**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

----

 

**Form 10-QSB/A No. 1**

 

**QUARTERLY REPORTPURSUANT TO SECTION 13 OR 15() OF THE**

**SECURITIES EXCHANGEACT OF 1934**

 

**For the quarterly period ended September 30, 2001**

 

**Commission File Number:**

 

**0-25074**

 

**STONEHAVEN REALTY TRUST**

(Exact name of registrant asspecified in its charter)

 
| **Maryland**

(State or other jurisdiction of incorporation)                                | **39-6594066**

(I.R.S. Employer Identification Number) |
|---------------------------------------------------------------------------------------------|---------------------------------------------------------|
| **5620 Smetana  Road, Suite 330, Minnetonka, MN**

(Address of principal executive offices) | **55343**

(Zip code)                                   |

 

Issuer’s telephone number: **952-935-5411** Fax number: **952-935-5659**

 

**4150 OlsonMemorial Highway, Minneapolis, MN  55422**

(Former address)

 

Securities registered underSection 12(b) of the Act: None

 

Securities registered underSection 12(g) of the Act: Common Shares, $0.01 par value

 

___________

 

Check whether the issuer (1) filed allreports required to be filed by Section 13 or 15(d) of the Exchange Actduring the past 12 months (or for such shorter period that the registrantwas required to file such reports), and (2) has been subject to the filingrequirements for the past 90 days. Yes ý No o

 

As of March 1, 2002, 4,517,524 shares of theissuer’s common shares were outstanding.

 

Transitional Small Business Disclosure Format(Check one): Yes o No ý

(Added by Exch Act Rel No. 31905, eff4/26/93.)

 

**This report contains 27 pages. There are no exhibits.**

** **

 

 

**STONEHAVEN REALTY TRUST AND SUBSIDIARIES**

**FORM 10-QSB**

**INDEX**

 

 

** **
| **PART I.  Financial Information**                                                                         |   |
|-----------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                            |   |
| **Consolidated  Balance Sheet-September 30, 2001 (unaudited)**                                                  |   |
|                                                                                                            |   |
| Consolidated  Statements of Operations-Nine months endedSeptember  30, 2001 and September 30, 2000 (unaudited)  |   |
|                                                                                                            |   |
| Consolidated  Statements of Operations-Three months endedSeptember  30, 2001 and September 30, 2000 (unaudited) |   |
|                                                                                                            |   |
| Consolidated  Statements of Cash Flows-Nine months endedSeptember  30, 2001 and September 30, 2000 (unaudited)  |   |
|                                                                                                            |   |
| Notes to  Consolidated Financial Statements                                                                     |   |
|                                                                                                            |   |
| Management’s  Discussion and Analysis of Financial Condition andPlan of Operation                          |   |
|                                                                                                            |   |
| **Part  II.  Other Information**                                                                           |   |
|                                                                                                            |   |
| Other Information                                                                                               |   |
|                                                                                                            |   |
| Exhibits and  Reports on Form 8-K                                                                               |   |
|                                                                                                            |   |
| Signatures                                                                                                      |   |
|                                                                                                            |   |

 

2

----

**StonehavenRealty Trust and SubsidiariesConsolidated Balance Sheet**

** September 30, 2001**

**(unaudited)**

 

 

** **
| **ASSETS**                                                                                                                                                                             |   |        |       |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------|------------|
| Investments in  fixed assets:                                                                                                                                                          |   |        |       |
| Land                                                                                                                                                                                   |   | $           | 2,195,034  |   |
| Buildings and  improvements                                                                                                                                                            |   | 8,823,447   |       |
| Computer  hardware, software and other fixed assets                                                                                                                                    |   | 69,922      |       |
|                                                                                                                                                                                   |   | 11,088,403  |       |
| Accumulated  depreciation and amortization                                                                                                                                             |   | (502,965    | )          |
| Net investments  in real estate                                                                                                                                                        |   | 10,585,438  |       |
| Cash and cash  equivalents                                                                                                                                                             |   | 136,670     |       |
| Marketable  securities, net                                                                                                                                                            |   | 2,880,000   |       |
| Accounts  receivable, net                                                                                                                                                              |   | 148,881     |       |
| Restricted cash                                                                                                                                                                        |   | 276,496     |       |
| Other assets,  net                                                                                                                                                                     |   | 78,802      |       |
| Deferred income  taxes                                                                                                                                                                 |   | 1,243,200   |       |
| **TOTAL  ASSETS**                                                                                                                                                                      |   | $           | 15,349,487 |   |
|                                                                                                                                                                                   |   |        |       |
| **LIABILITIES  AND SHAREHOLDERS’ EQUITY**                                                                                                                                         |   |        |       |
| Liabilities:                                                                                                                                                                           |   |        |       |
| Mortgage loans and notes payable                                                                                                                                                       |   | $           | 6,564,874  |   |
| Related party  notes payable                                                                                                                                                           |   | 402,000     |       |
| Income taxes  payable                                                                                                                                                                  |   | 50,000      |       |
| Accounts payable  and accrued expenses                                                                                                                                                 |   | 1,464,528   |       |
| Deferred revenue  and security deposits                                                                                                                                                |   | 135,832     |       |
| Dividends and  distributions payable                                                                                                                                                   |   | 209,139     |       |
| Total  liabilities                                                                                                                                                                     |   | 8,826,373   |       |
|                                                                                                                                                                                   |   |        | ** ** |
| **Minority interest in  consolidated subsidiary**                                                                                                                                      |   | **30,449**  | ** ** |
|                                                                                                                                                                                   |   |        | ** ** |
| **COMMITMENTS  AND CONTINGENCIES:  (Note 8)**                                                                                                                                     |   |        | ** ** |
|                                                                                                                                                                                   |   |        | ** ** |
| Shareholders’  equity:                                                                                                                                                            |   |        | ** ** |
| Preferred Shares — $0.01 par value, 10,000,000  authorized:  663,291 Class A  cumulative convertible shares issued and outstanding, $10.00 per share  liquidation preference |   | 6,633       |       |
| Common Shares — $0.01 par value, 100,000,000  authorized; 4,517,524 shares issued and outstanding                                                                                 |   | 45,176      |       |
| Additional  paid-in capital                                                                                                                                                            |   | 25,595,216  |       |
| Accumulated  other comprehensive loss; net unrealized loss on marketable securities                                                                                                    |   | (1,864,800  | )          |
| Accumulated  deficit                                                                                                                                                                   |   | (17,249,791 | )          |
| Treasury stock,  at cost                                                                                                                                                               |   | (39,769     | )          |
| Total  shareholders’ equity                                                                                                                                                       |   | 6,492,665   |       |
| **TOTAL  LIABILITIES AND SHAREHOLDERS’ EQUITY**                                                                                                                                   |   | $           | 15,349,487 |   |

