be materially different from any future results, performance or achievements expressed
or implied by the forward-looking statements.
In some cases, you
can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,”
“plan,” “aim,” “anticipate,” “could,” “intend,” “target,”
“project,” “contemplate,” “believe,” “estimate,” “predict,” “potential”
or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this document
are only predictions. We have based these forward-looking statements largely on our current expectations and projections about
future events and financial trends that we believe may affect our business, financial condition and results of operations. These
forward-looking statements speak only as of the date of this document and are subject to a number of risks, uncertainties and assumptions
described under the sections in this document titled “Risk Factors” and elsewhere in this document. Forward-looking
statements are subject to inherent risks and uncertainties, some of which cannot be predicted or quantified and some of which are
beyond our control. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual
results could differ materially from those projected in the forward-looking statements. Moreover, new risk factors and uncertainties
may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties that we may face.
Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein,
whether as a result of any new information, future events, changed circumstances or otherwise.
INFORMATION REQUIRED IN REGISTRATION STATEMENT
This
Amendment No 5 to the Registration Statement on Form 10 (“Amendment No 4”) amends the Registration Statement on Form 10 originally
filed on September 18, 2020 (“Original Filing”) by UC Asset LP, a Delaware limited partnership (“UC Asset,”
the “Company,” the “Partnership”, “we,” or “us”).
Item 1. Business.
General development of business.
UC Asset LP is a limited partnership
formed on February 01, 2016 under the laws of the State of Delaware. We invest in our portfolio investments for the purpose of capital
appreciation. According to our bylaws, the overwhelming majority of our portfolio investments must be allocated to real estate in metropolitan
areas, such as Atlanta, GA and Dallas, TX. Our portfolio investments are owned through a number of subsidiaries, which may develop, redevelop,
operate and trade these properties for the purpose of expanding our portfolio, increasing capital appreciation, and exiting from investments.
As of March 31, 2021, all of our subsidiaries are wholly-owned and controlled by us. Our principal office address is 2299 Perimeter Park
Drive, Suite 120, Atlanta, GA 30341.
Our partnership is
managed by our general partner, UCF Asset LLC under the terms of our partnership’s Limited Partnership Agreement. Except
for limited conditions defined in our limited partnership agreement, UCF Asset LLC acting as general partner has authority to exercise
full management of our partnership. Limited partners are passive investors and have limited power over our partnership and our
general partner.
General Partner
UCF Asset LLC is a
limited liability company formed on January 26, 2016 under the law of the State of Georgia. The principal office of our general
partner is the same to that of our partnership.
The individuals who,
directly or indirectly, own and control our general partner are “Larry” Xianghong Wu with an 80% interest and Gregory
Bankston with a 20% interest. Gregory Bankston is the managing member of our general partner.
UCF Asset LLC does
not conduct any business activities other than management of our partnership.
The general partner
may be removed, upon consent of the limited partners representing at least sixty-six and two-thirds percent (66 2/3%) of the outstanding
common units voting as a single class, where (i) the general partner has been convicted of fraud, embezzlement, or a similar felony
by a court of competent jurisdiction in a final judgment, or (ii) the general partner materially and willfully breaches our limited
partnership agreement.
The general partner
may, at any time, assign all or a portion of its partnership interest to any affiliate and, in the general partner’s sole
discretion, admit the affiliate as an additional or substitute general partner.
The general partner
is paid an annual management fee, in four payments made quarterly, at 2.0% of net asset under management of the partnership.
Business Operations
By and as of June 30,
2021, our operations primarily consist of our ownership interests in Atlanta Landsight LLC, SHOC Holdings LLC, and Hotal LLC, all of
them are Georgia limited liability companies,. Our partnership owns 100% of all these subsidiaries.
We had expanded our operations
into Dallas, TX and invested in a piece of farmland there, held under our 100% subsidiary, UCF Development LLC, which was a Texas limited
liability company. We sold that piece of farmland in October, 2020, and dissolved UCF Development LLC in November, 2020.
Atlanta Landsight LLC,
(“ALS”), invests in residential and commercial properties in the Atlanta metropolitan area. The primary goal of Atlanta Landsight’s
business strategy is to support the interests of the wider group of investors in UC Asset LP. Its investment strategy involves acquiring
a property, renovating or remodeling it, and placing it back on the market for sale, or renting it out for continuous rental income.
Any substantive non-passive works in development and redevelopment are performed and managed by third party contractors. Occasionally,
ALS also invested in residential properties in other metropolitan areas. As of June 30, 2021, ALS has decreased its holdings in residential
property, but ALS has not made any investments in commercial real estate. Over time, we expect that commercial properties will account
for the majority of ALS’s portfolio.
UCF Development
LLC, (“UCFD”), had acquired land located in Farmersville, Texas in the Dallas metropolitan area. The land was acquired
by Atlanta Landsight LLC in January 2020. ALS subsequently sold the land to a third party in October 2020.
In the fourth quarter
of 2020, our investment portfolio expanded to include investment interests in two more subsidiaries, SHOC LLC and Hotal LLC, both
Georgia limited liability companies. Our ownership interests represent 100% of both SHOC LLC and Hotal LLC. We formed SHOC LLC by
investing an initial capital of $900,000 into it, which includes $200,000 of cash and $700,000 of short-term notes assigned to SHOC.
We formed Hotal LLC. by investing a nominal amount of capital and by assigning to it certain intangible assets, including registered
brand name Hotal and website theHotal.com. Those intangible assets are not valued and carry zero book value. Agreements of the
above assignments were previously filed as exhibits to our annual report. SHOC LLC plans to invest in and develop properties located
in communities adjacent to major airports and/or central business districts for shared home-office accommodations. Hotal LLC plans
to invest in shared home-office accommodations or other commercial properties in hospitality industry. It currently has no
operations and only nominal capital formation. Both subsidiaries were formed for the purpose to support the interests of the wider
group of investors in UC Asset LP.
UC Asset LP also invests
in private debts and other non-property-based opportunities, to the extent that the revenue generated from those debts and other opportunities
will not exceed ten percent (10%) of total revenue of the Partnership. From inception through June 30, 2021, UC Asset LP held debt investments
of approximately $750,000 in total. $700,000 of those debts were assigned to SHOC LLC as capital contribution in the fourth quarter of
2020.
Narrative description of business.
The business purpose of our Partnership is to invest for capital appreciation.
By and of the date of June
30, 2021, our partnership primarily invests in residential properties for capital appreciation in the Atlanta metropolitan area. We have
made our first commercial property investment in the second quarter of 2021, and expect to expand our portfolio to include more commercial
properties.
We perform our investment
activities through a number of subsidiaries, which are usually wholly-owned or majority-owned by us, and all of them operate for the
business purpose of real estate investment.
Our investment strategy
is to look for high-growth and value-added investment patterns in real estate. Each of our subsidiaries are expected to create and implement
their unique high-growth and value-added investment patterns or models. The management of Partnership will work continuously to identify
such investment patterns/models, and then invest in existing companies or form new companies of which the business purposes are to implement
those strategies/models for greater capital appreciation.
Specifically, new technologies
are changing people’s life, changing their way to live, work and travel. Hence new technologies are redefining the concept of “property”
for both residential and commercial properties. We believe that technology will create many new opportunities for value-added, high-growth
investment patterns/models in real estate.
Residential Investment
in Metropolitan Atlanta
Our subsidiary, Atlanta
Landsight LLC, a Georgia limited liability company, acquires and redevelops residential real estate properties in metropolitan Atlanta,
mostly in suburban regions north of downtown Atlanta, known as Brookhaven, Dunwoody and Marietta, and in downtown Atlanta. Atlanta is
the ninth largest metropolitan area in the United States.
Upon acquisition of a
property, Atlanta Landsight LLC may make improvements intended to increase its value before putting it back on the market for sale. Depending
on the condition of a property, the improvements may be renovation, remodeling, or a complete tear-down and rebuild of the residential
home. After improvements, ALS management may sell the completed project immediately if management believes the submarket has reached
its short-term peak; or, they may rent it out for a period, usually 12 months, if management believes that the submarket has potential
of appreciation in the coming year. All substantive non-passive works of improvements are performed and managed by third party contractors.
ALS may resell
a property without improvement if the value appreciation has generated a satisfactory ROI, or if there are any reasonable business
considerations.
Renovation
Renovating a property
usually includes optimizing spaces, fixing or replacing water, power and HVAC equipment, installing new flooring, upgrading the
kitchen and bathrooms, installing new appliances, and/or painting of interior and exterior walls. Renovation can be a relatively
low-cost method to improve the value of a property.
For the fiscal year of 2019,
ALS completed 7 residential renovation projects in the Atlanta metropolitan area. Three properties were sold, and three were rented out,
and one property was still listed for sale as of December 31, 2019. This property was ultimately sold in the first quarter of 2020.
For the fiscal year of
2020, ALS completed one residential renovation project in the Atlanta metropolitan area. It was sold in early August 2020. ALS terminated
the lease of one of the rental properties, and listed it for sale in May 2020. This property was sold in early August 2020.
Remodeling
A remodeled property may
include many of the renovations described above, but it can also include changes to the structure, usually by adding more space and altering
floor plans. Remodeling will usually cost more than renovation but less than rebuilding, and its return on investment (“ROI”)
will usually be higher than renovation but lower than rebuilding.
For the fiscal years 2019
and 2020, ALS did not have any remodeling projects. Atlanta Landsight LLC’s last remodeling project was completed in 2017. It was
rented out for several years before eventually sold in June 2021.
Rebuilding
If the condition
of a property is in such poor shape that it would not be cost effective to repair it, it may be a candidate to tear down and rebuild.
When choosing properties to rebuild, ALS management prefers those in a neighborhood where other active rebuilding projects have
taken place and completed rebuilt properties have been sold.
For the fiscal year of 2019,
ALS completed two rebuilding projects in the Atlanta metropolitan area. One of them was sold, and the other one was rented out in June,
2020.
For the fiscal year of
2020 and till the first quarter of 2021, ALS completed one rebuilding project and it was sold in April 2021.
* * *
Starting from the second
quarter of 2020, ALS has been decreasing its portfolio in residential properties. The process has continued in 2021, as the management
project that residential market has reached its short-term peak. As of June 30, 2021, ALS owned three residential properties and one
developable lot in metro Atlanta; and one residential property in Greensboro, North Carolina.
Of these four properties,
ALS has leased out two on annual or monthly contracts. Monthly revenue on two rental properties is approximately $6,500, as of June 30,
2021. Monthly revenue will rise to $7,500 after certain improvements will be performed to one of the properties.
As of June 30, 2021, the
fair market value of ALS’ residential properties, which have occupancy permits, was obtained either by appraisals conducted by
a licensed and independent third party(i.e. Real Estate Valuation, Inc.), or by the management based on executed contracts. Total value
of these properties was assessed at approximately $1.84 million. There is one property that currently doesn’t meet the code and
one vacant lot, for which their fair market values were calculated using methods developed by the management. The methods, as well as
the results, have been reviewed and approved by an independent and licensed third party. – i.e. Brandon Atkins from Keller Williams
(Atlanta Perimeter office). Total value of these properties was assessed at approximately $263,000.
Farmland
Investment in Metropolitan Dallas
In September 2016, our
subsidiary UCF Development LLC (“UCFD”) purchased 76% of a 72.53-acre farmland located within the township of Farmersville,
Texas, in Collin County, located in the northeast quadrant of the Dallas Metropolitan Area. In February 2018, UCFD purchased the remaining
24% of this property, and this land is now included in our investment, Atlanta Landsight LLC.
The purchase price
in September, 2016 for the Farmersville property was $805,216. The total historical cost for this property (including commissions,
taxes, consulting fees etc.) is approximately $900,000, as of September 30, 2020.
The value of the
Farmersville, TX property is solely based on the valuation by independent and licensed third parties. The most up-to-date appraisal
report valued the property at $1,088,000.00 as of December 19, 2019. This report was provided by Michelle Godwin from Valuright
Appraisal, Inc.
This property was sold for
$1,300,000.00 in October, 2020.
SHOC (“Shared
Home Office Cluster/Community”) properties: investment, development, and operation
SHOC is a new concept
of properties similar to “home rentals” developed and operated by companies such as Airbnb (NASDAQ: ABNB) and Vrbo. The improvement
from common “home rentals” is that SHOC properties are defined as home-offices for rent.
Home rentals have become
trendy and are perceived as alternatives to conventional hotels. So far, home rentals have become an appealing choice for leisure travelers,
but not as appealing to business travelers. According to our research, there are two major factors that are preventing business travelers
from using home rentals instead of conventional business hotels. First, most home rental properties are residential properties, absent
of business facilities, such as conference rooms. Secondly, most home rental properties are not adjacent to either major airports or
the center business districts, which make them geographically not convenient for business travelers. To address those concerns, we have
come up with the concept SHOC, standing for Shared Home-Office Community or Shared Home-Office Cluster (depending on the density of our
SHOC properties). In comparison to conventional hotel rooms, SHOC will be equipped with home-office facilities such as hi-speed internet,
video conferencing, easy access to office accessories such as printers and scanners, and other tools to empower today’s business
travelers. But it also presents the personalized charm, including home-style full-equipped kitchen, to serve travelers with a home office
away from home.
SHOC holdings LLC(“SHOC
LLC”) is the start-up focusing on acquiring and managing a portfolio of SHOC properties. We own 100% of the ownership interests
in SHOC LLC.
Daily operation of SHOC’s
portfolio properties, including sales on platforms such as Airbnb, will be performed by third party business partners. We are engaging
into negotiations with such third party partners.
For the fiscal year of
2020:
SHOC LLC has just started
and has done some research and development of its products, and has searched and screened properties that could potentially become SHOC
properties, however, no projects have been completed, and no revenues have been generated at this time.
For the 6 months by June
30, 2021:
SHOC LLC has purchased
a commercial property of 8 apartment units in downtown Atlanta for approximately $750,000. It carries a loan of approximately $400,000,
with an annual interest of 4.250% and a term of 1 year. Management project to redevelop this property into 8-10 units of shared-home-office
units. The cost of redevelopment will likely be fully covered with the loan.
The redevelopment of the
property, as well as the following operation of this property as short-term rental, will be performed by independent third parties.
Hotal LLC
In the fourth quarter
of 2020, we formed Hotal LLC with purpose to apply innovative investment models in hospitality properties. As of June 30, 2021, it had
not made any investments.
Debt Investments
We have made a limited
number of debt investments from time to time in promissory notes or private loans to related and unrelated third parties. As of June
30, 2021, we held approximately $739,000 of outstanding debt investments, which accounts for approximately10% of our net equity.
Status of Publicly Announced
New Services
In May 2020, we
announced that we were offering, through and to be managed by Atlanta Landsight LLC, a pandemic mortgage debt relief program
for businesses experiencing financial emergencies due to the COVID-19 pandemic. This program is aimed at acquiring equities in
commercial properties which are suffering from the impact of Covid-19 pandemic.
As of December 31, 2020,
this new service has been terminated due to inadequate demand from the market. We have spent approximately $5000 in marketing and promoting
this program. which represents total cost associated with this program.
Competitive Position in
the Industry and Methods of Competition
UC Asset is structured
as a Master Limited Partnership (MLP) rather than a real estate investment trust (REIT) in order to focus on long-term value growth.
The Partnership is among one of the very few real estate MLPs trading on US public markets, and the only one on OTCQX. This unique legal
structure empowers UC Asset to take a longer-term approach to real estate investments, because MLPs do not have to constantly make cash
distributions as REITs are required to do. Our legal structure allows us to hold our investment indefinitely for the purpose of maximizing
return on investment.
Number of Employees
As of June 30, 2021, the
Partnership has two full time employees, who are the two members of our General Partner, UCF Asset LLC. The Partnership has five part
time employees, including a project manager, an accountant, an investor relations director, and two Audit Committee members.
Reports to Security Holders
Currently, our partnership
is required by security laws to file Form 1-K, Form 1-SA as annual and semi-annual reports, with the Securities and Exchange Commission
(SEC). We also voluntarily file quarterly reports on Form 1-U with the SEC. Once this registration statement goes effective the
Partnership will be filing regular reports under the Securities Act of 1934 – 10-K’s and 10-Q’s --on the EDGAR
platform.
The SEC maintains an
internet site that contains reports, proxy and information statements, and other information regarding issuers that file
electronically with the Commission. The address of that site is http://www.sec.gov where our reports can be found at https://www.sec.gov/cgi-bin/browse-edgar?company’uc+asset
Item 1A. Risk Factors.
Investing in our
common units involves a high degree of risk. You should carefully consider the risks described below, as well as the other information
in this Offering Circular before deciding whether to invest in our common units. The occurrence of any of the events or developments
described below could harm our financial condition, results of operations, business, and prospects. Additional risks and uncertainties
not presently known to us or that we currently deem immaterial also may harm our business, financial conditions, result of operations,
and prospects.
General Risks Related to our Partnership
We have a limited
operating history.
We were formed in February
2016 and have a limited operating history. As a result, there is only a limited period on which to base an assumption that our
business operations will prove to be successful. Our future operating results will depend on many factors, including our ability
to raise adequate working capital, availability of properties for investment, and our ability to develop and redevelop properties.
We are significantly
dependent on our general partner and its managing member and member of majority interest.
Our business plan is
significantly dependent upon the abilities and continued participation of Gregory C. Bankston and “Larry” Xianghong
Wu, the managing member and member of majority interest respectively of our general partner. It would be difficult to replace either
of them at this stage of our partnership. The loss by or unavailability of their services would have an adverse effect on our business,
operations, and prospects. There can be no assurance that we would be able to locate or employ personnel to replace Mr. Bankston
or Mr. Wu should their services be discontinued. In the event that we are unable to locate or employ personnel to replace either
of them, we may be required to cease pursuing our business, which could result in a loss on your investment.
We are significantly
dependent on our subsidiary’s management team and their continuous operation
Our investment activities
are usually performed by our subsidiaries which are affiliate investment entities. Depending on the terms and conditions of our investments,
including the terms and conditions of operating agreements of our subsidiaries, we will be able to retain limited level of control on
their management, which may or may not include: to replace or initiate replacement for the management team, to set guidelines for the
use of our capital, to approve or disapprove strategic changes of business plans, and other means of controls. Despite of these controls
we may or may not have, those subsidiaries are operated separately from us, no matter whether they are fully or partially owned by us.
We depend upon the abilities of their management teams and successes of their operations to achieve our investment goal. In the event
that one or more of our subsidiaries fail to meet their business goal or discontinue their operations, we may not have adequate control
to stop these events from happening and may lose part or even all our interests in those subsidiaries.
Our general
partner has broad discretion to manage our partnership and you will have limited ability to exercise control over the direction
of our partnership.
UCF Asset LLC, our general
partner, has the power to make operational decisions without input by the limited partners. Such decisions may pertain to the scope of
development, the selection of personnel, and whether to enter into material transactions with related parties. You will be unable to
evaluate the economic merit of property investments before we make them and will be entirely relying on the ability of UCF Asset LLC,
our general partner, to select our investments. Our general partner will have broad discretion in investing or divesting our equity positions
in any subsidiaries, and they may also have broad discretion in approving or disapproving investment strategies of our subsidiaries,
and selecting or replacing managements of our subsidiaries. You may not have the opportunity in advance to review any of these business
decisions made and actions taken by our general partner.
Removal of the General Partner
The General Partner
may not be removed for cause unless such removal is approved by written consent of the Limited Partners owning 66 2/3% of the Units.
This could greatly reduce the ability of the limited partners to remove the general partner.
You will have
limited control over changes in our policies and operations, which increases the uncertainty and risks you face as a limited partner.
Our general partner
determines our major policies, including our policies regarding financing, growth and debt capitalization. Our general partner
may amend or revise these and other policies without a vote of the limited partners. Our general partner’s broad discretion
in setting policies and our limited partners’ inability to exert control over those policies increases the uncertainty and
risks you face as a limited partner.
Our ability
to make distributions to our limited partners is subject to fluctuations in our financial performance, operating results and capital
improvement requirements.
We do not currently have
an established policy on paying distribution to our limited partners. In the event of downturns in our operating results, our capability
to receive capital returns or distribution from our subsidiaries, unanticipated capital requirements to support the continuous operation
of our subsidiaries and to manage our portfolio properties which are usually held under our subsidiaries, or other factors, we may be
unable to declare or pay distributions. The timing and amount of distributions are the sole discretion of our general partner who will
consider, among other factors, our financial performance, any debt service obligations, and our taxable income and capital expenditure
requirements. We cannot assure you that we will generate sufficient cash in order to fund distributions.
The failure of
our properties to appreciate in value would most likely preclude our limited partners from realizing a return on their ownership.
There is no assurance
that our real estate investments will appreciate in value or will ever be sold at a profit. The marketability and value of the properties
will depend upon many factors beyond the control of our management. There is no assurance that there will be a ready market for the properties,
since investments in real property are generally non-liquid. The real estate market is affected by many factors, such as general economic
conditions, availability of financing, interest rates and other factors, including supply and demand, that are beyond our control. We
cannot predict whether our will be able to sell any property for the price or on the terms set by it, or whether any price or other terms
offered by a prospective purchaser would be acceptable to our investee. We also cannot predict the length of time needed to find a willing
purchaser and to close the sale of a property.
Risks Related to our Operations
Real estate
investments are illiquid.
Because real estate investments
are relatively illiquid, our subsidiary’s ability to promptly sell one or more properties or investments in our portfolio in response
to changing economic, financial and investment conditions may be limited. In particular, these risks could arise from weakness in or
even the lack of an established market for a property, changes in the financial condition or prospects of prospective purchasers, changes
in national or international economic conditions, and changes in laws, regulations or fiscal policies of jurisdictions in which the property
is located. We may be unable to realize our investment objectives by sale, other disposition or refinance at attractive prices within
any given period of time or may otherwise be unable to complete any exit strategy.
The profitability
of real estate investment is uncertain.
We expect our subsidiaries
will make investments in properties selectively. Acquisition of properties entails risks that investments will fail to perform in accordance
with expectations. In undertaking these acquisitions, our subsidiary’s will incur certain risks, including the expenditure of funds
on, and the devotion of management’s time to, transactions that may not come to fruition, and the prospects for sale of a property
may prove inaccurate.
Our investment
portfolio may not be diversified.
Our investment portfolio
currently are overwhelmingly consisted of our ownership interests in a number of real estate properties which are overwhelmingly centered
in the Atlanta and Dallas metropolitan areas. Our potential profitability and our ability to diversify our investments may be limited,
both geographically and by type of properties purchased. Our properties may not be well diversified, and their economic performance could
be affected by changes in local economic conditions. Our performance is therefore linked to economic conditions in the regions in which
our will acquire properties and in the market for real estate generally. Therefore, to the extent that there are adverse economic conditions
in the regions in which our properties are located and in the market for real estate, such conditions could result in a reduction of
our income and cash to return capital and thus affect the amount of distributions we can make to you.
Our subsidiary’s
may not have control over procedure and quality of redevelopment of properties.
We expect that our subsidiary
will retain general contractors to perform the actual physical redevelopment on their properties. As a result, they will be subject to
risks in connection with a contractor’s ability to control costs, the timing of completion of redevelopment, and a contractor’s
ability to build in conformity with plans and specification. Theoretically, the P&L (profit or loss) of redevelopment will be borne
by contractors. However, contractors may try to renegotiate the budget with us and transfer part of extra cost to our subsidiaries. Further,
failed improvements, untimely completion of improvements, and/or lower-than-expected-quality of improvements may impair our subsidiaries’
ability to sell a property at projected value, or to generate revenue from a property.
Inventory or
available properties might not be sufficient to achieve our investment goals.
Our subsidiary’s
may not be successful in identifying suitable properties that meet our acquisition criteria, or in consummating acquisitions or investments
on satisfactory terms. Failures in identifying or consummating acquisitions would impair the pursuit of our business plan.
The consideration
paid for our target acquisition may exceed fair market value, which may harm our financial condition and operating results.
The consideration that
our subsidiary’s pay for a property will be based upon numerous factors, and the acquisition may be purchased in a negotiated transaction
rather than through a competitive bidding process. We cannot assure anyone that wthey will be able to negotiate the best purchase price
or that the purchase price that is paid for a property will be the best possible price, that they will be able to generate an acceptable
return on such acquisitions, or that the location or other relevant economic and financial data of any properties that they acquire will
meet acceptable risk profiles.
Our subsidiary’s
may not make a profit if they sell a property.
The prices that can be
obtained when they determine to sell a property will depend on many factors that are presently unknown, including the operating history,
tax treatment of real estate investments, demographic trends in the area, and available financing. Our subsidiary may not realize any
significant appreciation on their investment in a property.
Our subsidiary’s
may obtain lines of credit and other borrowings, increasing the risk of loss due to heightened risk of foreclosure.
Our subsidiary’s
may obtain lines of credit or other financing that may be secured by their properties. As with any liability, there is a risk that they
may be unable to repay its obligations from the sale of their assets. Therefore, when borrowing and securing such borrowing with their
assets, they risk losing such assets in the event wthey are unable to repay such obligations or meet such demands.
Our subsidiary’s
may suffer losses that are not covered by insurance.
The geographic areas in
which they acquire, and own properties may be at risk for damage to property due to certain weather-related and environmental events,
including such things as severe thunderstorms, hurricanes, flooding, and tornadoes. To the extent possible, the subsidiary may, but is
not required to attempt, to acquire insurance against fire or environmental hazards. However, such insurance may not be available in
all areas, nor are all hazards insurable. In addition, an insurance company may deny coverage for certain claims or determine that the
value of the claim is less than the cost to restore the property, resulting in further losses in income to our partnership.
Our debt investments
and/or our subsidiary’s debt investment are risky
Our primary business goal
is to invest into real estate companies, and to guide those companies to invest into the development, operation or transaction of real
estate properties. From time to time, when we or our subsidiaries have cash reserve, those cash may be invested into short-term debts
to increase return. Overall, debt investments are not as risky as real estate investment. Yet they are subject to loss of value due to
defaults by the borrowing parties. Since most borrowers of our debts are small businesses with low credit quality, the risk of default
can be considerable.
We cannot assure
you that we will achieve or maintain profitability and our auditor has expressed substantial doubt about our ability to continue as a
going concern.
We will need to raise
additional working capital to continue our normal and planned operations. We will need to generate and sustain significant revenue levels
in future periods in order to become profitable, and, even if we do, we may not be able to maintain or increase our level of profitability.
We may have to seek out additional funding to pay for our operating expenses. Accordingly, substantial doubt exists about our ability
to continue as a going concern and we cannot assure you that we will achieve sustainable operating profits as we continue to expand our
business, and otherwise implement our growth initiatives. Our auditors refer to this in footnote 3 to the financial statements.
Investment Company Risks
Investors will
not receive the benefit of the regulations provided to real estate investment trusts or investment companies.
We are not a real estate
investment trust and enjoy a broader range of permissible activities. Under the Investment Company Act of 1940 (referred to as
the “1940 Act”), an “investment company” is defined as an issuer which is or holds itself out as being
engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, or trading in securities; is engaged
or proposes to engage in the business of issuing face-amount certificates of the instalment type, or has been engaged in such
business and has any such certificate outstanding; or is engaged or proposes to engage in the business of investing, reinvesting,
owning, holding, or trading in securities, and owns or proposes to acquire investment securities having a value exceeding 40% of
the value of such issuer’s total assets (exclusive of government securities and cash items) on an unconsolidated basis. We
intend to operate in such manner as not to be classified as an “investment company” within the meaning of the 1940
Act as we intend on primarily holding real estate. The management and the investment practices and policies of ours are not supervised
or regulated by any federal or state authority. As a result, investors will be exposed to certain risks that would not be present
if we were subjected to a more restrictive regulatory situation.
The exemption
from the Investment Company Act of 1940 may restrict our operating flexibility.
We do not believe that
at any time we will be deemed an “investment company” under the 1940 Act as we do not intend on trading or selling
securities. Rather, we intend to hold and manage real estate. However, if at any time we may be deemed an “investment company,”
we believe we will be afforded an exemption under Section 3(c)(5)(C) of the 1940 Act. Section 3(c)(5)(C) of the 1940 Act excludes
from regulation as an “investment company” any entity that is primarily engaged in the business of purchasing or otherwise
acquiring “mortgages and other liens on and interests in real estate”. To qualify for this exemption, we must ensure
our asset composition meets certain criteria. Maintaining this exemption may adversely impact our ability to acquire or hold investments,
to engage in future business activities that we believe could be profitable, or could require us to dispose of investments that
we might prefer to retain. If we are required to register as an “investment company” under the 1940 Act, then the additional
expenses and operational requirements associated with such registration may materially and adversely impact our financial condition
and results of operations in future periods.
If we are deemed
to be an investment company, we may be required to institute burdensome compliance requirements and our activities may be restricted.
If we are ever deemed
to be an investment company under the 1940 Act, we may be subject to certain restrictions including:
|
●
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restrictions on the nature of our investments; and
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|
●
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restrictions on the issuance of securities.
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In addition, we may
have imposed upon us certain burdensome requirements, including:
|
●
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registration as an investment company;
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●
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adoption of a specific form of corporate structure; and
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●
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reporting, record keeping, voting, proxy, compliance policies and procedures and disclosure requirements and other rules and regulations.
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Federal Income Tax Risks
The Internal
Revenue Service may challenge our characterization of material tax aspects of your investment in our common units.
You are urged to consult
with your own tax advisor with respect to the federal, state, local, and foreign tax considerations of an investment in our partnership.
We do not intend to seek any rulings from the Internal Revenue Service regarding any of the tax issues impacting our partnership.
Accordingly, we cannot assure you that the tax conclusions discussed in this offering, if contested, would be sustained by the
Internal Revenue Service or any court.
You may realize
taxable income without cash distributions, and you may have to use funds from other sources to fund tax liabilities.
As a limited partner,
you will be required to report your allocable share of our taxable income on your personal income tax return regardless of whether
you have received any cash distributions from us. It is possible that your common units will be allocated taxable income in excess
of your cash distributions. We cannot assure you that funds will be available for distribution in any year. As a result, you may
have to use funds from other sources to pay your tax liability.
You may not
be able to benefit from any tax losses that are allocated to your common units.
Common units in our
partnership may be allocated their share of tax losses should any arise. Section 469 of the Internal Revenue Code limits the allowance
of deductions for losses attributable to passive activities, which are defined generally as activities in which the taxpayer does
not materially participate. Any tax losses allocated to investors will be characterized as passive losses, and, accordingly, the
deductibility of such losses will be subject to these limitations. Losses from passive activities are generally deductible only
to the extent of a taxpayer’s income or gains from passive activities and will not be allowed as an offset against other
income, including salary or other compensation for personal services, active business income or “portfolio income”,
which includes non-business income derived from dividends, interest, royalties, annuities and gains from the sale of property held
for investment. Accordingly, you may receive no benefit from your share of tax losses unless you are concurrently being allocated
passive income from other sources.
We may be audited
which could subject you to additional tax, interest, and penalties.
Our federal income
tax returns may be audited by the Internal Revenue Service. Any audit of our partnership could result in an audit of your tax return.
The results of any such audit may require adjustments of items unrelated to your investment, in addition to adjustments to items
related to our partnership. In the event of any such audit or adjustments, you might incur attorneys’ fees, court costs,
and other expenses in contesting deficiencies asserted by the Internal Revenue Service. You may also be liable for interest on
any underpayment and penalties from the date your tax was originally due. The tax treatment of all partnership items will generally
be determined at the partnership level in a single proceeding rather than in separate proceedings with each partner, and our general
partner is primarily responsible for contesting federal income tax adjustments proposed by the Internal Revenue Service. In such
a contest, our general partner may choose to extend the statute of limitations as to all partners and, in certain circumstances,
may bind the partners to a settlement with the Internal Revenue Service. Further, our general partner may cause us to take advantage
of simplified flow-through reporting of partnership items. If so, adjustments to partnership items would continue to be determined
at the partnership level however, and any such adjustments would be accounted for in the year they take effect, rather than in
the year to which such adjustments relate. Our general partner will have the discretion in such circumstances either to pass along
any such adjustments to the partners or to bear such adjustments at the partnership level.
Legislative
or regulatory action could adversely affect investors.
We cannot assure you
that legislative, judicial, or administrative changes in the federal income laws will not adversely affect you as a limited partner.
Any such changes could have an adverse effect on an investment in our partnership or on the market value or the resale potential
of our properties. You are urged to consult with your own tax advisor with respect to the impact of recent legislation on your
investment in our partnership and the status of legislative, regulatory, or administrative developments and proposals and their
potential effect on an investment in our common units.