 

 

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

 

3

----

**StonehavenRealty Trust and SubsidiariesConsolidated Statements of Operations**

**(unaudited)**

 
|                                                                                                                |   | **For the nine months ended September 30,** |       |
|---------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------|------------|
|                                                                                                                |   | **2001**                                    |       | **2000** |   |
| **Revenues**                                                                                                        |   |                                        |       |   |   |
| Rental revenue                                                                                                      |   | $                                           | 895,594    |   | $ | 2,438,178 |   |
| Tenant  recoveries                                                                                                  |   | 568,061                                     |       | 1,413,101 |   |
| Professional  services and sales of hardware and software                                                           |   | 1,803,266                                   |       | 1,696,299 |   |
| Interest and  other                                                                                                 |   | 167,529                                     |       | 269,500 |   |
| Total revenues                                                                                                      |   | 3,434,450                                   |       | 5,817,078 |   |
| **Expenses**                                                                                                        |   |                                        |       |   |   |
| Property,  operating and maintenance                                                                                |   | 176,359                                     |       | 723,549 |   |
| Advertising and  promotion                                                                                          |   | 107,821                                     |       | 129,694 |   |
| Property taxes  and insurance                                                                                       |   | 353,119                                     |       | 749,320 |   |
| Depreciation and  amortization                                                                                      |   | 1,703,642                                   |       | 1,668,977 |   |
| Interest                                                                                                            |   | 597,099                                     |       | 1,379,765 |   |
| General and  administrative                                                                                         |   | 1,474,820                                   |       | 2,148,895 |   |
| Management fees                                                                                                     |   | 70,084                                      |       | 191,144 |   |
| Costs related to  professional services and sales of hardware and software                                          |   | 855,785                                     |       | 1,360,237 |   |
| Product  development                                                                                                |   | 114,917                                     |       | 421,456 |   |
| Nonrecurring  expenses                                                                                              |   | —                                      |       | 318,315 |   |
| Total expenses                                                                                                      |   | 5,453,646                                   |       | 9,091,352 |   |
| Loss from  operations before equity in income of unconsolidated subsidiary and loss  allocated to minority interest |   | (2,019,196                                  | )          | (3,274,274 | ) |
| Equity in income  of unconsolidated subsidiary                                                                      |   | —                                      |       | 2,912 |   |
| Loss allocated  to minority interest                                                                                |   | 67,344                                      |       | 313,755 |   |
| Loss from  operations                                                                                               |   | (1,951,852                                  | )          | (2,957,607 | ) |
| Loss on sale of  investments in real estate                                                                         |   | (165,835                                    | )          | — |   |
| Gain on sale of  certain assets of Stonehaven Technologies                                                          |   | 397,263                                     |       | — |   |
| Loss before  provision for income taxes                                                                             |   | (1,720,424                                  | )          | (2,957,607 | ) |
| Provision  for  income taxes                                                                                   |   | (50,000                                     | )          | — |   |
| Net Loss                                                                                                            |   | (1,770,424                                  | )          | (2,957,607 | ) |
| Preferred Share  Dividends                                                                                          |   | (315,063                                    | )          | (643,558 | ) |
| Net loss  available to Common Shareholders                                                                          |   | $                                           | (2,085,487 | ) | $ | (3,601,165 | ) |
| Net loss  available to Common Shareholders per Common Share:  Basic and Diluted                                |   | $                                           | (0.46      | ) | $ | (0.84 | ) |
| Weighted average  number of Common Shares outstanding                                                               |   | 4,517,524                                   |       | 4,288,956 |   |

 

4

----

**Stonehaven Realty Trust andSubsidiariesConsolidated Statements of Operations - continued**

**(unaudited)**

 
|                                      |   | **For the nine months ended September 30,** |       |
|-------------------------------------------|--------|---------------------------------------------|------------|
|                                      |   | **2001**                                    |       | **2000** |   |
| Comprehensive  loss:                      |   |                                        |       |   |   |
| Net Loss                                  |   | $                                           | (1,770,424 | ) | $ | (2,957,607 | ) |
| Other  comprehensive loss:                |   |                                        |       |   |   |
| Unrealized loss  on marketable securities |   | (3,108,000                                  | )          | — |   |
| Tax effect                                |   | 1,243,200                                   |       | — |   |
|                                      |   | (1,864,800)                                 |       | — |   |
| Comprehensive  loss                       |   | $                                           | (3,635,224 | ) | $ | (2,957,607 | ) |

The accompanyingnotes are an integral part of the consolidated financial statements.

 

5

----

**StonehavenRealty Trust and SubsidiariesConsolidated Statements of Operations**

**(unaudited)**

 
|                                                                                          |   | **For the three months ended September 30,** |    |
|-----------------------------------------------------------------------------------------------|--------|----------------------------------------------|---------|
|                                                                                          |   | **2001**                                     |    | **2000** |   |
| **Revenues**                                                                                  |   |                                         |    |   |   |
| Rental revenue                                                                                |   | $                                            | 202,164 |   | $ | 711,179 |   |
| Tenant  recoveries                                                                            |   | 128,585                                      |    | 505,560 |   |
| Professional  services and sales of hardware and software                                     |   | 187,518                                      |    | 656,065 |   |
| Interest and  other                                                                           |   | 108,227                                      |    | 77,816 |   |
| Total revenues                                                                                |   | 626,494                                      |    | 1,950,620 |   |
| **Expenses**                                                                                  |   |                                         |    |   |   |
| Property,  operating and maintenance                                                          |   | 28,355                                       |    | 241,947 |   |
| Advertising and  promotion                                                                    |   | 13,623                                       |    | 125,693 |   |
| Property taxes  and insurance                                                                 |   | 88,851                                       |    | 267,411 |   |
| Depreciation and  amortization                                                                |   | 145,233                                      |    | 723,840 |   |
| Interest                                                                                      |   | 124,421                                      |    | 440,469 |   |
| General and  administrative                                                                   |   | 401,771                                      |    | 813,758 |   |
| Management fees                                                                               |   | 16,823                                       |    | 62,571 |   |
| Costs related to  professional services and sales of hardware and software                    |   | 120,956                                      |    | 654,944 |   |
| Product  development                                                                          |   | —                                       |    | 127,856 |   |
| Nonrecurring  expenses                                                                        |   | —                                       |    | 82,150 |   |
| Total expenses                                                                                |   | 940,033                                      |    | 3,540,639 |   |
| Loss from operations  before (income) loss allocated to minority interest                     |   | (313,539                                     | )       | (1,590,019 | ) |
| (Income) loss  allocated to minority interest                                                 |   | (17,169                                      | )       | 88,268 |   |
| Loss from  Operations                                                                         |   | (330,708                                     | )       | (1,501,751 | ) |
| Gain on sale of  certain assets of Stonehaven Technologies                                    |   | 397,263                                      |    | — |   |
| Income (loss)  before provision for income taxes                                              |   | 66,555                                       |    | (1,501,751 | ) |
| Provision for  income taxes                                                                   |   | (50,000                                      | )       | — |   |
| Net Income  (Loss)                                                                            |   | 16,555                                       |    | (1,501,751 | ) |
| Preferred Share  Dividends                                                                    |   | —                                       |    | (315,063 | ) |
| Net income  (loss) available to Common Shareholders                                           |   | $                                            | 16,555  |   | $ | (1,816,814 | ) |
| Net income  (loss) available to Common Shareholders per Common Share:  Basic and Diluted |   | $                                            | 0.00    |   | $ | (0.36 | ) |
|                                                                                          |   |                                         |    |   |   |
| Weighted average  number of Common Shares outstanding:   Basic and Diluted               |   | 4,517,524                                    |    | 5,012,506 |   |

 

6

----

**Stonehaven Realty Trust andSubsidiariesConsolidated Statements of Operations - continued**

**(unaudited)**

 
|                                      |   | **For the three months ended September 30,** |       |
|-------------------------------------------|--------|----------------------------------------------|------------|
|                                      |   | **2001**                                     |       | **2000** |   |
| Comprehensive  income (loss):             |   |                                         |       |   |   |
| Net Income  (Loss)                        |   | $                                            | 16,555     |   | $ | (1,501,751 | ) |
| Other  Comprehensive income (loss):       |   |                                         |       |   |   |
| Unrealized loss  on marketable securities |   | (3,108,000                                   | )          | — |   |
| Tax effect                                |   | 1,243,200                                    |       | — |   |
|                                      |   | (1,864,800)                                  |       | — |   |
| Comprehensive  loss                       |   | $                                            | (1,848,245 | ) | $ | (1,501,751 | ) |

The accompanyingnotes are an integral part of the consolidated financial statements.

 