Risks Related to our Common Units
An investment
in our common units may be illiquid.
Our common units are
currently traded on OTCQX, but there is no assurance that you will be able to sell your common units on OTCQX at your desired price.
You may never be able to liquidate your investment or otherwise dispose of your common units at your desired price. Our partnership
does not currently have a redemption program and there is no assurance that our partnership will ever redeem or “buy back”
your common units.
A sale of a
substantial number of common units may cause the price of our common units to decline.
If our limited partners
sell, or the market perceives that our limited partners intend to sell for various reasons, substantial amounts of our common units
in a public market, the market price of our common units could fall. Sales of a substantial number of our common units may make
it more difficult for us to sell securities in the future at a time and price that we deem reasonable or appropriate.
Regulatory changes
by Chinese government.
A majority of the common
units are owned by Chinese citizens who purchased our common units using funds in accounts outside of mainland of China (“offshore
accounts”) that are not currently subject to any laws and/or regulations mandated by the Chinese government. These offshore
accounts may be located in but not limited to the U.S., Canada, United Kingdom, Hong Kong and Macau. If the Chinese government
implements new laws and/or regulations to extend its jurisdiction to offshore accounts owned by Chinese citizens, we may be unable
to successfully raise capital in future offerings.
If relations
between the United States and China worsen, investors may be unwilling to hold or buy our common units and the market price of
our common units may decrease.
A significant number
of our common units are and will be owned by Chinese individuals. At various times during recent years, the U.S. and China have
had significant disagreements over political and economic issues. Controversies may arise in the future between these two countries.
Any political or trade controversies between the U.S. and China, whether or not directly related to our business, could reduce
the price of our common units.
The COVID-19
pandemic could have negative effects on our business.
On March 11, 2020 the
World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containments and
mitigation measures worldwide. The Partnership is monitoring this closely, and although operations have not been materially affected
by the coronavirus outbreak to date, the ultimate severity of the outbreak is uncertain. Operations of the Partnership are ongoing
as the delivery of electricity to customers is considered as essential business. Further the uncertain nature of its spread globally
may impact our business operations resulting from quarantines of employees, customers, and third-party service providers. At this
time, the Company is unable to estimate the this event on its operations.
Item 2. Financial Information.
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
You should read
the following discussion and analysis of our financial condition and results of operations together with our financial statements
and the related notes and other financial information included elsewhere in this Annual Report. Some of the information contained
in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and
strategy for our business, includes forward-looking statements that involve risks and uncertainties. Our actual results may differ
materially from the results described in or implied by the forward-looking statements contained in the following discussion and
analysis.
Management is currently
unaware of any trends or conditions other than those mentioned in this management’s discussion and analysis that could have
a material adverse effect on the Company’s current financial position, future results of operations, or liquidity. However,
investors should also be aware of factors that could have a negative impact on the Company’s prospects and the consistency
of progress in the areas of revenue generation, liquidity, and generation of capital resources. These may include: (i) variations
in revenue, (ii) possible inability to attract investors for its equity securities or otherwise raise adequate funds from any source
should the Company seek to do so, (iii) increased governmental regulation or significant changes in such regulations, (iv) increased
competition, (v) unfavorable outcomes to litigation to which the Company may become a party in the future, and (vi) a very competitive
and rapidly changing real estate environment.
The risks identified
here are not all inclusive. New risk factors emerge from time to time and it is not possible for management to predict all of such
risk factors, nor can it assess the impact of all such risk factors on the Company’s business or the extent to which any
factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements.
Accordingly, forward-looking statements should not be relied upon as a prediction of actual results.
Overview
We are a limited partnership
engaged in the investment of real estate properties, including improvement and/or redevelopment of these properties for the purpose of
capital appreciation, in metropolitan Atlanta, GA and Dallas, TX. Our general partner is UCF Asset LLC.
Since its incorporation,
the Company has grown its net equity from $2.25 million as of the date of March 01, 2016, to $8.67 million as of June 30, 2021.
Net equity per common
unit has grown from $1.156/per unit as of March 01, 2016, to $1.538/per unit (fully diluted) as of December 31, 2020, after a $0.050
dividend distribution in the year of 2018. The following table shows the change of net equity per share during this period:
Period end
|
|
Net Equity per Unit pre-dilution
|
|
|
After Potential Dilution/Anti-dilution*
|
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Dividend Distributed per Unit
|
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Inception, March 1, 2016 - unaudited
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$
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1.156
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|
|
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N/A
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|
|
|
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December 31, 2016
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$
|
1.332
|
|
|
|
N/A
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|
|
|
|
|
December 31, 2017
|
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$
|
1.560
|
|
|
|
N/A
|
|
|
|
|
|
December 31, 2018
|
|
$
|
1.482
|
|
|
|
N/A
|
|
|
$
|
0.050
|
|
December 31, 2019
|
|
$
|
1.528
|
|
|
|
N/A
|
|
|
|
|
|
December 31, 2020
|
|
$
|
1.583
|
|
|
$
|
1.538
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|
|
|
|
|
June 30, 2021 - unaudited
|
|
$
|
1.529
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|
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$
|
1.493
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|
|
|
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Table I: Net equity per share of UC Asset
LP, between March 01, 2016 to June 30, 2021.
* Based on the assumption
that all preferred units/convertible notes were converted into maximum possible number of common units. Currently there are 166,667
preferred units issued and they could possibly be converted at $1.60/unit into a maximum number of 187,500 common units.
On January 02, 2020,
our units began to be quoted on the OTCQX, the Best Market of OTC markets.
Legal Structure
of our Company
The business is structured
as a publicly traded limited partnership (Master Limited Partnership or MLP) rather than a real estate investment trust (REIT)
in order to appeal to investors looking for long-term growth. It combines the tax benefits of a private partnership with the liquidity
of a publicly traded company. The majority of MLPs are organized in natural resources sectors of the economy, and only a very limited
number invest in real estate. The Master Limited Partnership Association counted a total number of 82 MLPs trading on US national
exchanges, and only four of them are in the real estate sector. As a matter of fact, we are the only real estate MLP quoted on
OTCQX.
Liquidity and Capital Resources
Capital Resources
Since our inception,
we have funded our operations primarily through the issuance of limited partner interests to raise capital. Prior to our initial
public offering (IPO) in 2018, we conducted three private placements of limited partner interests in March 2016, October 2016,
and April 2017. We have raised a total of $6,900,000 from these private placements. Prior to our public offering, there were 42
limited partners in our partnership.
Initial Public Offering
In January 2018, we
made our first public filing of our Offering Circular with the SEC pursuant to the requirements of Regulation A plus. This original
Offering Circular intended to raise capital of a minimum of $6 million and a maximum of $12 million. However, it was beyond Management’s
reasonable expectation that economic ties between the U.S. and China would experience a fast downturn in the first quarter of 2018,
as the so-called “trade war” between the U.S. and China erupted. The demand for our IPO substantially decreased, and
we changed our Offering Circular in April 2018, to decrease the size of our IPO to a minimum of $3 million and maximum of $6 million.
On June 13, 2018, our
Offering Circular was qualified by the SEC. However, in the following months, the tension of trade disputes between the U.S. and
China kept rising. During this period, a series of negative comments spread by a third party (against whom we have filed a charge
of defamation in a Chinese court and won the court decision in September 2019), might also have decreased the demand to our offering.
By August 2018, it was clear that we would not be able to raise a minimum of $3 million. We made another change to our Offering
Circular and reduced the fundraising target to a minimum of $1.43 million and a maximum of $2.85 million.
Our IPO was closed
on October 12, 2018. The gross amount of raised capital was $1.45 million. We had a total of 80 limited partners after the IPO.
Issuance of Series A Preferred
Units
On March 02, 2020,
the Partnership closed a private placement, under which the company issued 166,667 shares of Series A Preferred Units to raise
capital of $300,000, at a price of $1.80/unit, from a domestic investor.
The Series A Preferred
Units were sold with premium, in the sense that the price for the preferred shares to be converted into common units is considerably
higher than the current net equity per unit of the Partnership. The issuance of Series A Preferred Units, therefore, will likely
increase the Partnership’s net equity per unit.
The Series A Preferred
Units may be converted into common units at the holder’s option, after 12 months from the initial issuance date. The conversion
price may range between $1.60 - $1.80 per unit, depending on the trading price of common units at the time of conversion.
Debt financing
As of June 30, 2021, our subsidiaries
had following loan facilities:
SHOC Holdings LLC has a construction
loan of $400,000 from a local bank. Material terms of this loan include the follows:
Lender: The Citizens Bank
of Georgia.
Principal: $400,000.
Duration: 12 months. Borrower
will pay in one payment all outstanding principal and unpaid accrued interests on July 05, 2022.
Interest and Interest rate:
Borrower will pay monthly any unpaid accrued interests. Interest rate is variable which is 1.000 percentage point over the Index rate.
The Index is 4.42500% per annum at the beginning of the term.
Security: the loan is secured
by the property under construction.
Full text of the loan agreement
is included in this registration statement as Exhibit 4.2.
After adjustment of our
investment and operating plan, we believe our available capital will be sufficient to fund our operating plan through at least the next
twelve months. However, our operating plan may change due to many factors currently unknown to us, and we may need to seek additional
funds sooner than planned, through public or private equity or debt financings or other sources, such as strategic collaborations. Further,
we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds
for our current or future operating plans. There is no assurance that the Company, either through itself or through any of its subsidiaries,
will be able to obtain such funds on terms that are acceptable to us.
Additional financing
may result in dilution to limited partners, imposition of debt covenants and repayment obligations or other restrictions that may
affect our business.
Anti-dilution Clause
Section 4.01(a) of
our Limited Partnership Agreement contains an anti-dilution clause which offers protection to the interests of current investors
when additional units or derivative units of our Company will be offered for the purpose of additional financing. The referenced
clause reads as follows:
“….
provided that i) any Common Units shall not be offered at a price lower than the book value per Common Unit based on the last audited
financial statement immediately preceding the offering of such Common Unit; and ii) any Units or Derivative Units, if convertible
into Common Units, the conversion price shall not be set or calculated at a price lower than the book value per Common Unit based
on the last audited financial statement immediately preceding the date when such Units or Derivative Units were issued. The foregoing
conditions i) and ii) may be waived for any offering if the general partner has received the approval of a Unit Majority prior
to such offering.”
Cash Flows
The following table shows a summary of cash
flows for the periods set forth below:
|
|
Year Ended
December 31,
2020
|
|
|
Year Ended
December 31,
2019
|
|
Net cash used in operating activities
|
|
$
|
360,960
|
|
|
$
|
(383,766
|
)
|
Net cash (used in) provided by investing activities
|
|
$
|
1,820,983
|
|
|
$
|
164,226
|
|
Net cash provided by financing activities
|
|
$
|
(194,000
|
)
|
|
$
|
135,383
|
|
Cash at beginning of period
|
|
$
|
153,687
|
|
|
$
|
237,844
|
|
Cash at end of period
|
|
$
|
1,419,710
|
|
|
$
|
153,687
|
|
|
|
Half year Ended
June 30,
2021
|
|
|
Half year Ended
June 30,
2020
|
|
Net cash used in operating activities
|
|
$
|
170,440
|
|
|
$
|
627,673
|
|
Net cash (used in) provided by investing activities
|
|
$
|
1,072,199
|
|
|
$
|
181,587
|
|
Net cash provided by financing activities
|
|
$
|
400,000
|
|
|
$
|
492,000
|
|
Cash at beginning of period
|
|
$
|
1,419,710
|
|
|
$
|
153,687
|
|
Cash at end of period
|
|
$
|
2,721,469
|
|
|
$
|
199,601
|
|
Net Cash Used in Operating Activities
For the year ended
December 31, 2019, net cash used in operating activities was primarily the result of management fees and professional fees.
For the year ended December
31, 2020, net cash used in operating activities was primarily the result of management fees and professional fees.
For the six months ended
June 30, 2020, net cash used in operating activities was primarily the result of management fees and professional fees.
For the six months ended
June 30, 2021, net cash used in operating activities was primarily the result of management fees and professional fees.
Net Cash (Used in)
Provided by Investing Activities
For the year ended December
31, 2019, net cash provided by investing activities was primarily the result of the exit of portfolio properties generating $2.8 million
in cash, the investment of $2.2 million on portfolio properties and net $0.4 million in new loans to related parties.
For the year
ended December 31, 2020, net cash provided by investing activities was primarily the result of the exit of portfolio properties generating
$4.7 million in cash, investment of $3.0 million on portfolio properties and net $0.06 million in repayments of loans to related parties.
For the six months ended
June 30, 2020, net cash provided by investing activities was primarily the result of the above-reported, plus $400,000 investment in
debts.
For the six months ended
June 30, 2021, net cash provided by investing activities was primarily the result of approximately $1,910,000 received from selling two
residential properties, $350,000 invested in acquiring one commercial property, and $16,500 earnest money invested in acquiring a historic
landmark property.
Net Cash Provided
by Financing Activities
For the year ended December
31, 2019, net cash provided by financing activities was due to a refund of back-up withholding from the U.S. Internal Revenue Service
on behalf of our limited partners and the receipt of $0.1 million from a new construction loan.
For the year ended December
31, 2020, net cash provided by financing activities was due to the net proceeds of $300,000 in contribution by a limited partner through
issuance of Series A Preferred Units and proceeds of $0.2 million from the construction loan and the repayment of $0.4 million on the
construction loan.
For the six months ended
June 30, 2020, net cash provided by financing activities was primarily due to a construction loan, as discussed above, plus net proceeds
of $300,000 in contribution by a limited partner through issuance of Series A Preferred Units.
For the six months ended June 30, 2021, net cash provided by financing
activities was primarily the result of an acquisition loan utilized by SHOC Holdings LLC, in the amount of $400,000.
Commitments
and Contingencies
We pay quarterly management
fees to our general partner, UCF Asset LLC. Management fees are calculated at 2.0% of assets under management as of the last day of our
preceding fiscal year. Management fees for the years ended December 31, 2019 and 2020 were $164,488 and $182,798, respectively. Management
fees for the six months ended June 30, 2020 and 2021 were $89,075 and $77,053, respectively.
In addition, we lease
space from an unaffiliated third party at 2299 Perimeter Park Drive, Suite 120 in Atlanta, GA. Rent was paid monthly at $2,035 through
November 1, 2019, and increased to $2,096 through November 1, 2020, and increased to $2,158 for the next twelve months. Pursuant to the
terms of the lease, we have provided a deposit of $2,189 to the landlord.
Off Balance-sheet Arrangements
The Partnership doesn’t
have any off balance-sheet arrangements.
Results of Operations
Year Ended December
31, 2019
In fiscal year 2019, our
investment operations were primarily performed through our wholly owned subsidiary Atlanta Landsight LLC. It purchased three properties
and sold five properties during this period. Atlanta Landsight LLC had $41,138 of realized loss and $677,139 of unrealized gains. We
recorded this gain as a combined unrealized gain of $636,001 for the period. UCF Development LLC had $108,000 unrealized gain during
this period. In addition, our unrealized gains during this period included accrued but unpaid interest.
Our operational expenses
were $516,329 during this period, consisting principally of management fees paid to our general partner, and professional fees.
During the year ended
December 31, 2019, we recorded an increase in net equity of $203,542.
Year Ended December
31, 2020
In fiscal year 2020, our
investment operations were primarily performed through our wholly owned subsidiary UCF Development LLC and Atlanta Landsight LLC.
UCF Development LLC transferred
its portfolio investment to Atlanta Landsight LLC in the first quarter for a nominal price of $1.00. UCF Development was later dissolved
in November 2020, and all its remaining assets, which was a cash balance of approximately $12,000, was returned to the Partnership.
Atlanta Landsight LLC
purchased one property and sold five properties during this period. Atlanta Landsight LLC had $466,479 of realized loss and $394,211
of unrealized loss. We recorded this net loss as a combined unrealized loss of $860,789 for the period. UCF Development LLC was dissolved,
and all its gains and losses were absorbed by Atlanta Landsight LLC during this period. In addition, our unrealized gains during this
period included accrued but unpaid interest amounting to $40,837 on our loan portfolio.
Our operational expenses
were $584,424 during this period, consisting principally of management fees of $182,789 paid to our general partner, and professional
fees.