7

----

**Stonehaven Realty Trust and SubsidiariesConsolidated Statements of Cash Flows**

**(unaudited)**
|                                                                            |   | **For the nine months ended September 30,** |       |
|---------------------------------------------------------------------------------|--------|---------------------------------------------|------------|
|                                                                            |   | **2001**                                    |       | **2000** |   |
| **Cash flows from operating  activities:**                                      |   |                                        |       |   |   |
| Net loss                                                                        |   | $                                           | (1,770,424 | ) | $ | (2,957,607 | ) |
| Adjustments to  reconcile net loss to net cash used in operating activities:    |   |                                        |       |   |   |
| Depreciation and  amortization                                                  |   | 1,703,642                                   |       | 1,668,977 |   |
| Loss allocated  to minority interest                                            |   | (67,344                                     | )          | (313,755 | ) |
| Loss on sales of  investment of real estate                                     |   | 165,835                                     |       | — |   |
| Gain on sale of  certain assets of Stonehaven Technologies                      |   | (397,263                                    | )          | — |   |
| Equity in income  of unconsolidated subsidiary                                  |   | —                                      |       | (2,912 | ) |
| Net change in  assets and liabilities:                                          |   |                                        |       |   |   |
| Accounts  receivable, net                                                       |   | 324,633                                     |       | 24,710 |   |
| Restricted cash                                                                 |   | 757,538                                     |       | (1,466,585 | ) |
| Other assets,  net                                                              |   | 65,418                                      |       | (3,749 | ) |
| Income taxes  payable                                                           |   | 50,000                                      |       | — |   |
| Accounts payable  and accrued expenses                                          |   | (854,279                                    | )          | 486,395 |   |
| Deferred revenue  and security deposits                                         |   | (10,383                                     | )          | 170,692 |   |
| Net cash used in  operating activities                                          |   | (32,627                                     | )          | (2,393,834 | ) |
|                                                                            |   |                                        |       |   |   |
| **Cash flows from investing  activities:**                                      |   |                                        |       |   |   |
| Acquisition of  and additions to real estate properties                         |   | (43,305                                     | )          | (1,359,246 | ) |
| Acquisition of  computer hardware, software and other fixed assets              |   | (63,649                                     | )          | (857,550 | ) |
| Acquisition of  licensing agreements                                            |   | (300,000                                    | )          | — |   |
| Cash proceeds  from disposition of real estate property                         |   | 593,579                                     |       | 66,652 |   |
| Costs associated  with disposition of certain assets of Stonehaven Technologies |   | (827,738                                    | )          | — |   |
| Cash proceeds from acquisition of consolidated  subsidiary                      |   | —                                      |       | 160,759 |   |
| Redemption of  marketable securities, net                                       |   | —                                      |       | 5,188,779 |   |
| Investment in  unconsolidated subsidiary                                        |   | —                                      |       | 7,425 |   |
| Net cash  (used in) provided by investing activities                            |   | (641,113                                    | )          | 3,206,819 |   |
|                                                                            |   |                                        |       |   |   |
| **Cash flows from financing  activities:**                                      |   |                                        |       |   |   |
| Payments for  financing transactions                                            |   | —                                      |       | (61,249 | ) |
| Payments on  mortgage loans and notes payable                                   |   | (77,443                                     | )          | (422,515 | ) |
| Payments on line  of credit                                                     |   | —                                      |       | (68,466 | ) |
| Payments of  related party note payable                                         |   | —                                      |       | (415,000 | ) |
| Repurchase of  Common Shares                                                    |   | —                                      |       | (39,769 | ) |
| Dividends/distributions  paid                                                   |   | (815,063                                    | )          | (433,519 | ) |
| Proceeds from  related party note payable                                       |   | 67,000                                      |       | — |   |
| Net cash used in  financing activities                                          |   | (825,506                                    | )          | (1,440,518 | ) |
|                                                                            |   |                                        |       |   |   |
| Net decrease in cash and cash equivalents                                       |   | (1,499,246                                  | )          | (627,533 | ) |
| Cash and cash  equivalents                                                      |   |                                        |       |   |   |
| Beginning of period                                                             |   | 1,635,916                                   |       | 2,892,724 |   |
| End of period                                                                   |   | $                                           | 136,670    |   | $ | 2,265,191 |   |

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

 

8

----

**Stonehaven Realty Trust and Subsidiaries**

 

**Notes to Consolidated Financial Statements**

 

 

**Note 1—Organization**

 

Stonehaven Realty Trust (the “Company”) isa real estate and technology company separated into two business segments: acommercial real estate segment which acquires, owns and operates commercialreal estate and a technology segment which provides information technology consultingand document management solutions.

 

The Company is aself-administered real estate investment trust (“REIT”) formed on March 15,1994 under Maryland law.  In November1998, the Company became an umbrella partnership REIT and formed an operating partnership,Wellington Properties Investments, L.P. (“Operating Partnership”), of which theCompany is the sole general partner and owns an approximate 92.9%interest.  Through the OperatingPartnership and certain wholly owned subsidiaries, the Company acquires, ownsand operates commercial real estate investment properties.  As of September 30, 2001, the Company ownedfour commercial industrial properties that contained approximately 129,000rentable square feet.

 

On July 10, 2001, Stonehaven Technologies, Inc. (Formerly, RESoft, Inc.)(“Stonehaven Technologies”), a Delaware company and a wholly-owned subsidiaryof Stonehaven Realty Trust, sold certain of its assets to Stellent, Inc.(Formerly, IntraNet Solutions, Inc.) (“Stellent”), a Minnesota company (NASDAQ:STEL).

 

**Note 2—Basisof Presentation and Summary of Significant Accounting Policies**

 

The Company has prepared the consolidated financial statements withoutaudit pursuant to the rules and regulations of the Securities and ExchangeCommission. Certain information and footnote disclosures normally included inthe financial statements prepared in accordance with generally acceptedaccounting principles have been condensed or omitted pursuant to such rules andregulations.  However, the Companybelieves that the included disclosures are adequate to make the informationpresented not misleading. In the opinion of the Company, all adjustments(consisting solely of normal recurring items) necessary for a fair presentationof the financial position of the Company as of September 30, 2001, the resultsof their operations for the nine months and three months ended September 30,2001 and 2000, and their cash flows for the nine month periods ended September30, 2001 and 2000 have been included. The results of operations for suchinterim periods are not necessarily indicative of the results for a full year.For further information, refer to the Company’s consolidated financialstatements and footnotes included in the Annual Report of Form 10-KSB forthe year ended December 31, 2000.

 

**Use of Estimatesin the Preparation of Financial Statements**

 

In order to conform with generally accepted accounting principles,management, in preparation of the Company’s consolidated financial statements,is required to make estimates and assumptions that affect the reported amountsof assets and liabilities and disclosure of contingent assets and liabilitiesas of September 30, 2001, and the reported amounts of revenues and expenses forthe nine months and three months ended September 30, 2001 and 2000. Actualresults could differ from those estimates.

# ** **

 

9

----

# **Other Assets**

 

As of September 30, 2001, other assets primarilyconsist of deferred financing costs incurred to obtain and secure mortgage debtfinancing.  Other assets are carried atcost, less accumulated amortization.

 

The deferred financing costs are being amortized over the life of therespective loans on a straight-line basis. Accumulated amortization related to deferred financing costs as ofSeptember 30, 2001 was approximately $19,000.

 

As a result of the sale of certain assets ofStonehaven Technologies on July 10, 2001, our ability to market our royalties,and licensing agreements has been significantly impaired primarily due to thefact that Stellent has become an active competitor to our technology. Stellentand other competitors have substantially greater resources, financial andotherwise, than we do.   As a result,the Company considers the remaining unamortized costs of these assets ofapproximately $1,620,000 ($2,482,000 net of accumulated amortization ofapproximately $862,000) as an offset to the gain on sale of certainassets of Stonehaven Techologies.

 

Further, as a result of the sale of certain assets of Stonehaven Technologieson July 10, 2001, goodwill incurred in connection with the acquisition ofStonehaven Technologies was recorded as an offset to gain on sale of certainassets of Stonehaven Technologies.

 

**RevenueRecognition**

 

Rental revenue from tenants is recognized on a straight-line basis overthe term of the lease agreements regardless of when payments are due.  Tenant recoveries include payments fromcommercial property tenants for reimbursement of the tenant’s share of realestate taxes and certain common area maintenance costs.  Such costs are recognized as revenue in theperiod the costs are incurred.

 

Revenue generated from professional services and sales of hardware andsoftware is recognized as services and goods are provided.  Services billed in advance are recorded asdeferred revenues and recognized when revenue is earned.

 

**ProductDevelopment Costs**

 

Costs related to development of the Company’s new software product arecharged to product development expense as incurred.  Software development costs are capitalized beginning when aproduct’s technological feasibility has been established, which to date hasbeen when the Company has a working model of the software, and ending, when aproduct is available for general release to customers.  Substantially all development costs areincurred prior to establishing a working model.  As a result, the Company has not capitalized any softwaredevelopment costs since costs have not been significant.

 

# **Income Taxes**

 

The tax provisiondiffers from the benefit that would ordinarily result from applying Federalstatutory rates to the loss before taxes due to the effect of state incometaxes and valuation allowances for deferred tax assets.  Substantially all deferred tax assets relateto net operating loss carry forwards and unrealized loss on marketablesecurities.

 

At September 30,2001, the Company has net operating losses. While these losses created a deferred tax asset, a valuation allowancewas applied against the asset because of the uncertainty of whether or not theCompany will be able to use these loss carry forwards, which will expire invarying amounts through the year 2021.

 

10

----

**SegmentDisclosure**

 

In June 1997, the FASB issued Statement of Financial Accounting StandardsNo. 131, “Disclosures about Segments of an Enterprise and RelatedInformation”.  This statement requiresthat a public company report financial and descriptive information about itsreportable operating segments. Generally, financial information is required to be reported on the basisthat it is used internally for evaluating segment performance and deciding howto allocate resources to segments, Management views the Company as two businesssegments: a commercial real estate segment which acquires, owns and operatescommercial real estate and a technology segment which provides informationtechnology consulting and document management solutions.

 

**Note 3—MarketableSecurities**

 

The Company’s investments in marketable securities areavailable-for-sale and represent 200,000 shares of common stock ofStellent.  Such shares were acquired inconnection with the sale of certain assets of Stonehaven Technologies on July10, 2001 and were recorded at an aggregate of $5,988,000 (valued at $29.94 pershare based on the NASDAQ closing quote per share of common stock of Stellenton July 9, 2001).  The shares wereunregistered when acquired and Stellent subsequently registered the shares withthe Securities and Exchange Commission effective September 7, 2001.  As of September 30, 2001, the fair marketvalue of these marketable securities aggregate $2,880,000 (based upon theNASDAQ closing quote per share of common stock of Stellent of $14.40 onSeptember 30, 2001).  As a result theCompany has recorded a gross unrealized loss of $3,108,000 net of relateddeferred tax benefit of approximately $1,243,000.

 

Through September 30, 2001, the Company had not sold any of itsavailable-for-sale marketable securities.

 

**Note 4—Dispositionof Certain Assets of Stonehaven Technologies and Real Estate Properties**

 

On July 10, 2001,Stonehaven Technologies sold all of its interest in SmartCabinet software code(software technology replicating and mapping a company’s business logic in webbase format) and related assets including its REDocs initiatives, to Stellentpursuant to an Asset Purchase Agreement between the Company, StonehavenTechnologies and Stellent.

 

In exchange for the SmartCabinet software code and related assets, Stonehaven Technologies received 200,000 unregistered shares of Stellent common stock (the “Stellent Shares”) with a market value aggregating approximately $5,988,000 (valued at $29.94 per share based on the NASDAQ closing quote per share on July 9, 2001).  Stellent subsequently registered the Stellent Shares with the Securities and Exchange Commission effective September 7, 2001.  Additionally, Stonehaven Technologies retained the right to continue to sell the SmartCabinet product with certain retained Stellent Expedio software licenses pursuant to a Value Added Reseller Agreement dated September 30, 2000 between Stonehaven Technologies and Stellent.  Stonehaven Technologies will also receive a 2% royalty fee for two years for sales of the SmartCabinet product by Stellent and a 5% referral fee on sales of the SmartCabinet product to customers referred to Stellent by Stonehaven Technologies.   The Company has recorded a gain on the sale of approximately $397,000 as of September 30, 2001,  net of the unamortized costs of certain royalties, licensing agreements, and goodwill.