During the year ended
December 31, 2020, we recorded an increase in net equity of $120, 174.
Six months Ended
June 30, 2020
During the six month period
ending on June 30, 2020, our investment operations were primarily performed through our wholly owned subsidiaries Atlanta Landsight LLC
and UCF Development LLC.
Atlanta Landsight LLC
had a realized loss of $456,785, which was mostly from the exit of two portfolio properties at reduced price, and an unrealized loss
of $1,187,608, which was mostly from readjustment of the fair market value of our inventories in consideration of potential impact of
the pandemic.
Our operational expenses
were $226, 531 during this period, consisting principally of management fees paid to our general partner, and professional fees. In addition,
we made investment income of $23,225 from loan investments.
UCFD transferred its farmland
property to ALS along with the unrealized gain carried in the property. In additional, UCFD had $802 of realized losses from continuous
operations.
We consolidated these
gains/losses into a realized loss of $660,894 and a unrealized loss of $1,187,608.
During the 6 month period
ending on June 30, 2020, we also recorded a decrease in net equity of $1,848,502.
Six months Ended
June 30, 2021
For the six months ending
on June 30, 2021, our investment operations were primarily performed through our wholly owned subsidiary Atlanta Landsight LLC and SHOC
Holdings LLC.
Atlanta Landsight LLC
had $47,870 of realized gain, mostly from liquidating two portfolio properties and received rental income from held portfolio properties,
and $106,313 of unrealized loss, mostly from the adjustment of fair market value of two portfolio properties due to change of use. SHOC
Holdings LLC had $23,340 of realized gain in this period, mostly from interest income from its portfolio investments.
Our operational expenses
were $224,998 during this period, consisting principally of management fees paid to our general partner, and professional fees. In addition,
we made investment income of $2,654 from short term loans.
We consolidated our gains/losses
into a realized loss of $151, 113 and an unrealized loss of $106,313.
During the 6-month period ending
on June 30, 2021, we recorded a decrease in net equity of $257,426.
Trend information
The following discussion
covers some significant trends affecting our business, in our industry, or to the macro economy, since the last fiscal year, which
had impacts on our operations. It also covers known trends, uncertainties, demands, commitments or events that are reasonably likely
to have a material effect on our operation for the current fiscal year of 2020.
Public trading of
our common units and its impact on our business operation
On October 31, 2019,
we qualified to be quoted on OTC markets. On January 02, 2020, our common units began being quoted on the OTCQX, the Best Market
of OTC Markets.
We believe that clearance
by FINRA and the quoting of our units on OTCQX will have significant impact on our business operations in the year of 2020 and
the years to follow. First of all, we now have the option of raising capital via PIPE deals (private placement of public equity)
to meet our operational needs. If we are able to raise funds via pipe deals, as to which there is no assurance, this will provide
available capital which has not been available as a funding source to the Partnership during the past two years.
Secondly, we believe it
will enable us to acquire properties by issuing new units, possibly preferred units and/or restricted units, instead of cash for all
or part of the acquisition cost. This will reduce our cash outflow, and the capital saved can be used on renovation/remodeling/rebuilding
of the acquired properties.
Impact of COVID-19
on national and local real estate markets
COVID-19 pandemic
has had a huge impact on real estate markets. In the two metropolitan areas where we conduct our business, the City of Atlanta
had been under lock-down since March 17, 2020 followed by a lockdown of the whole state of Georgia since April 01, 2020 and the
State of Texas had been under lockdown since March 19, 2020. These lockdown orders placed many businesses on halt or remote operations
and is expected to hurt the economy and, eventually, the real estate market.
Commercial properties
in Atlanta were impacted immediately. According to a report released April 20 by Atlanta consulting firm, Bleakly Advisory Group,
the corona virus pandemic may push retail vacancy across metro Atlanta to 40%, creating an unprecedented challenge for mall owners
and other landlords. Socially driven businesses, such as restaurants, lounges and clubs, also have experienced record-breaking
economic losses. We believe this in turn will hurt the landlords of commercial properties that lease properties to those businesses.
Generally, residential
real estate prices have remained at the same level. But the number of sales of residential properties have decreased. The reason,
according to data of several independent sources, was that supply dropped even faster than demand. This led to a temporary balance
of supply and demand at the same price level.
We believe that this
balance is not sustainable, because economic impact of COVID-19 is not temporary and hence the buyers will not return soon. We
have observed the trend of market adjustment in the last few weeks before the end of first half of year 2020.
However, the impact
of Covid-19 may help our business in a relative sense. On April 30, 2020, a research report issued by Zacks Small-cap Research
(https://finance.yahoo.com/news/ucasu-thinking-past-uncertainty-invest-090000970.html) praised our company, concluding that “UC
Asset combines an experienced management team with an attractive investment track record, backed by a stable base of long-term
investors, and it is well positioned to both manage through the slowdown and leverage opportunities on the other side.”
Our Strategy to
Counter against and Benefit from the Impact of COVID-19
On April 20, 2020,
ALS closed two transactions liquidating two properties to cash buyers, at prices substantially lower than their current book values.
ALS made this decision based on management’s best-effort projection of real estate market in US generally and in Atlanta
specifically, under the impact of the pandemic of COVID-19.
Management believes
that it served the best interest of the Partnership and its shareholders for ALS to liquidate these properties, because 1) ALS
had entered into a drought of sales due to COVID-19 pandemic and its cash reserves had decreased to a risky level; 2) management
believes that the real estate market will enter into a bearish period due to COVID-19 pandemic, and ALS may not be able to liquidate
those properties at better prices in foreseeable future; 3) ALS and the Partnership have other investments and investment opportunities
that are believed to be more promising than those liquidated properties; and 4) the Partnership has formulated a business plan
to capitalize opportunities in a projected bearish real estate market, and it needs cash returned from ALS to execute on its business
plan.
As further measures
to counter the impact of the pandemic, ALS made some properties available for rent to generate cash flow. ALS also rented out
one additional property in the first quarter. By and as of the end of first nine months of 2020, ALS had three properties generating
stable monthly rental incomes.
By the end of the year
2020, the management was convinced that the residential market is reaching its peak in the next 12 months. This position was reflected
in a “White Paper” released by the management on February 23, 2021. In the White Paper, the management also concluded that
the fast rising of building costs, which is also a consequence of COVID-19 pandemic, made it undesirable to invest into residential homes
that need redevelopments.
Following this conclusion,
the management started to execute a strategy to decrease its portfolio investment in residential property and shift funds to more promising
opportunities such as SHOC. As of and by June 20, 2021, ALS has sold 7 properties in the past 18 months, which represent an approximate
$5 million dollar decrease of the company’s holdings in detached residential properties. Plus the sale of the 72-acre farmland
in Dallas, TX, our cash reserve and other liquid assets surpassed $5 million in late June. After a purchase of a SHOC property for $750,000,
we still retained a strong cash position. As new COVID-19 cases are dropping across the United States and in most places of the world,
we believe we are well-prepared for the post-pandemic real estate market.
Item 3. Properties.
Properties Owned
under ALS
The following table provides
information of general character of ALS’s principal physical properties, grouped under 3 categories on basis of the various investment
strategies that have been applied in acquiring them. All the properties are owned indirectly by the Partnership through its subsidiary
Atlanta Landsight LLC. Atlanta Landsight LLC owns most of the properties in fee simple and there is no debt on the properties, except
for a mortgage loan of approximately $380,000 (as of June 30, 2021) from a local bank.
Business Purpose
|
|
Numbers of Properties
|
|
Locations
|
|
Total Fair Market Value
|
|
|
Total Monthly Rent
|
|
Residential for Rent
|
|
2
|
|
Atlanta, GA & Greensboro, NC
|
|
$
|
1,272,000
|
|
|
$
|
6,500
|
|
Residential Held
|
|
3
|
|
Atlanta, GA
|
|
$
|
896,200
|
|
|
|
--
|
|
TOTAL
|
|
|
|
|
|
$
|
2,168,200
|
|
|
$
|
6,500
|
|
The fair market value
of ALS’s residential properties is determined by licensed and independent experts. Independent and licensed appraiser Real Estate
Valuation, Inc was hired by ALS to provide appraisal reports on certain individual properties, while independent and licensed realtor
Brandon Atkins from Keller Williams was hired to review and approve our fair market value calculation formula on other properties collectively.
These two approaches covered all the properties owned by ALS.
More Detailed
Discussion of Our Properties Listed in Above Table
By and as of June 30,
2020, ALS’s principal physical properties include 5 residential properties. With one exception, all of the residential properties
are located in metropolitan Atlanta, GA, mostly in growing suburban areas surrounding downtown Atlanta. Out of the 4 properties in metropolitan
Atlanta, 2 are detached single-family houses, 1 is lot zoned for detached house, and 1 is small multi-family property. We also own a
detached single-family house in Greensboro, NC.
Two of our detached single-family
houses are currented rented out, including one in northern suburban area of Atlanta, and one in north-western suburban area of Greensboro.
The Atlanta properties are on 12-month lease with option to annual renew. The Greensboro property lease expires on June 20, 2021, and
it includes a lease-buy term giving the tenant an option to buy the property at $500,000 before the date of expiration, which is July
21, 2021. Upon mutual agreements, the expiration date has been extended for 3 months. The total value of fair market value of these two
properties is approximately $1.27 million, and the monthly rent income generated from these three properties add up to $6,500. Annual
gross rent income equals approximately 6.1% of the total fair market value.
Three properties are residential
and may be used to partner with third-party developers for development. According to our business plan as of June 30, 2021: 1) one multiple-family
property in an underdeveloped community in southern suburban Atlanta may be torn down and rebuilt into multiple-family property for sale
or for rent; 2) one lot in a growing community in southern suburban Atlanta may be developed into a single house for sale or for rent;
and 3) one detached single-family properties in northern suburban Atlanta may be renovated for sale or for rent. Fair market value of
these properties adds up to approximately $896,000
Properties previously
owned under UCFD
In September 2016,
UCF Development LLC (“UCFD”) purchased 76% of a 72.53-acre farmland located within the township of Farmersville, Texas,
in Collin County, located in the northeast quadrant of the Dallas Metropolitan Area. In February 2018, UCFD purchased the remaining
24% of this property and now own 100% of this land. In January 2020 this land was sold to Atlanta Landsight LLC through a internal
nominal sale.
The purchase price
in September, 2016 for the Farmersville property was $805,216. The total historical cost for us on this property (including commissions,
taxes, consulting fees etc.) is approximately $860,000, as of September 30, 2020.
The value of the Farmersville,
TX property was appraised at $1,088,000.00 as of December 19, 2019. This appraisal report was provided by Michelle Godwin from Valuright
Appraisal, Inc. This property was sold in October 2020 at $1,300,000.
UCFD was subsequently dissolved after the sale of the
farmland.
Properties owned
under SHOC
In April 2021, SHOC purchased
its first Shared Home-Office Cluster (SHOC) property located in the historical district of downtown Atlanta. The deal is closed in June
2021.
This property may be developed
into about 10 units for short-stay rental, through online platforms such as Airbnb or Vrbo, following the innovative business model of
SHOC. SHOC is a disruptive new concept for real estate investment. SHOC Holdings defines the concept as a residential property with each
bedroom designed as an individual business lodge equipped with office capabilities. These home-office spaces can be rented out individually,
mostly targeting business travelers.
Management believes that
SHOC combines the merits of both home stays (such as Airbnb) and conventional business hotels. It offers business conveniences that current
home stays lack, and provides a lifestyle charm that current business hotels fail to provide.
For this specific property,
total acquisition cost is approximately $750 000. SHOC estimates an additional $300,000 to $400,000 will be invested to remodel and renovate
the property into about 10 units, including 2 executive suite units with private patio, 1 unit as a common meeting area, and 1 basement
unit which may provide additional lodging for an onsite manager.
Properties owned
under other subsidiaries
As of June 30, 2021, our
other subsidiaries did not own any properties.
COVID-19 Disclosure
To the knowledge of our
management, we do not see and/or foresee any other specific impacts of COVID-19 on our properties that are material enough to require
disclosure, besides those we have already disclosed and discussed in the section Trending Information of Item 2 in this filing. Specifically,
all of our leases have been fully paid, and none of our tenants have made any rent relief requests.
We will keep monitoring
the development of COVID-19 pandemic and will disclose in timely manner any specific and material impacts of COVID-19 on our properties,
including but not limited to if any of our lease will not be fully paid, or if any of our tenants may make any rent relief requests,
in our future filings.
Item 4. Security Ownership of Certain Beneficial Owners and
Management.
As of and by the
date we filed this amendment to our registration statement, which, there were no unit holders to our knowledge that beneficially
owns more than 10% of our common units, and there were no holder to our knowledge beneficially owns more than 5% of our common
units except for one investor who owned approximately 5.37%. The managing member does not beneficially own any of our common units
and the member of majority interest of our general partner (“Larry” Xianghong Wu,) beneficially owns 172,953 of our
common units (3.07%). The general partner is entitled to 20% of all distribution to be made by the Partnership after the common
unit holders receive a return equal to the Partnership audited book value See “Distribution”.
As of the by the date
of filing of this amendment, the security ownership of certain beneficial owners and management of our company is listed as below:
Beneficial Owner
|
|
Title
|
|
Security
|
|
Amount
|
|
|
Percentage of Same Type
of Securities
|
|
Ying Huang
|
|
None
|
|
Common Units
|
|
|
302,667
|
|
|
|
5.37
|
%
|
Officers and Directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
“Larry” Xianghong Wu
|
|
Majority Owner of General Partner
|
|
Common Units
|
|
|
172,953
|
|
|
|
3.07
|
%
|
Gregory Bankston
|
|
Managing Member of General
Partner
|
|
N/A
|
|
|
0
|
|
|
|
0
|
%
|
Harris Miller
|
|
Audit Committee Member
|
|
N/A
|
|
|
0
|
|
|
|
0
|
%
|
Li Zheng
|
|
Audit Committee Member
|
|
N/A
|
|
|
0
|
|
|
|
0
|
%
|
Item 5. Directors and Executive Officers.
The operation of
our partnership is managed by our general partner. We do not have any directors, officers, or significant employees. The following
are key managers of our general partner and their respective ages and positions as of March 1, 2021. As the member of majority
interest of our general partner, Dr. Wu contributes his time and services to our general partner as an owner rather than an employee.
Name
|
|
Position
|
|
Age
|
|
Since
|
Gregory Bankston
|
|
Managing Member
|
|
48
|
|
formation
in January 2016
|
“Larry” Xianghong Wu
|
|
Member of Majority Interest
|
|
51
|
|
formation in January
2016
|
Mr. Gregory Bankston
has served as managing member of UCF Asset LLC since its formation in January 2016. Between 2013 and 2016, he founded and
operated Real Estate Butlers. Prior to then, he was a co-owner of Bankston Brokers, formerly known as Bankston Realty, since 2010.
Mr. Bankston is a member of Atlanta Board of Realtors, the Georgia Association of Realtors, and the National Association of Realtors.
Dr. “Larry”
Xianghong Wu has been the member of majority interest of UCF Asset LLC since its formation in January 2016. Between 2012 and
2016, he was the founder and chief executive officer of Shanghai Heqing Asset Management LP, a limited partnership based in Shanghai,
China, focused on Chinese investments in the U.S., particularly real estate. Between 2011 and 2012, he was chief executive officer of
EHE Capital, a Chinese PE fund managing a portfolio of approximately $1 billion from 2011. Prior to then, he worked at Cisco Systems,
Inc. between 2009 and 2011 as a vice president in charge of Cisco’s strategic business transformation in China. Dr. Wu has served
as policy advisor and counsellor to the Chinese government and officials. He also served as a Board Member of Finance and Investment
of the Capital Club in China from 2009 to 2013.
The general partner
may be removed, upon consent of the limited partners representing at least sixty-six and two-thirds percent (66 2/3%) of the outstanding
common units voting as a single class, where (i) the general partner has been convicted of fraud, embezzlement, or a similar felony
by a court of competent jurisdiction in a final judgment, or (ii) the general partner materially and willfully breaches our limited
partnership agreement.
The general partner
may, at any time, assign all or a portion of its partnership interest to any affiliate and, in the general partner’s sole
discretion, admit the affiliate as an additional or substitute general partner.
Audit Committee
Our Company is a limited
partnership and is not required to set up a board of directors. However, we are still required by the rule of OTCQX to set up an
Audit Committee.