 

In connection with the transaction, Stonehaven Technologies and Mary Henschel, former President of Stonehaven Technologies, entered into a Separation Agreement.  Ms. Henschel and most of Stonehaven Technologies’ other employees are no longer employed by Stonehaven Technologies.  Further, Duane H. Lund terminated his employment with Stonehaven Technologies as of September 9, 2001.  Associated costs in connection with the agreements have been accrued as of September 30, 2001.

 

 

11

Stonehaven Technologies also terminated its Exclusive Agency andRepresentation Agreement with Venture One Real Estate, LLC, in July 2001 andagreed to pay it a $262,500 termination fee. Further in connection with the July 2001 transaction, the warrantsassociated with certain intangible assets were cancelled.

 

On March 31, 2001, the Company sold the St. Cloud, Minnesota realproperty to an unrelated third party. In exchange for the real property, the Company received approximately$8.3 million in cash.  In addition, theCompany retired the related mortgage indebtedness of approximately $7.3million.  The Company has recorded aloss on the sale of the investment in the real estate of approximately $166,000as of September 30, 2001.

 

The following pro formacondensed consolidated financial information presented below is as if theacquisition of the Plymouth Properties and the dispositions of Lake Pointe,Highlander, Cold Springs, Thresher and certain assets of Stonehaven Technologieshad occurred on January 1, 2000.  Thepro forma financial information is not necessarily indicative of the results,which actually would have occurred if the acquisitions or dispositions had beenconsummated on January 1, 2000, nor does the pro forma information purport torepresent the results of operations for future periods.

** **
|                                               |   | **For the nine months ended****September 30,** |      |
|----------------------------------------------------|--------|------------------------------------------------|-----------|
|                                               |   | **2001**                                       |      | **2000** |   |
| Pro forma total revenue                            |   | $                                              | 1,144,000 |   | $ | 1,375,000 |   |
| Pro forma loss                                     |   | $                                              | 657,000   |   | $ | 858,000 |   |
| Pro forma loss available to  Common Shareholders   |   | $                                              | 972,000   |   | $ | 1,502,000 |   |
| Pro forma loss per Common Share  Basic and Diluted |   | $                                              | 0.22      |   | $ | 0.37 |   |

 

**Note 5—MortgageLoans and Notes Payable**

 

In connection withthe disposition of Cold Springs, the Company retired mortgage notes payabletotaling approximately $7.3 million.

 

As of September30, 2001, a Trustee of the Company made a loan to the Company in the amount of$67,000.  The note is short term andbears interest at the prime rate (6.00% at September 30, 2001).

 

**Note 6—Equity/Distributions**

 

On April 19, 2001, the Company declared a dividend of $0.475 per sharewith respect to the Class A Preferred Shares. The dividend with respect to the Class A Preferred Shares was paid onMay 15, 2001 to shareholders of record on April 30, 2001.

 

On October 22, 2001, the Company declared a dividend of $0.475 per sharewith respect to the Class A Preferred Shares. The dividend with respect to Class A Preferred Shares will be paid onNovember 19, 2001 to shareholders of record on November 5, 2001.

 

 

12

----

**Note 7—LossPer Share**

 

The Company has adopted the Statement of Financial Accounting StandardsNo. 128, “Earnings Per Share” (“EPS”) for all periods presented herein.Net loss per weighted average Common Share outstanding—basic and net loss perweighted average Common Share outstanding—diluted is computed based on theweighted average number of Common Shares outstanding for the period. Theweighted average number of Common Shares outstanding for the nine months endedSeptember 30, 2001 and September 30, 2000 were 4,517,524 and 4,288,956 respectively. Common share equivalents of approximately 4.2 millioninclude outstanding convertible preferred shares, warrants and stock options,and are not included in net loss per weighted average Common Shareoutstanding—diluted as they would be anti-dilutive.

 
|                                                                                                              |   | **For the nine months ended September 30,** |       |
|-------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------|------------|
|                                                                                                              |   | **2001**                                    |       | **2000** |   |
| **Numerator**                                                                                                     |   |                                        |       |   |   |
| Net Loss                                                                                                          |   | $                                           | (1,770,424 | ) | $ | (2,957,607 | ) |
| Preferred Share  Dividends                                                                                        |   | (315,063                                    | )          | (643,558 | ) |
|                                                                                                              |   |                                        |       |   |   |
| Net loss  available to Common Shareholders                                                                        |   | $                                           | (2,085,487 | ) | $ | (3,601,165 | ) |
|                                                                                                              |   |                                        |       |   |   |
| **Denominator**                                                                                                   |   |                                        | ** ** |   | ** ** |
| Weighted average  Common Shares outstanding at September 30, 2001 and 2000, respectively:  Basic and Diluted |   | 4,517,524                                   |       | 4,288,956 |   |
|                                                                                                              |   |                                        |       |   |   |
| **Basic and Diluted EPS**                                                                                         |   |                                        |       |   |   |
| Net loss available to  Common Shareholders  — Basic and  Diluted                                        |   | $                                           | (0.46      | ) | $ | (0.84 | ) |

 

 

#### **Note8 — Commitments and Contingencies**

#### ** **

#### **LicenseAgreements**

 

In connection with license agreements entered into by Stonehaven Technologieson September 28, 2000, Stonehaven Technologies paid $1,350,000 through the ninemonths ended September 30, 2001. No further payments are required in connectionwith these agreements.

#### ** **

During the nine months ended September 30, 2001, the Company paid$300,000 in connection with certain additional licenses agreements entered intowith Stellent.  No further payments arerequired in connection with these agreements.

#### ** **

#### **Legal Proceeding**

### ** **

On December 29, 2000,Stonehaven notified Odeh Muhawesh, a Trustee of the Company, that it wassuspending its payment to him under a promissory note assumed by StonehavenTechnologies. Stonehaven Technologies assumed the payment obligation inFebruary 2000 pursuant to the terms of the merger agreement between the Company,Stonehaven Technologies and NETLink International, Inc. (“NETLink”), a companyfounded and owned by Mr. Muhawesh whereby NETLink was merged into StonehavenTechnologies. Management of the Company believes Mr. Muhawesh is in defaultunder the merger agreement for, among other things, failure by him to cause tobe transferred to Stonehaven Technologies 5% of the issued and outstandingstock of MyFreeDesk.com, Inc.

 

13

----

 

On January 8, 2001, Mr.Muhawesh filed a complaint against Stonehaven Technologies in the DistrictCourt of Hennepin County, Minnesota alleging that Stonehaven Technologiesfailed to pay him $350,000 on January 1, 2001 under the terms of a promissorynote. The Company has filed a counterclaim against Mr. Muhawesh requesting,among other things, the repayment of amounts previously paid to him under thepromissory note.  Theparties are conducting discovery proceedings.

 

#### **Legal Actions**

 

In the normal course ofbusiness, the Company is involved in legal actions arising from the ownershipand administration of its properties and its technology segment.  In management’s opinion, the liabilities, ifany, that may ultimately result from such legal actions are not expected tohave a materially adverse effect on the consolidated financial position,operations or liquidity of the Company.

 

**Note 9—RelatedParty Transactions**

 

**Management Fees**

 

TheCompany maintains a property management agreement with HoytProperties Inc. (“Hoyt”), an entity controlled by a Trustee of theCompany, to serve as Property Manager of the commercial properties owned by theCompany.  In connection with theagreement, Hoyt manages the day-to-day operations of properties owned by theCompany and receives a management fee for this service. Management fees paid toHoyt were approximately $70,000 and $145,000 for the nine months endedSeptember 30, 2001 and September 30, 2000, respectively.

 

**Note 10— Supplemental Information toStatements of Cash Flows**

** **
|                                                                                                               |   | **For the  nine months ended September 30,** |    |
|--------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|---------|
|                                                                                                               |   | **2001**                                     |    | **2000** |   |
| Interest paid                                                                                                      |   | $                                            | 625,768 |   | $ | 1,206,931 |   |
| Supplemental  schedule of non-cash investing and financing activities:                                             |   |                                         |    |   |   |
| The following  assets and liabilities were assumed in connection with the acquisition of  Stonehaven Technologies: |   |                                         |    |   |   |
| Furniture and  equipment                                                                                           |   | $                                            | —  |   | $ | (74,672 | ) |
| Accounts  receivable                                                                                               |   | —                                       |    | (430,888 | ) |
| Goodwill                                                                                                           |   | —                                       |    | (4,499,777 | ) |
| Other assets                                                                                                       |   | —                                       |    | (74,604 | ) |
| Line of credit                                                                                                     |   | —                                       |    | 68,466 |   |
| Related party  note payable                                                                                        |   | —                                       |    | 750,000 |   |
| Other  liabilities                                                                                                 |   | —                                       |    | 422,233 |   |
| Common Shares                                                                                                      |   | —                                       |    | 9,143 |   |
| Additional paid  in capital                                                                                        |   | —                                       |    | 3,990,858 |   |
| **Cash proceeds from acquisition  of consolidated subsidiary**                                                     |   | $                                            | —  | ** ** | **$** | **160,759** | ** ** |

 

14

----

**Note 10— Supplemental Information toStatements of Cash Flows - continued**

 
|                                                                                                                                                 |   |       | **For the nine months ended  September 30,** |       |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|----------------------------------------------|------------|--------|
|                                                                                                                                                 |   | **2001**   |                                         | **2000**   |   |
| The following assets and  liabilities were assumed in connection with the acquisition of the Plymouth  Properties and additions to other properties: |   |       |                                         |       |   |
| Purchase of real  estate                                                                                                                             |   | $          | —                                       |       | $      | (6,772,313 | ) |
| Additions to  real estate                                                                                                                            |   | (43,305    | )                                            | (3,254     | )      |
| Mortgage notes  payable                                                                                                                              |   | —     |                                         | 4,471,694  |   |
| Minority  interests                                                                                                                                  |   | —     |                                         | 794,627    |   |
| Common shares                                                                                                                                        |   | —     |                                         | 429        |   |
| Additional paid  in capital                                                                                                                          |   | —     |                                         | 149,571    |   |
| **Acquisition of and additions to  real estate properties**                                                                                          |   | **$**      | **(43,305**                                  | **)**      | **$**  | **(1,359,246** | **)** |
| The following assets and liabilities were disposed of in connection  with the dispositions of Lake Pointe, Highlander and Cold Springs:              |   |       |                                         |       |   |
| Disposition of real estate                                                                                                                           |   | $          | 8,184,686                                    |       | $      | 3,304,358 |   |
| Disposition of  investment in unconsolidated subsidiary                                                                                              |   | —     |                                         | 95,756     |   |
| Restricted cash                                                                                                                                      |   | —     |                                         | 110,566    |   |
| Deferred costs  and other assets                                                                                                                     |   | 26,552     |                                         | 90,942     |   |
| Mortgage note  payable                                                                                                                               |   | (7,306,716 | )                                            | (2,699,460 | )      |
| Accounts payable  and accrued liabilities                                                                                                            |   | (140,997   | )                                            | 15,000     |   |
| Security  deposits                                                                                                                                   |   | (4,111     | )                                            | (43,914    | )      |
| Dividends paid                                                                                                                                       |   | —     |                                         | (45,000    | )      |
| Preferred shares                                                                                                                                     |   | —     |                                         | (950       | )      |
| Additional paid  in capital                                                                                                                          |   | —     |                                         | (760,646   | )      |
| Loss on sale of  investment in real estate                                                                                                           |   | (165,835   | )                                            | —     |   |
| Cash proceeds from dispositions of real estate  properties                                                                                           |   | $          | 593,579                                      |       | $      | 66,652 |   |
| The following assets and liabilities were disposed of in connection  with the disposition of certain assets of Stonehaven Technologies:              |   |       |                                         |       |   |
| Disposition of equipment, net                                                                                                                        |   | $          | 675,616                                      |       | $      | — |   |
| Fair market  value of marketable securities received                                                                                                 |   | (5,988,000 | )                                            | —     |   |
| Deferred costs  and other assets                                                                                                                     |   | 1,635,688  |                                         | —     |   |
| Goodwill, net                                                                                                                                        |   | 2,451,695  |                                         | —     |   |
| Gain on sale of  certain assets of Stonehaven Technologies                                                                                           |   | 397,263    |                                         | —     |   |
| Costs associated with dispositions of certain assets  of Stonehaven Technologies                                                                     |   | $          | (827,738                                     | )          | $      | — |   |
| Dividends and distributions payable                                                                                                                  |   | $          | 209,139                                      |       | $      | 1,024,202 |   |
| Sales and marketing warrant valuation                                                                                                                |   | $          | —                                       |       | $      | 682,338 |   |
| Software licensing prepaid minimum royalty                                                                                                           |   | $          | 300,000                                      |       | $      | 1,500,000 |   |
|                                                                                                                                                      |        |            |                                              |            |        |  |  |  |  |  |  |