In February 2019, the
Company resolved to establish an Audit Committee. Starting from July 01, 2019, we have admitted two Audit Committee members who
both are independent. Herein the meaning of “independent” follows the guidelines published by OTC Market Group Inc.
The two members are:
Harris Miller
is a prominent American politician, businessman, and lobbyist. Miller served as president of the Information Technology
Association of America and the World Information Technology and Services Alliance (WITSA) for 12 years. He ran for US Senate in
2006 and lost to Jim Webb in the Commonwealth of Virginia. Mr. Miller received a political science master’s degree from Yale
University in 1975.
For a detailed
biography of Harris Miller, please see: https://en.wikipedia.org/wiki/Harris_Miller
Li Zheng is
currently president of Techtop Industries Inc., an electric motor manufacturer based in Atlanta, GA, which Li co-founded in 2008
with extended family members. Before founding and operating Techtop, Li worked as an environmental engineer, and spent 10 years
on academic research and consulting for various water resources and sustainable development projects in the western United States,
Northern China, Tibet Plateau, and the mountainous regions of Nepal and India. Li has also been serving as a board member of non-profit
Atlanta Young Singers since 2015. Li obtained his Ph.D. degree in Water Resources Engineering from the University of Notre Dame
in 1997.
Item 6. Executive Compensation.
The operation of our
partnership is managed by our general partner, UCF Asset LLC. Our partnership does not have any directors or officers who receive
compensation other than the Audit Committee members.
We pay management fees
quarterly to our general partner. Management fees are calculated at 2.0% of assets under management as of the last day of our preceding
fiscal year. The fee is paid quarterly. Management fees for the periods ended December 31, 2019 and 2020 was $164,488 and $182,798, respectively.
Management fees for the six months ended June 30, 2021 were $77,053. In addition, the General Partner will receive approximately 20%
of all distributions the Partnership makes above a “hurdle rate”. See “Distributions”.
We also pay our Audit
Committee members $7,000 each annually.
In addition to the
management fee, we reimburse the general partner for standard expenses it may incur in managing the Partnership in accordance with
our limited partnership agreement. These reimbursable expenses include: organizational expenses; fees for accountants, attorneys,
auditors, and other professionals; expenses associated with partnership taxation reporting; operational expenses including insurance,
valuation reports, and real estate brokerage commissions; and government filing fees and costs.
Item 7. Certain Relationships and Related
Transactions, and Director Independence.
We utilize the
real estate brokerage services of Liz Bankston of Bankston Brokers to acquire and sell properties in the Atlanta area. Mrs. Bankston
is the wife of Gregory Bankston, the managing member of our general partner. Our working relationship with Liz Bankston is not
exclusive, and we have worked with other brokers from time to time. In 2019, ALS paid Mrs. Bankston approximately $31,152 as commissions
for acting as broker in connection with five real estate transactions. In 2020, ALS paid Mrs. Bankston approximately $71,430 in
connection with five real estate transactions. We believe the sales commissions paid to Mrs. Bankston are at or less than the
standard market rate.
In June 2019, we
advanced $100,000 to our general partner. This advance carries a 0.25% monthly interest rate and maturity date of June 10, 2021
or upon the LP having raised an additional $20,000,000 in capital. This advancement was made to empower and fund the general partner
to carry on the business plan of converting the Company into a Qualified Opportunity Zone. However, the plausibility of such conversion
has considerably dropped since the advance. Since then, $52,513.76 of the advance, plus interest of $3,515, has been paid back
by the general partner prior to its due date. The rest of the loan will be paid back using a payment schedule, through which the
principal amount will carry a 1% quarterly interest rate. The general partner will pay 10% of its management fee back to the Partnership
quarterly, until all the principal and accumulated interest is paid off.
In April 2019, we loaned
$300,000 to a third party, which then acquired a 10% economic interest in our general partner. This note carried a 5.6% annual interest
rate in 2019, 8% annual interest rate for 2020 and 10% annual interest rate for 2021 and a maturity date of March 31, 2021, in a single
lump sum. In March 2020, in consideration of the COVID-19 pandemic, we reached an agreement with this third party to keep the introductory
rate of 5.6% for the year of 2020. In December 2020, the Note was extended to the year end of 2021.
Item 8. Legal Proceedings.
To our knowledge there
are no material pending legal proceedings against the Company at this time.
Item 9. Market Price of and Dividends
on Our Common Units and Related Stockholder Matters.
Starting from the date
of January 02, 2020, our common units have been quoted on OTCQX under the symbol UCASU. OTCQX quotations, as over-the-counter market
quotations, reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual
transactions. The high and low common unit sales per unit were as follows:
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Full
Year
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
2.20
|
|
|
$
|
2.36
|
|
|
$
|
2.36
|
|
|
$
|
2.40
|
|
|
$
|
2.40
|
|
Low
|
|
$
|
1.88
|
|
|
$
|
0.215
|
|
|
$
|
2.20
|
|
|
$
|
0.52
|
|
|
$
|
0.215
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
n/a
|
|
|
$
|
n/a
|
|
|
$
|
n/a
|
|
|
$
|
n/a
|
|
|
$
|
n/a
|
|
Low
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
n/a
|
|
|
$
|
n/a
|
|
|
$
|
n/a
|
|
|
$
|
n/a
|
|
|
$
|
n/a
|
|
Low
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and by the
date of January 02, 2020, we have 80 holders of our common units. After January 02, 2020, our units became actively traded on
OTC markets, and since there are non-NOBO shareholders, we are no longer able to have a precise head count of our unit holders.
We paid a $0.05/unit
dividend to our common unit holders for the fiscal year of 2018. We may pay dividend to our common unit holders in the future,
at the sole discretion of our general partner, on basis of their judgment on our business matters.
As of June 30, 2021, there
were no securities of our partnership authorized for issuance under equity compensation plans.
Item 10. Recent Sales of Unregistered
Securities.
On March 2, 2020 we
sold 166,667 Series A preferred units to one purchaser for a total consideration of $300,000. These units were sold on a private
basis, no underwriter was involved with the sales and no commissions were paid in connection with such sales.
The Series A units
were sold to an “accredited investor.” The Series A units issued by the Partnership are deemed “restricted securities”
within the meaning of that term as defined in Rule 144 of the Securities Act and have been issued pursuant to the “private
placement” exemption under Section 4(2) of the Securities Act. This transaction did not involve a public offering of securities.
Investors who purchased securities in the private placement had access to information on the Partnership necessary to make an informed
decision. The Partnership has been informed that the purchaser is able to bear the economic risk of this investment, they are aware
that the securities were not registered under the Securities Act, and they have been notified that the securities cannot be re-offered
or re-sold unless the securities are registered or are qualified for sale pursuant to an exemption from registration.
Neither the Partnership
nor any person acting on its behalf offered or sold the securities by means of any form of general solicitation or general advertising.
The purchaser represented
in writing that he acquired the securities for his own accounts and not with the view to, or for resale in connection with any
distribution. A legend was placed on the certificate issued stating that the securities are restricted, they have not been registered
under the Securities Act and they cannot be sold or otherwise transferred without an effective registration or an exemption therefrom.
Item 11. Description of Registrant’s
Securities to be Registered.
General
The following is a
summary of the rights of our common units, key provisions of our limited partnership agreement, and certain tax consequences of
our partnership and being a limited partner.
Common Units
Common units represent
limited partner interests in our partnership. The holders of common units are entitled to participate in partnership distributions
and exercise the rights or privileges available to limited partners under our limited partnership agreement. For a description
of the rights and privileges of limited partners under our limited partnership agreement, including voting rights, please read
“Limited Partnership Agreement” below.
Transfer Agent
As of the date
of this registration statement our transfer agent is Securities Transfer Corporation.
Limited Partnership Agreement
Our limited partnership
agreement, as amended from time to time, is the governing instrument establishing the terms and conditions pursuant to which our
partnership will conduct business. Our limited partnership agreement also establishes the rights and obligations between and among
the limited partners and our general partner, as well as other important terms and provisions relating to our partnership.
The following is a
summary of our limited partnership agreement. A copy of our limited partnership agreement is included as an exhibit to the offering
statement of which this Offering Circular forms a part. This summary is qualified by reference to the exhibit containing our complete
limited partnership agreement.
Profits and
Losses
Losses for any fiscal
year shall be allocated among the limited partners in proportion to their capital account balances, until the balance of each capital
account equals zero. Thereafter, all losses shall be allocated in accordance with each limited partner’s respective percentage
interest in our partnership. Profits will first be allocated pro rata to the limited partners in accordance with the amount of
losses previously allocated if such previous losses were not offset by profits. Thereafter, profits shall be allocated in accordance
with actual distributions as described below. The General Partner participates in the profits of the Partnership at a rate of 20%
above a 10% annualized return to the Limited Partners: increasing to 40% of the profits above an 18% annualized return to the Limited
Partners.
Distributions
Except as provided
elsewhere in our limited partnership agreement, net cash flow of the Partnership with respect to each disposed portfolio investment
shall be distributed to the partners at the discretion of the general partner, in the following order:
|
(i)
|
First, 100% to the limited partners in proportion to their respective percentage interests, calculated at the time of such distribution, until the limited partners have received an aggregate amount equal to the annual rate of return (non-compounding) of the audited book value for the fiscal year immediately preceding such distribution.
|
|
(ii)
|
Second, 100% to our general partner until the cumulative distribution to our general partner pursuant to this clause (ii) equals twenty percent (20%) of the total amounts distributed pursuant to clause (i) and this clause (ii), in each case, attributable to such portfolio investment (including any capital contributions used to fund fees and expenses with respect to such portfolio investment) and all other portfolio investments that have been previously disposed of (and not previously recouped) in the same fiscal year.
|
|
(iii)
|
Third, 80% to the limited partners in proportion to their respective percentage interests and 20% to our general partner.
|
Voting Rights
The limited partners
will have no right to participate in the management of our partnership and will have limited voting rights. Limited partners shall
have the right to vote only on the following matters:
Removal of General
Partner for Cause
The limited partners,
by an affirmative vote of limited partners representing more than 66 2/3% of the outstanding units, shall have the right to remove
our general partner where (i) our general partner has been convicted of fraud, embezzlement, or a similar felony by a court of
competent jurisdiction in a final judgment; or (ii) our general partner has willfully and materially breached our limited partnership
agreement. An action for removal also provides for the election of a substitute general partner by the limited partners.
Amendment of Limited
Partnership Agreement
Our limited partnership
agreement may be amended or modified by the limited partners representing at least a majority of the outstanding units; provided,
however, that our limited partnership agreement may be amended by our general partner without the consent of the limited partners
(i) in any manner that does not materially adversely affect the limited partners, individually or collectively, (ii) to effect
any changes required by any governmental body or agency, or (iii) to comply with any applicable laws or regulations; provided further,
that there shall be no amendment that (i) would materially reduce the rights, or increase the obligations, of a limited partner
unless the amendment (A) is consented to by such limited partner or (B) by its terms applies to all limited partners; or (ii) (A)
increases a limited partner’s capital commitment or (B) imposes personal liability upon a limited partner for any debts or
obligations of our partnership unless, in each case, the amendment is consented to by such limited partner.
Consent of Limited
Partners
In any circumstances
requiring the approval or consent of the limited partners, a failure to respond in the time specified by our general partner, which
time shall not be less than 15 days, shall constitute a vote and consent to approve the proposed action.
Annual Meetings
Our general partner
shall specify the time and place of each annual meeting of the partners. Special meetings may be called only by our general partner
or by the limited partners representing at least a majority of the outstanding units. Notice of such meetings shall be provided
not less than ten (10) calendar days nor more than sixty (60) calendar days before the date of the meeting, to each record holder
entitled to vote at such meeting.
List of Limited
Partners Entitled to Vote
A complete list of
limited partners entitled to vote at any meeting of the partners shall be open to the examination of any limited partner, for any
purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days before the meeting, at the
principal place of business of our partnership.
Tax Information
Returns to Limited Partners
Our partnership shall
use commercially reasonable efforts to provide to each limited partner and, to the extent necessary, each former limited partner,
Internal Revenue Service Schedule K-1 with respect to such fiscal year by April 15th of the calendar year immediately following
the end of each fiscal year.
No Right to
Repurchase or Redemption of Units.
Our limited partnership
agreement does not provide for the repurchase or redemption of units.
Death, Disability,
Incompetency or Bankruptcy of a Limited Partner
In the event of the
death, disability, incapacity or adjudicated incompetency of a limited partner or if a limited partner becomes bankrupt, his, her
or its rights as a limited partner to share in our partnership’s distributions and allocations and to assign his, her or
its interest or cause the substitution of a substituted limited partner will transfer to his, her or its personal representative,
administrator, guardian, conservator, trustee in bankruptcy or other legal representative.
Limits on General
Partner’s Liability
Our general partner
shall be fully protected and indemnified by our partnership against all liabilities and losses suffered by our general partner
(including attorneys’ fees, costs of investigation, fines, judgments and amounts paid in settlement, actually and reasonably
incurred by our general partner in connection with such action, suit or proceeding) by virtue of its status as general partner
with respect to any acts or omissions, except for gross negligence, criminal misconduct, or willful misconduct.
Other Activities
of General Partner
Our general partner
shall devote such time as reasonably necessary to manage our partnership’s business affairs. Subject to the other express
provisions of our limited partnership agreement, our general partner, at any time and from time to time may engage in and possess
interests in other business ventures of any and every type and description, independently or with others, including ventures in
competition with our partnership, with no obligation to offer to our partnership or any limited partner the right to participate
therein,
Dissolution
of the Partnership
Our partnership shall
be dissolved upon the first to occur of the following events: (i) an election to dissolve our partnership by our general partner
that is approved by limited partners representing at least a majority of the outstanding units, (ii) the sale, exchange, or other
disposition of all or substantially all of partnership assets, (iii) our partnership ceasing to have any limited partners, or (iv)
the entry of a decree of a judicial dissolution of our partnership.
Power of Attorney
By becoming a party
to our limited partnership agreement, each limited partner will appoint our general partner as his, her or its attorney-in-fact
and empower and authorize our general partner to make, execute, acknowledge, publish and file on behalf of such limited partner
in all necessary or appropriate places, such documents as may be necessary or appropriate to carry out the intent and purposes
of our limited partnership agreement.
Accounting Records
and Reports
Our partnership
may engage an independent accountant or accounting firm, in the discretion of our general partner, to act as the accountant for
our partnership and to audit our partnership’s books and accounts as of the end of each fiscal year. As soon as practicable
after the end of such fiscal year, our general partner shall provide to each limited partner a balance sheet and an income statement
of our partnership as of the end of and for such fiscal year. Upon inquiry, limited partners may be given access to additional
information at the general partner’s discretion. Additional information made available to any limited partner will be made
available to each other limited partner making a similar request; provided that no information is confidential or proprietary
as to a limited partner.
Tax Matters
Our general partner
is designated as the Tax Matters Partner, who is authorized and required to represent our partnership in connection with all tax
audits, examinations and investigations of the affairs of our partnership by any federal, state or local tax authorities, including
any resulting administrative and judicial proceedings. Our general partner shall keep all partners reasonably informed of the progress
of any tax audit, examination or investigation.
Undertakings
Our partnership undertakes
to send to each limited partner at least on an annual basis a detailed statement of any transactions with the general partner or
its affiliates, and of fees, commissions, compensation and other benefits paid, or accrued to the general partner or its affiliate
for the fiscal year completed, showing the amount paid or accrued to each recipient and the services performed.
Taxation
The following is a
summary of certain relevant federal income tax considerations resulting from an investment in our partnership, but does not purport
to cover all of the potential tax considerations applicable to any specific purchaser. Prospective investors are urged to consult
with and rely upon their own tax advisors for advice on these and other tax matters with specific reference to their own tax situation
and potential changes in applicable law.
Taxation of
Undistributed Fund Income
Under the laws pertaining
to federal income taxation of limited partnerships, no federal income tax is paid by our partnership as an entity. Each individual
limited partner reports on the limited partner’s federal income tax return the distributive share of partnership income,
gains, losses, deductions and credits, whether or not any actual distribution is made to the limited partner during a taxable year.
Each individual limited partner may deduct the limited partner’s distributive share of partnership losses, if any, to the
extent of the tax basis of the limited partner’s interests at the end of the year in which the losses occurred. The characterization
of an item of profit or loss will usually be the same for the limited partner as it was for our partnership. Since individual limited
partners will be required to include partnership income in their personal income without regard to whether there are distributions
of partnership income, limited partners may become liable for federal and state income taxes on partnership income even though
they have received no cash distributions from our partnership with which to pay such taxes.
Tax Returns
We will provide limited
partners sufficient information from our partnership’s informational tax return for limited partners to prepare their individual
federal, state, and local tax returns. Our informational tax returns will be prepared by certified public accountants selected
by our general partner.
Series A Preferred Units
Preferred Dividends
The holders of the
Series A preferred units will receive an annual dividend of $0.09 per unit. The preferred units shall not be entitled to share
in any other dividends that are distributed to any other class of units.
Voting Rights
The Series A preferred
units shall be entitled to no voting rights.
Ranking
The Series A preferred
units shall be senior to the common units with respect to dividends, distributions and payments on liquidation.
Redemption at
the option of the holder
The Series A preferred
units shall be redeemed at the option of the holder for $.50 per share at any time the common units fall below $.50 per share on
the common units’ trading platform, consecutively for a minimum of 20 straight trading days.
Conversion
After 12 months from
the initial issuance the holders of the Series A preferred units shall be entitled to convert them to common units, based on a
formula tied to the current trading price of the common units.
Limitation on
Sale Price
This Series A preferred
units shall not be offered, and any conversion units shall not be set lower than the book value per common unit based on the last
audited financial statement.
Item 12. Indemnification of Directors
and Officers.
Section 3.06 of our
current Limited Partnership Agreement provides indemnification to our covered persons, to the fullest extent permitted by law.
Covered persons including our General Partner, its affiliates, or their respective members, partners, officers, directors, employees,
shareholders, agents, and managers of each of them. This indemnification is provided against any and all claims, demands, damages,
liabilities, costs, expenses, including legal fees, losses, suits, proceedings, and actions, whether judicial, administrative,
investigative, or otherwise, of whatever nature, known or unknown, liquidated or unliquidated, that may accrue to or be incurred
by any covered person, or in which any covered person may become involved, as a party or otherwise, or with which any covered person
may be threatened, relating to or arising out of the investment or other activities of our partnership, or activities undertaken
in connection with the partnership, or otherwise relating to or arising out of our Limited Partnership Agreement, including amounts
paid in satisfaction of judgments, in compromise or as fines or penalties, and counsel fees and expenses incurred in connection
with the preparation for or defense or disposition of any investigation, action, suit, arbitration, or other proceeding, whether
civil or criminal (all of such Claims, amounts and expenses covered by this Section 3.05(d) are referred to collectively as “Damages”),
except to the extent that such Damages arose from disabling conduct to which such covered person has pleaded guilty or nolo contendere,
or it shall have been determined by a court of competent jurisdiction in a final judgment that such Damages arose from a disabling
conduct of such covered person.
Notwithstanding the
foregoing, a covered person will only be eligible for indemnification for claims relating to or arising out of transactions or
covered actions that took place during the time such Covered Person was a shareholder, officer, director, employee, agent, partner,
member, or manager of any of the General Partner or any of its affiliates. The satisfaction of any indemnification and any saving
harmless shall be from and limited to partnership assets, and no partner shall have any personal liability on account thereof.
Expenses incurred by
a covered person in defense or settlement of any claim that may be subject to a right of indemnification hereunder shall be advanced
by the Partnership, in the sole discretion of the General Partner, prior to the final disposition thereof upon receipt of an undertaking
by or on behalf of the covered person to repay the amount advanced to the extent that it shall be determined ultimately by a court
having appropriate jurisdiction in the decision that is not subject to appeal, that such covered person is not entitled to be indemnified
hereunder.
In the event any covered
person becomes involved in any capacity in any action, proceeding, or investigation brought by or against any person in connection
with any matter arising out of or in connection with the Partnership’s business or affairs and to which such covered person
may have a right to indemnification hereunder, the Partnership will periodically reimburse such covered person for its legal and
other expenses (including the cost of any investigation, preparation, defense, or settlement thereof) incurred in connection therewith
prior to the final disposition thereof, provided, that such covered person shall promptly repay to the partnership the amount of
any such reimbursed expenses paid to it if it shall ultimately be determined, by a court having appropriate jurisdiction in the
decision that is not subject to appeal, that such covered person is not entitled to be indemnified by the partnership in connection
with such action, proceeding, or investigation as a result of disabling conduct.
Any covered person
entitled to indemnification from the Partnership hereunder shall obtain the written consent of the General Partner prior to entering
into any compromise or settlement which would result in an obligation of the Partnership to indemnify such Person if such covered
person is other than the General Partner. Additionally, if liabilities arise out of the conduct of the affairs of the Partnership
and any other person for which the person entitled to indemnification from the Partnership hereunder was then acting in a similar
capacity, the amount of the indemnification provided by the Partnership shall be limited to the Partnership’s proportionate
share thereof as determined in good faith by the General Partner in light of its fiduciary duties to the Partnership and the shareholders.
Item 13. Financial Statements and Supplementary
Data.
Financial statements
and applicable supplementary data required by this Form are included herein as a separate section of this Form 10 beginning on
page F-1 and are incorporated in this Item 13 by reference.
Item 14. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
There have been no
changes in certifying accountants and there have been no disagreements with accountants in the two most recent fiscal years or
any subsequent interim period.
Item 15. Financial Statements and Exhibits.
(a) Index to Financial Statements
1.1 Consolidated Financial Statements of
2 years by December 31, 2020
Report of Independent
Registered Public Accounting Firm
To the shareholders and the board of directors
of UC Asset, LP
Opinion on the Financial Statements
We have audited the accompanying consolidated
balance sheets of UC Asset, LP as of December 31, 2020 and 2019, the related statements of operations, stockholders’ equity (deficit),
and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In
our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December
31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles
generally accepted in the United States.
Substantial Doubt about the Company’s
Ability to Continue as a Going Concern
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
has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company continues to experience
negative cash flows from operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
Management’s plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were
we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an
understanding of internal control over financial reporting 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.
Our audit included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/S/ BF Borgers CPA PC
BF Borgers CPA PC
We have served as the Company’s auditor since
2021
Lakewood, CO
August 2, 2021
UC
ASSET, LP
Consolidated Balance
Sheets
December 31,
|
|
2020
|
|
|
2019
|
|
ASSETS
|
|
|
|
|
|
|
Portfolio investments
|
|
$
|
7,493,777
|
|
|
$
|
8,624,091
|
|
Property and equipment and other assets, net
|
|
|
66,980
|
|
|
|
77,083
|
|
Cash and cash equivalents
|
|
|
1,419,710
|
|
|
|
153,687
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
8,980,467
|
|
|
$
|
8,854,861
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS’ CAPITAL
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
57,938
|
|
|
$
|
52,507
|
|
Construction loan
|
|
|
-
|
|
|
|
194,000
|
|
Partners’ Capital:
|
|
|
|
|
|
|
|
|
Series A preferred units, 166,667 and 0 issued and outstanding
at December 31,2020 and 2019
|
|
|
300,000
|
|
|
|
-
|
|
Common units 5,635,306 issued and
outstanding
|
|
|
8,622,529
|
|
|
|
8,608,354
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Partners’
Capital
|
|
$
|
8,980,467
|
|
|
$
|
8,854,861
|
|
The accompanying notes are an integral
part of the financial statements
UC
ASSET, LP
Consolidated Statements
of Changes in Net Assets
Year ended December 31,
|
|
2020
|
|
|
2019
|
|
INCOME
|
|
|
|
|
|
|
Sales of homes
|
|
$
|
4,376,205
|
|
|
$
|
2,843,362
|
|
Rental income
|
|
|
118,447
|
|
|
|
83,900
|
|
Interest income
|
|
|
31,581
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
Total income
|
|
|
4,526,233
|
|
|
|
2,927,283
|
|
|
|
|
|
|
|
|
|
|
COST OF SALES
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
4,390,681
|
|
|
|
2,884,551
|
|
|
|
|
|
|
|
|
|
|
Total cost of sales
|
|
|
4,390,681
|
|
|
|
2,884,551
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
|
|
|
135,552
|
|
|
|
42,732
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
Management fees
|
|
|
182,789
|
|
|
|
169,560
|
|
Professional fees and other expenses
|
|
|
335,259
|
|
|
|
285,214
|
|
Depreciation
|
|
|
66,376
|
|
|
|
61,555
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
584,424
|
|
|
|
516,329
|
|
|
|
|
|
|
|
|
|
|
Net investment loss before unrealized gains (losses)
|
|
|
(448,872
|
)
|
|
|
(473,597
|
)
|
|
|
|
|
|
|
|
|
|
GAINS/LOSSES FROM INVESTMENTS
|
|
|
|
|
|
|
|
|
Net realized and unrealized gains (losses) from investments:
|
|
|
|
|
|
|
|
|
Net unrealized gain (loss) on portfolio investments
|
|
|
463,047
|
|
|
|
677,139
|
|
|
|
|
|
|
|
|
|
|
Net realized and unrealized gains (losses)
|
|
|
463,047
|
|
|
|
677,139
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net assets from operations
|
|
$
|
14,175
|
|
|
$
|
203,542
|
|
|
|
|
|
|
|
|
|
|
Net increase in net assets per unit from operations
|
|
$
|
0.00
|
|
|
$
|
0.04
|
|
Weighted average units outstanding
|
|
|
5,635,306
|
|
|
|
5,635,306
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part
of the financial statements
UC
ASSET, LP
Consolidated Statement
of Partners’ Capital
|
|
Limited
Partners
Common
Units
|
|
|
Limited
Partners
Preferred
A Units
|
|
|
Limited
Partners
Common Units
Amount
|
|
|
Limited
Partners
Preferred
A Units
Amount
|
|
|
General
Partner
|
|
|
Total
Partners’
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, January 1, 2019
|
|
|
5,635,306
|
|
|
|
-
|
|
|
$
|
8,359,739
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
8,359,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return of limited partner tax distributions
|
|
|
-
|
|
|
|
-
|
|
|
|
48,271
|
|
|
|
-
|
|
|
|
|
|
|
|
48,271
|
|
Distributions
|
|
|
-
|
|
|
|
-
|
|
|
|
(16,668
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(16,668
|
)
|
Net change in net assets from
operations
|
|
|
-
|
|
|
|
-
|
|
|
|
217,012
|
|
|
|
-
|
|
|
|
-
|
|
|
|
217,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, December 31, 2019
|
|
|
5,635,306
|
|
|
|
-
|
|
|
|
8,608,354
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,608,354
|
|
Issuance of Preferred Series A units
|
|
|
-
|
|
|
|
166,667
|
|
|
|
-
|
|
|
|
300,000
|
|
|
|
|
|
|
|
300,000
|
|
Net change in net assets from
operations
|
|
|
-
|
|
|
|
-
|
|
|
|
14,175
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, December 31, 2020
|
|
|
5,635,306
|
|
|
|
166,667
|
|
|
$
|
8,622,529
|
|
|
$
|
300,000
|
|
|
$
|
-
|
|
|
$
|
8,922,529
|
|
The accompanying notes are an integral part
of the financial statements
UC
ASSET, LP
Consolidated Statements
of Cash Flows
Year ended December 31,
|
|
2020
|
|
|
2019
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net increase (decrease) in net assets from
operations
|
|
$
|
14,175
|
|
|
$
|
175,874
|
|
Adjustments to reconcile net increase (decrease) in
net assets from operations to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Net unrealized (gains) losses on portfolio investments
|
|
|
(463,047
|
)
|
|
|
(636,001
|
)
|
Amortization of prepaid expense and deferred rent
|
|
|
|
|
|
|
22,183
|
|
Depreciation and amortization
|
|
|
66,376
|
|
|
|
61,555
|
|
Changes in working capital items
|
|
|
|
|
|
|
|
|
Accrued interest receivable
|
|
|
4,200
|
|
|
|
(4,200
|
)
|
Accounts receivable
|
|
|
4,445
|
|
|
|
6,937
|
|
Deposits
|
|
|
3,456
|
|
|
|
3,100
|
|
Prepaid expense
|
|
|
4,003
|
|
|
|
(15,936
|
)
|
Accrued expenses
|
|
|
5,432
|
|
|
|
2,722
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(360,960
|
)
|
|
|
(383,766
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Investments in portfolio loans
|
|
|
(70,000
|
)
|
|
|
(300,000
|
)
|
Investments in portfolio loans, related party
|
|
|
-
|
|
|
|
(150,000
|
)
|
Investments in portfolio properties
|
|
|
(2,968,981
|
)
|
|
|
(2,234,770
|
)
|
Proceeds from sale of portfolio properties
|
|
|
4,731,881
|
|
|
|
2,798,996
|
|
Repayments of portfolio loans
|
|
|
128,083
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
investing activities
|
|
|
1,820,983
|
|
|
|
164,226
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from construction loan
|
|
|
232,000
|
|
|
|
103,780
|
|
Payments on construction loan
|
|
|
(426,000
|
)
|
|
|
|
|
Distributions to limited partners
|
|
|
-
|
|
|
|
(16,668
|
)
|
Return of limited partner tax
distributions
|
|
|
-
|
|
|
|
48,271
|
|
|
|
|
|
|
|
|
|
|
Net cash provided in financing
activities
|
|
|
(194,000
|
)
|
|
|
135,383
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash
equivalents
|
|
|
1,266,023
|
|
|
|
(84,157
|
)
|
|
|
|
|
|
|
|
|
|
CASH and cash equivalents,
beginning of period
|
|
|
153,687
|
|
|
|
237,844
|
|
|
|
|
|
|
|
|
|
|
CASH and cash equivalents,
end of period
|
|
$
|
1,419,710
|
|
|
$
|
153,687
|
|
|
|
|
|
|
|
|
|
|
Non-Cash Financing Activities:
|
|
|
|
|
|
|
|
|
Sale of portfolio property for
notes receivable
|
|
$
|
1,300,000
|
|
|
$
|
-
|
|
The accompanying notes
are an integral part of the financial statements
UC
ASSET, LP
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND NATURE OF OPERATIONS
UC Asset, LP (the “Partnership”)
is a Delaware Limited Partnership formed for the purpose of making capital investments in limited liability companies with a focus on
growth-equity investments and real estate. The Partnership was formed on February 1, 2016.
The Partnership is managed by its General
Partner, UCF Asset LLC.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of accounting The Partnership
prepares its financial statements on the accrual basis in accordance with accounting principles generally accepted in the United States.
Purchases and sales of investments are recorded upon the closing of the transaction. Investments are recorded at fair value with unrealized
gains and losses reflected in the statement of changes in net assets.
(b) Principles of Consolidation The
Partnership’s consolidated financial statements include the financial statements of UC Asset, LP and its wholly owned subsidiaries:
Atlanta Landsight, LLC, SHOC Holdings LLC and Hotal Service LLC. All intercompany balances and transactions have been eliminated.
(c) Use of 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, disclose contingent assets and liabilities
at the date of the financial statements and report amounts of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
(d) Fair value measurements The Partnership
records and carries its investments at fair value, defined as the price the Partnership would receive to sell the asset in an orderly
transaction with a market participant at the balance sheet date. In the absence of active markets for the identical assets, such measurements
involve the development of assumptions based on market observable data and, in the absence of such data, internal information that is
consistent with what market participants would use in a hypothetical transaction that occurs at the balance sheet date.
Observable inputs reflect market data obtained
from independent sources, while unobservable inputs reflect management’s market assumptions. Preference is given to observable
inputs. These two types of inputs create the following fair value hierarchy:
Level 1: Quoted prices in active markets
for identical assets or liabilities.
Level 2: Quoted prices for similar instruments in active
markets, quoted prices for identical or similar instruments in markets that are not active, and model derived valuations whose inputs
are observable or whose significant value drivers are observable.
Level 3: Significant inputs to the
valuation model are unobservable
The General Partner maintains policies and
procedures to value instruments using the best and most relevant data available. In addition, The General partner reviews valuations,
including independent price validation for certain instruments. Further, in other instances, independent pricing vendors are obtained
to assist in valuing certain instruments.
(e) Cash and equivalents The Partnership
considers all highly liquid debt instruments with original maturities of three (3) months or less to be cash equivalents.
(f) Investments The Partnership’s
core activity is to make investments in real estate properties. Excess funds are held in financial institutions.
Investments in short term loans are recorded
at fair value, which are their stated amount due to their short-term maturity and modest interest rates. Portfolio investments are recorded
at their estimated fair value, as determined in good faith by the General Partner of the Partnership. Unrealized gains and losses are
recognized in earnings.
The estimated fair value of investments in
properties as determined by the General Partner, whose values have been estimated by the General Partner in the absence of readily ascertainable
market values. Due to the inherent uncertainty of valuation, the General Partner’s determination of values may differ significantly
from values that would have been realized had a ready market for the investments existed, and the differences could be material. See
Note 3.
(g) Federal Income taxes As a limited
partnership, the Partnership is not a taxpaying entity for federal or state income tax purposes; accordingly, a provision for income
taxes has not been recorded in the accompanying financial statements. Partnership income or losses are reflected in the partners’
individual or corporate tax returns in accordance with their ownership percentages.
As defined by Financial Accounting Standards
Board Accounting Standards Codification (ASC) Topic 740, Income Taxes, no provision or liability for materially uncertain tax positions
was deemed necessary by management. Therefore, no provision or liability for uncertain tax positions has been included in these financial
statements. Generally, the Partnerships tax returns remain open for three years for federal income tax examination.
(h) Income Interest income from portfolio
investments is recorded as interest as accrued.
(i) Recent Accounting Pronouncements
Partnership management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would
have a material effect on the accompanying financial statements.
NOTE 3 – LIQUIDITY AND GOING CONCERN CONSIDERATIONS
The Partnership’s consolidated financial
statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities and
commitments in the normal course of business. The Partnership sustained a net operating loss of approximately $448,872 and cash use of
$360,960 from operations for the year ended December 31, 2020. These conditions raise substantial doubt about our ability to continue
as a going concern. The accompanying consolidated financial statements do not include any adjustments that might be necessary if we are
unable to continue as a going concern.
NOTE 4 - FAIR VALUE OF FINANCIAL INSTRUMENTS
(a) Cash and Cash Equivalents The fair
value of financial instruments that are short-term and that have little or no risk are considered to have a fair value equal to book
value.
(b) Unsecured Loan Investments The
fair value of short-term unsecured loans are considered to have a fair value equal to book value due to the short-term nature and market
rate of interest commensurate with the level of credit risk. At December 31, 2019 and 2018, there were $400,000 and no short-term loans,
respectively.
(c) Portfolio Investments The portfolio
investments consist of member equity interests which are not publicly traded. The General Partner (“GP”) uses the investee
entity’s real estate valuation reports as a basis for valuation when there is limited, or no, relevant market activity for a specific
instrument or for other instruments that share similar characteristics. Portfolio investments priced by reference to valuation reports
are included in Level 3. The GP conducts internal reviews of pricing to ensure reasonableness of valuations used. Based on the information
available, management believes that the fair values provided are representative of prices that would be received to sell the individual
assets at the measurement date (exit prices).
The fair values of the investee entity’s
assets are determined in part by placing reliance on third-party valuations of the properties and/or third party approved internally
prepared analyses of recent offers or prices on comparable properties in the proximate vicinity. The third-party valuations and internally
developed analyses are significantly impacted by the local market economy, market supply and demand, competitive conditions and prices
on comparable properties, adjusted for anticipated date of sale, location, property size, and other factors. Each property is unique
and is analyzed in the context of the particular market where the property is located. In order to establish the significant assumptions
for a particular property, the GP analyzes historical trends, including trends achieved by the GP’s operations, if applicable, and current
trends in the market and economy impacting the property. These methods use unobservable inputs to develop fair value for the GP’s
properties. Due to the volume and variance of unobservable inputs, resulting from the uniqueness of each of the GP’s properties, the
GP does not use a standard range of unobservable inputs with respect to its evaluation of properties.
NOTE 4 - FAIR VALUE OF FINANCIAL INSTRUMENTS, continued
(c) Portfolio Investments, continued
Changes in economic factors, consumer demand
and market conditions, among other things, could materially impact estimates used in the third-party valuations and/or internally prepared
analyses of recent offers or prices on comparable properties. Thus, estimates can differ significantly from the amounts ultimately realized
by the investee segment from disposition of these assets.
The following tables present the fair values
of assets and liabilities measured on a recurring basis:
At
December 31, 2020
|
|
|
|
|
Fair
Value Measurement at Reporting Date Using
|
|
|
|
Fair
Value
|
|
|
Quoted
Prices in
Active Markets
for Identical
Assets/Liabilities
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Atlanta Landsight, LLC
|
|
$
|
4,936,494
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
4,936,494
|
|
UCF Development, LLC
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
SHOC Holdings LLC
|
|
|
740,837
|
|
|
|
-
|
|
|
|
-
|
|
|
|
740,837
|
|
Hotal Service LLC
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Short term loans
|
|
|
405,001
|
|
|
|
-
|
|
|
|
-
|
|
|
|
405,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
5,341,495
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
5,341,495
|
|
At
December 31, 2019
|
|
|
|
|
Fair
Value Measurement at Reporting Date Using
|
|
|
|
Fair
Value
|
|
|
Quoted
Prices in
Active Markets
for Identical
Assets/Liabilities
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Atlanta Landsight, LLC
|
|
$
|
7,120,630
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
7,120,630
|
|
UCF Development, LLC
|
|
|
1,142,118
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,142,118
|
|
Short term loans
|
|
|
405,001
|
|
|
|
-
|
|
|
|
-
|
|
|
|
405,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
8,667,749
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
8,667,749
|
|
The fair value measurements are subjective
in nature, involve uncertainties and matters of significant judgment; therefore, the results cannot be determined with precision, substantiated
by comparison to independent markets and may not be realized in an actual sale or immediate settlement of the instruments.
NOTE 4 - FAIR VALUE OF FINANCIAL INSTRUMENTS, continued
(c) Portfolio Investments, continued
There may be inherent weaknesses in any calculation technique,
and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect
the results. For all of these reasons, the aggregation of the fair value calculations presented herein do not represent, and should not
be construed to represent, the underlying value of the Partnership.
Generally, the fair value of the Atlanta investee’s properties
is not sensitive to changes in unobservable inputs since generally the properties are held for less than six months. Generally such changes
in unobservable inputs take longer than six months to have an appreciable effect of more than 1 to 2% on these properties fair value.
The Dallas investee’s property is more sensitive to changes in unobservable inputs because this property was acquired with a longer
time horizon due to the nature of its size and undeveloped status. However, the Dallas investee is very cognizant of changes in the unobservable
inputs that affect the fair value of this property and intends to consider any and all such changes as it develops it plan for the development
of this property.
The following table presents the changes in Level 3 instruments
measured on a recurring basis:
Year Ended December
31, 2020
|
|
Portfolio
Investments
|
|
January 1, 2020
|
|
$
|
8,667,749
|
|
Total gains or losses (realized/unrealized):
|
|
|
|
|
Included in earnings
|
|
|
996,342
|
|
Included in other comprehensive income
|
|
|
-
|
|
Purchases, issuance and settlements
|
|
|
(1,772,571
|
)
|
Transfers in/out of Level 3
|
|
|
-
|
|
|
|
|
|
|
December 31, 2020
|
|
$
|
7,891,520
|
|
Year Ended December 31, 2019
|
|
Portfolio
Investments
|
|
January 1, 2019
|
|
$
|
8,227,738
|
|
Total gains or losses (realized/unrealized):
|
|
|
|
|
Included in earnings
|
|
|
752,492
|
|
Included in other comprehensive income
|
|
|
-
|
|
Purchases, issuance and settlements
|
|
|
(312,481
|
)
|
Transfers in/out of Level 3
|
|
|
-
|
|
|
|
|
|
|
December 31, 2019
|
|
$
|
8,667,749
|
|
NOTE 5 - CONCENTRATIONS OF CREDIT RISK
a) Cash Funds held by the Partnership are guaranteed by
the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. The Partnership’s cash balance was in excess of
FDIC insured limits by $1,169,710 and $0 at December 31, 2020 and 2019.
NOTE 6 – CAPITAL
The Partnerships capital structure consists
of one General Partner and 81 limited partners. The Partnerships total contributed capital was $8,086,232 and $7,777,540 at December
31, 2020 and 2019, respectively. The limited partner common units are 5,635,306 at December 31, 2020 and 2019. The limited partner preferred
Series A units are 166,667 and 0 at December 31, 2020 and 2019, respectively.
The Preferred Units carry the following rights
and privileges:
|
-
|
annual dividend
of $0.09 per unit, not to exceed the audited annual net increase to net assets from operations
|
|
-
|
preference for
dividends and in liquidation
|
|
-
|
12 months post
issuance, redeemable at $0.50 per unit, if the market price of the common units falls below
$0.50 per unit for 20 consecutive trading days
|
|
-
|
12 months post
issuance, convertible into common units on a variable conversion ratio 1.0:1.0 (if the lowest
closing Price of the common units is $1.80 or more for the 5 trading days prior to conversion),
up to 1.125:1.0 (if the lowest closing price of the common units is $1.60 or less for the
5 trading days prior to conversion)
|
|
-
|
conversion and
redemption price shall not be lower than the book value per common unit based on the last
audited book value per unit
|
In the first quarter 2020 the partnership
issued 166,667 Series A preferred units in exchange for $300,000 in cash.
a) Distributions Distributions from
the Partnership are made to partners in accordance with the Partnerships limited partnership agreement.
During 2019, the partnership was refunded $48,271 of the previously
distributed backup withholding from the U.S. Internal Revenue Service.
b) Allocations of Profits and Losses The net profit of the
Partnership is allocated to the Limited Partners in proportion to each partner’s respective capital contribution on all liquidated
portfolio investments made by the Partnership. Losses are allocated to all partners in proportion to each partner’s respective
capital contribution, provided that, to the extent profits had been previously allocated in a manner other than in proportion to capital
contributions, losses are allocated in the reverse order as such profits were previously allocated.
The GP participates in the profits of the Partnership at a rate
of 20% above a 10% annualized return to the Limited Partners. Beginning January 1, 2020, the GP participates in the profits of the Partnership
at a rate of 20% above an 8% annualized return to the Limited Partners.
NOTE 7 - MANAGEMENT FEES - RELATED PARTY
The Partnership pays annual management fees
to UCF Asset LLC. Management fees are calculated at 2.0% of assets under management on the first day of the fiscal year, payable quarterly.
Management fees were $182,789 and $169,590 for the years ended December 31, 2020 and 2019, respectively.
1.2. Condensed Financial Statements of 6 months by June 30,
2021
UC ASSET, LP
Condensed Consolidated Balance Sheets
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Portfolio investments
|
|
$
|
6,394,330
|
|
|
$
|
7,493,777
|
|
Property and equipment and other assets, net
|
|
|
20,765
|
|
|
|
66,980
|
|
Cash and cash equivalents
|
|
|
2,721,469
|
|
|
|
1,419,710
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
9,136,564
|
|
|
$
|
8,980,467
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS’
CAPITAL
|
|
|
|
|
|
|
|
|
Accrued and other liabilities
|
|
$
|
71,461
|
|
|
$
|
57,938
|
|
Mortgage loans
|
|
|
400,000
|
|
|
|
|
|
Partners capital:
|
|
|
|
|
|
|
|
|
Series A preferred units, 166,667and 0 issued and outstanding
at March 31, 2020 and December 31, 2019, respectively
|
|
|
300,000
|
|
|
|
300,000
|
|
Common units, 5,635,306 units
issued and outstanding at June 30, 2020 and December 31, 2019
|
|
|
8,365,103
|
|
|
|
8,622,529
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Partners’
Capital
|
|
$
|
9,136,564
|
|
|
$
|
8,980,467
|
|
UC ASSET, LP
Condensed Consolidated Statements of Changes
in Net Assets from Operations
Three and Six months ended June 30,
(unaudited)
|
|
Three
Months Ended
June 30
|
|
|
Six
Months Ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of homes
|
|
$
|
1,909,644
|
|
|
$
|
869,087
|
|
|
$
|
1,909,644
|
|
|
$
|
869,087
|
|
Rental income
|
|
|
24,942
|
|
|
|
24,700
|
|
|
|
61,242
|
|
|
|
46,647
|
|
Interest income
|
|
|
38,504
|
|
|
|
14,525
|
|
|
|
93,065
|
|
|
|
23,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
income
|
|
|
1,973,090
|
|
|
|
908,312
|
|
|
|
2,063,951
|
|
|
|
938,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF SALES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
1,930,455
|
|
|
|
1,342,061
|
|
|
|
1,930,455
|
|
|
|
1,342,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
cost of sales
|
|
|
1,930,455
|
|
|
|
1,342,061
|
|
|
|
1,930,455
|
|
|
|
1,342,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
|
|
|
42,635
|
|
|
|
(433,749
|
)
|
|
|
133,496
|
|
|
|
(403,102
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fees
|
|
|
45,287
|
|
|
|
45,287
|
|
|
|
90,575
|
|
|
|
92,214
|
|
Professional fees and other expenses
|
|
|
55,931
|
|
|
|
72,137
|
|
|
|
149,627
|
|
|
|
142,386
|
|
Depreciation
|
|
|
22,321
|
|
|
|
11,499
|
|
|
|
44,407
|
|
|
|
23,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
123,539
|
|
|
|
128,923
|
|
|
|
284,609
|
|
|
|
257,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment loss before unrealized gains (losses)
|
|
|
(80,904
|
)
|
|
|
(562,672
|
)
|
|
|
(151,113
|
)
|
|
|
(660,893
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAINS/LOSSES FROM INVESTMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized and unrealized gains (losses) from investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized
gain (loss) on portfolio investments
|
|
|
(6,097
|
)
|
|
|
(291,805
|
)
|
|
|
(106,313
|
)
|
|
|
(1,187,608
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
realized and unrealized gains (losses)
|
|
|
(6,097
|
)
|
|
|
(291,805
|
)
|
|
|
(106,313
|
)
|
|
|
(1,187,608
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in net
assets from operations
|
|
$
|
(87,001
|
)
|
|
$
|
(854,477
|
)
|
|
$
|
(257,426
|
)
|
|
$
|
(1,848,501
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in net assets per
unit
|
|
$
|
(0.02
|
)
|
|
$
|
(0.15
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.33
|
)
|
Weighted average units outstanding
|
|
|
5,635,303
|
|
|
|
5,635,303
|
|
|
|
5,635,303
|
|
|
|
5,635,303
|
|
UC ASSET, LP
Condensed Consolidated Statement of Partners’
Capital
For the three and six months ended June
30, 2020
(unaudited)
|
|
Limited
Partners
Common
Units
|
|
|
Limited
Partners
Preferred A
Units
|
|
|
Limited
Partners
Common
Units
Amount
|
|
|
Limited
Partners
Preferred A
Units
Amount
|
|
|
General
Partner
|
|
|
Total
Partners’
Equity
|
|
BALANCE, January 1, 2020
|
|
|
5,635,303
|
|
|
|
-
|
|
|
$
|
8,798,031
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
8,798,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Preferred Series A units
|
|
|
|
|
|
|
166,667
|
|
|
|
-
|
|
|
|
300,000
|
|
|
|
|
|
|
|
300,000
|
|
Net change in net assets from
operations
|
|
|
-
|
|
|
|
-
|
|
|
|
(994,022
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(994,022
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, March 31, 2020
|
|
|
5,635,303
|
|
|
|
166,667
|
|
|
|
7,804,009
|
|
|
|
300,000
|
|
|
$
|
-
|
|
|
|
8,104,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in net assets from
operations
|
|
|
-
|
|
|
|
-
|
|
|
|
(854,477
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(854,477
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, June 30, 2020
|
|
|
5,635,303
|
|
|
|
166,667
|
|
|
$
|
6,949,532
|
|
|
$
|
300,000
|
|
|
|
-
|
|
|
$
|
7,249,532
|
|
UC ASSET, LP
Condensed Consolidated Statement of Partners’
Capital
For the three and six months ended June
30, 2021
(unaudited)
|
|
Limited
Partners
Common
Units
|
|
|
Limited
Partners
Preferred A
Units
|
|
|
Limited
Partners
Common
Units
Amount
|
|
|
Limited
Partners
Preferred A
Units
Amount
|
|
|
General
Partner
|
|
|
Total
Partners’
Equity
|
|
BALANCE, January 1, 2021
|
|
|
5,635,303
|
|
|
|
166,667
|
|
|
$
|
8,622,529
|
|
|
$
|
300,000
|
|
|
$
|
-
|
|
|
$
|
8,922,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in net assets from
operations
|
|
|
-
|
|
|
|
-
|
|
|
|
(170,425
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(170,425
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, March 31, 2021
|
|
|
5,635,303
|
|
|
|
166,667
|
|
|
|
8,452,104
|
|
|
|
300,000
|
|
|
|
-
|
|
|
|
8,752,104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in net assets from
operations
|
|
|
-
|
|
|
|
-
|
|
|
|
(87,001
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(87,001
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, June 30, 2021
|
|
|
5,635,303
|
|
|
|
166,667
|
|
|
$
|
8,365,103
|
|
|
$
|
300,000
|
|
|
|
-
|
|
|
$
|
8,665,103
|
|
UC ASSET, LP
Condensed Consolidated Statements of Cash
Flows
Six months ended June 30,
(unaudited)
|
|
2021
|
|
|
2020
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net decrease in net assets from operations
|
|
$
|
(257,426
|
)
|
|
$
|
(1,848,502
|
)
|
Adjustments to reconcile net decrease in net assets
from operations to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Net unrealized losses on portfolio investments
|
|
|
106,313
|
|
|
|
1,187,608
|
|
Amortization of prepaid expense
|
|
|
26,939
|
|
|
|
37,521
|
|
Depreciation
|
|
|
44,407
|
|
|
|
23,191
|
|
Changes in working capital items
|
|
|
|
|
|
|
|
|
Accrued receivables
|
|
|
(90,411
|
)
|
|
|
(15,937
|
)
|
Deposits and other assets
|
|
|
(262
|
)
|
|
|
(12,000
|
)
|
Accrued and other liabilities
|
|
|
-
|
|
|
|
446
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(170,440
|
)
|
|
|
(627,673
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Investment in portfolio properties
|
|
|
(768,321
|
)
|
|
|
(337,500
|
)
|
Sale of portfolio properties
|
|
|
1,909,643
|
|
|
|
869,087
|
|
Investments in portfolio loans
|
|
|
(100,000
|
)
|
|
|
(400,000
|
)
|
Repayments of portfolio loans
|
|
|
24,000
|
|
|
|
50,000
|
|
Repayments of portfolio loans,
related party
|
|
|
6,877
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing
activities
|
|
|
1,072,199
|
|
|
|
181,587
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Cash received from mortgage loan on portfolio property
|
|
|
400,000
|
|
|
|
-
|
|
Cash received from construction loan on portfolio property
|
|
|
-
|
|
|
|
192,000
|
|
Cash received for preferred A
units
|
|
|
-
|
|
|
|
300,000
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing
activities
|
|
|
400,000
|
|
|
|
492,000
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash
equivalents
|
|
|
1,301,759
|
|
|
|
45,914
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents,
beginning of period
|
|
|
1,419,710
|
|
|
|
153,687
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents,
end of period
|
|
$
|
2,721,469
|
|
|
$
|
199,601
|
|
UC ASSET, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Information as to the three months ended March
31, 2021 is unaudited)
NOTE 1 - ORGANIZATION AND NATURE OF OPERATIONS
UC Asset, LP (the “Partnership”)
is a Delaware Limited Partnership formed for the purpose of making capital investments with a focus on growth-equity investments and
real estate. The Partnership was formed on February 1, 2016.
The Partnership is managed by its General
Partner, UCF Asset LLC.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of accounting The Partnership
prepares its financial statements on the accrual basis in accordance with accounting principles generally accepted in the United States.
Purchases and sales of investments are recorded upon the closing of the transaction. Investments are recorded at fair value with unrealized
gains and losses reflected in the statement of changes in net assets.
The accompanying unaudited condensed interim
financial statements have been prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United
States of America (“U.S.”) as promulgated by the Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) and with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). In
our opinion, the accompanying unaudited interim financial statements contain all adjustments (which are of a normal recurring nature)
necessary for a fair presentation. Operating results for the three months ended June 30, 2021 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2021.
(b) Principles of Consolidation The
Partnership’s consolidated financial statements include the financial statements of UC Asset, LP and its wholly owned subsidiaries:
Atlanta Landsight, LLC, SHOC Holdings LLC and Hotal Service LLC. All intercompany balances and transactions have been eliminated.
(c) Use of 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, disclose contingent assets and liabilities
at the date of the financial statements and report amounts of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
(d) Fair value measurements The Partnership
records and carries its investments at fair value, defined as the price the Partnership would receive to sell the asset in an orderly
transaction with a market participant at the balance sheet date. In the absence of active markets for the identical assets, such measurements
involve the development of assumptions based on market observable data and, in the absence of such data, internal information that is
consistent with what market participants would use in a hypothetical transaction that occurs at the balance sheet date.
Observable inputs reflect market data obtained
from independent sources, while unobservable inputs reflect management’s market assumptions. Preference is given to observable
inputs. These two types of inputs create the following fair value hierarchy:
UC ASSET, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
(d) Fair value measurements, continued
Level 1: Quoted prices in active markets
for identical assets or liabilities.
Level 2: Quoted prices for similar
instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model derived valuations
whose inputs are observable or whose significant value drivers are observable
Level 3: Significant inputs to the
valuation model are unobservable
The General Partner maintains policies and
procedures to value instruments using the best and most relevant data available. In addition, The General partner reviews valuations,
including independent price validation for certain instruments. Further, in other instances, independent pricing vendors are obtained
to assist in valuing certain instruments.
(e) Cash and equivalents The Partnership
considers all highly liquid debt instruments with original maturities of three (3) months or less to be cash equivalents.
(f) Investments The Partnership’s
core activity is to make investments in real estate properties. Excess funds are held in financial institutions.
Investments in short term loans are recorded
at fair value, which are their stated amount due to their short-term maturity and modest interest rates. Portfolio investments are recorded
at their estimated fair value, as determined in good faith by the General Partner of the Partnership. Unrealized gains and losses are
recognized in earnings.
The estimated fair value of investments as
determined by the General Partner was $7,436,461 and $7,493,777 representing 87.98% and 86.91% of partners’ capital at March 31,
2021 and December 31, 2020, whose values have been estimated by the General Partner in the absence of readily ascertainable market values.
Due to the inherent uncertainty of valuation, the General Partner’s determination of values may differ significantly from values
that would have been realized had a ready market for the investments existed, and the differences could be material.
(g) Federal Income taxes As a limited
partnership, the Partnership is not a taxpaying entity for federal or state income tax purposes; accordingly, a provision for income
taxes has not been recorded in the accompanying financial statements. Partnership income or losses are reflected in the partners’
individual or corporate tax returns in accordance with their ownership percentages.
As defined by Financial Accounting Standards
Board Accounting Standards Codification (ASC) Topic 740, Income Taxes, no provision or liability for materially uncertain tax positions
was deemed necessary by management. Therefore, no provision or liability for uncertain tax positions has been included in these financial
statements. Generally, the Partnerships tax returns remain open for three years for federal income tax examination.
(h) Income Interest income from portfolio investments is
recorded as accrued.
(i) Recent Accounting Pronouncements Partnership management
does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect
on the accompanying financial statements.
UC ASSET, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 3 - LIQUIDITY AND GOING CONCERN CONSIDERATIONS
The Partnership’s consolidated financial
statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities
and commitments in the normal course of business. The Partnership sustained a net operating loss of approximately $257,426 and cash use
of $170,440 from operations for the six months ended June 30, 2021. These conditions raise substantial doubt about our ability to continue
as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary
if we are unable to continue as a going concern.
NOTE 4 - FAIR VALUE OF FINANCIAL INSTRUMENTS
(a) Cash and Cash Equivalents The fair
value of financial instruments that are short-term and that have little or no risk are considered to have a fair value equal to book
value.
(b) Unsecured Loan Investments The
fair value of short-term unsecured loans are considered to have a fair value equal to book value due to the short-term nature and market
rate of interest commensurate with the level of credit risk. At June 30, 2021 and December 31, 2020, there were $899,603 and $782,754
in loans, respectively.
(c) Portfolio Investments The portfolio
investments consist of member equity interests which are not publicly traded. The General Partner (“GP”) uses the investee
entity’s real estate valuation reports as a basis for valuation when there is limited, or no, relevant market activity for a specific
instrument or for other instruments that share similar characteristics. Portfolio investments priced by reference to valuation reports
are included in Level 3. The GP conducts internal reviews of pricing to ensure reasonableness of valuations used. Based on the information
available, management believes that the fair values provided are representative of prices that would be received to sell the individual
assets at the measurement date (exit prices).
The fair values of the investee entity’s
assets are determined in part by placing reliance on third-party valuations of the properties and/or third party approved internally
prepared analyses of recent offers or prices on comparable properties in the proximate vicinity. The third-party valuations and internally
developed analyses are significantly impacted by the local market economy, market supply and demand, competitive conditions and prices
on comparable properties, adjusted for anticipated date of sale, location, property size, and other factors. Each property is unique
and is analyzed in the context of the particular market where the property is located. In order to establish the significant assumptions
for a particular property, the GP analyzes historical trends, including trends achieved by the GP’s operations, if applicable, and current
trends in the market and economy impacting the property. These methods use unobservable inputs to develop fair value for the GP’s
properties. Due to the volume and variance of unobservable inputs, resulting from the uniqueness of each of the GP’s properties, the
GP does not use a standard range of unobservable inputs with respect to its evaluation of properties.
Changes in economic factors, consumer demand
and market conditions, among other things, could materially impact estimates used in the third-party valuations and/or internally prepared
analyses of recent offers or prices on comparable properties. Thus, estimates can differ significantly from the amounts ultimately realized
by the investee segment from disposition of these assets.
UC ASSET, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 4 - FAIR VALUE OF FINANCIAL INSTRUMENTS,
continued
(c) Portfolio Investments, continued
The following tables present the fair values
of assets and liabilities measured on a recurring basis:
At
June 30, 2021
|
|
|
|
|
Fair
Value Measurement at Reporting Date Using
|
|
|
|
Fair
Value
|
|
|
Quoted
Prices in
Active Markets
for Identical
Assets/Liabilities
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Atlanta Landsight, LLC
|
|
$
|
4,990,484
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
4,990,484
|
|
SHOC Holdings LLC
|
|
|
796,949
|
|
|
|
-
|
|
|
|
-
|
|
|
|
796,949
|
|
Hotal Service LLC
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Short term loans
|
|
|
899,603
|
|
|
|
-
|
|
|
|
-
|
|
|
|
899,603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
6,687,036
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,687,036
|
|
At
December 31, 2020
|
|
|
|
|
Fair
Value Measurement at Reporting Date Using
|
|
|
|
Fair
Value
|
|
|
Quoted
Prices in
Active Markets
for Identical
Assets/Liabilities
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Atlanta Landsight, LLC
|
|
$
|
4,997,614
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
4,997,614
|
|
SHOC Holdings LLC
|
|
|
940,837
|
|
|
|
-
|
|
|
|
-
|
|
|
|
940,837
|
|
Hotal Service LLC
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Short term loans
|
|
|
782,754
|
|
|
|
-
|
|
|
|
-
|
|
|
|
782,754
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
6,721,205
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,721,205
|
|
The fair value measurements are subjective
in nature, involve uncertainties and matters of significant judgment; therefore, the results cannot be determined with precision, substantiated
by comparison to independent markets and may not be realized in an actual sale or immediate settlement of the instruments.
UC ASSET, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 4 - FAIR VALUE OF FINANCIAL INSTRUMENTS, continued
(c) Portfolio Investments, continued
There may be inherent weaknesses in any calculation
technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly
affect the results. For all of these reasons, the aggregation of the fair value calculations presented herein do not represent, and should
not be construed to represent, the underlying value of the Partnership.
Generally, the fair value of the Atlanta investee’s
properties is not sensitive to changes in unobservable inputs since generally the properties are held for less than six months. Generally
such changes in unobservable inputs take longer than six months to have an appreciable effect of more than 1 to 2% on these properties
fair value. The Dallas investee’s property is more sensitive to changes in unobservable inputs because this property was acquired
with a longer time horizon due to the nature of its size and undeveloped status.
The following table presents the changes in Level 3 instruments
measured on a recurring basis:
Three Months Ended March 31,
2021
|
|
Portfolio
Investments
|
|
January 1, 2020
|
|
$
|
7,891,520
|
|
Total gains or losses (realized/unrealized):
|
|
|
|
|
Included in earnings
|
|
|
(259,678
|
)
|
Included in other comprehensive income
|
|
|
(125,313
|
)
|
Purchases, issuance and settlements
|
|
|
(1,112,199
|
)
|
Transfers in/out of Level 3
|
|
|
-
|
|
|
|
|
|
|
March 31, 2021
|
|
$
|
6,394,330
|
|
Year Ended December 31, 2020
|
|
Portfolio
Investments
|
|
January 1, 2020
|
|
$
|
8,667,749
|
|
Total gains or losses (realized/unrealized):
|
|
|
|
|
Included in earnings
|
|
|
996,342
|
|
Included in other comprehensive income
|
|
|
(1,772,571
|
)
|
Purchases, issuance and settlements
|
|
|
|
|
Transfers in/out of Level 3
|
|
|
-
|
|
|
|
|
|
|
December 31, 2020
|
|
$
|
7,891,520
|
|
UC ASSET, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 5 - CONCENTRATIONS OF CREDIT RISK
a) Cash Funds held by the Partnership
are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. The Partnership’s cash balance
was in excess of FDIC insured limits by $2,174,279 and $798,743 at June 30, 2021 and December 31, 2020.
NOTE 6 - CAPITAL
The Partnerships capital structure consists
of one General Partner and 81 limited partners. The Partnerships total contributed capital was $8,077,540 at June 30, 2021 and December
31, 2020. The limited partner common units are 5,635,306 at June 30, 2021 and December 31, 2020. The limited partner preferred Series
A units are 166,667 at June 30, 2021 and December 31, 2020.
The Preferred Units carry the following rights
and privileges:
|
-
|
annual dividend of
$0.09 per unit, not to exceed the audited annual net increase to net assets from operations
|
|
-
|
preference for dividends
and in liquidation
|
|
-
|
12 months post issuance,
redeemable at $0.50 per unit, if the market price of the common units falls below $0.50 per
unit for 20 consecutive trading days
|
|
-
|
12 months post issuance,
convertible into common units on a variable conversion ratio 1.0:1.0 (if the lowest closing
price of the common units is $1.80 or more for the 5 trading days prior to conversion), up
to 1.125:1.0 (if the lowest closing price of the common units is $1.60 or less for the 5
trading days prior to conversion)
|
|
-
|
conversion and redemption
price shall not be lower than the book value per common unit based on the last audited book
value per unit In the first quarter 2020 the partnership issued 166,667 Series A preferred
units in exchange for $300,000 in cash.
|
b) Allocations of Profits and Losses
The net profit of the Partnership is allocated to the Limited Partners in proportion to each partner’s respective capital contribution
on all liquidated portfolio investments made by the Partnership. Losses are allocated to all partners in proportion to each partner’s
respective capital contribution, provided that, to the extent profits had been previously allocated in a manner other than in proportion
to capital contributions, losses are allocated in the reverse order as such profits were previously allocated.
The GP participates in the profits of the
Partnership at a rate of 20% above a 10% annualized return to the Limited Partners. Beginning January 1, 2020, the GP participates in
the profits of the Partnership at a rate of 20% above an 8% annualized return to the Limited Partners.
NOTE 7 - MANAGEMENT FEES - RELATED PARTY
The Partnership pays annual management fees
to UCF Asset LLC. Management fees are calculated at 2.0% of assets under management on the first day of the fiscal year, payable quarterly.
Management fees were $90,575 and $92,214 for the six months ended June 30, 2021 and 2020, respectively.
(b) Index to Exhibits
SIGNATURES
Pursuant to the requirements
of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this Amendment to Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized.
|
UC ASSET, LP (Registrant)
|
|
|
|
|
UC Asset, LLC (General Partner)
|
|
|
|
Date: September 15, 2021
|
By:
|
/s/ Gregory
Bankston
|
|
|
Gregory Bankston, Manager
|
|
|
|
|
And
|
|
|
|
|
By:
|
/s/ Xianghong Wu
|
|
|
Xianghong Wu, Majority Voting Rights Owner
|
29
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