 

 

15

----

**Note 11 — Information by BusinessSegment**

 

In June 1997, the FASB issued Statement of FinancialAccounting Standards No. 131, “Disclosure about Segments of an Enterprise andRelated Information”.  This statementrequires that a public business enterprise report financial and descriptiveinformation about its reportable operating segments.  Generally, financial information is required to be reported onthe basis that it is used internally for evaluating segment performance anddeciding how to allocate resources to segments.  Management views the operations of its real estate properties andthe operations of Stonehaven Technologies as two segments.

 

 
|                                      |   | **Real Estate Properties** |       | **Stonehaven Technologies** |       | **Total** |       |
|-------------------------------------------|--------|----------------------------|------------|-----------------------------|------------|-----------|------------|
| **Nine months ended September 30,  2001** |   |                       | ** ** |                        | ** ** |      | ** ** |
| Revenues                                  |   | $                          | 1,522,635  |                        | $          | 1,911,815 |       | $ | 3,434,450 |   |
| Operating expenses                        |   | 599,595                    |       | 963,573                     |       | 1,563,168 |       |
| Income  from operations                   |   | $                          | 923,040    |                        | $          | 948,242   |       | $ | 1,871,282 |   |
| Segment  assets at September 30, 2001     |   | $                          | 12,281,555 |                        | $          | 3,067,932 |       | $ | 15,349,487 |   |
| **Nine months ended September 30,  2000** |   |                       | ** ** |                        | ** ** |      | ** ** |
| Revenues                                  |   | $                          | 4,120,779  |                        | $          | 1,696,299 |       | $ | 5,817,078 |   |
| Operating  expenses                       |   | 1,664,013                  |       | 1,489,931                   |       | 3,153,944 |       |
| Income  from operations                   |   | $                          | 2,456,766  |                        | $          | 206,368   |       | $ | 2,663,134 |   |
| Segment assets at September 30, 2000      |   | $                          | 41,402,726 |                        | $          | 6,965,407 |       | $ | 48,368,133 |   |

 

16

----

The followingtable reconciles income from operations for reportable segments to loss fromoperations as reported in the Consolidated Statements of Operations.
|                                           |   | **Nine months ended**

**September 30,** |       |
|------------------------------------------------|--------|------------------------------------------|------------|
|                                           |   | **2001**                                 |       | **2000** |   |
| Income from operations for reportable segments |   | $                                        | 1,871,282  |   | $ | 2,663,134 |   |
| Add:                                           |   |                                     |       |   |   |
| Equity in income  of unconsolidated entities   |   | —                                   |       | 2,912 |   |
| Minority  interests                            |   | 67,344                                   |       | 313,755 |   |
| Less:                                          |   |                                     |       |   |   |
| General and  administrative                    |   | (1,474,820                               | )          | (2,148,895 | ) |
| Interest                                       |   | (597,099                                 | )          | (1,379,765 | ) |
| Product development                            |   | (114,917                                 | )          | (421,456 | ) |
| Nonrecurring  expenses                         |   | —                                   |       | (318,315 | ) |
| Amortization                                   |   | (1,318,224                               | )          | (993,616 | ) |
| Depreciation                                   |   | (385,418                                 | )          | (675,361 | ) |
| Loss  from operations                          |   | $                                        | (1,951,852 | ) | $ | (2,957,607 | ) |
|                                                |        |                                          |            |  |  |  |  |  |  |

 

 

17

----

**ITEM2.  MANAGEMENT’S DISCUSSION AND ANALYSISAND PLAN OF OPERATION**

 

The following discussion should be read in conjunctionwith the financial statements and notes thereto included elsewhere herein.

 

This report on Form 10-QSB contains “forward-looking”statements within the meaning of Section 27A of the Securities Act of 1933, asamended, and Section 21E of the Securities Exchange Act of 1934, as amended.Forward—looking statements are based on certain assumptions and describe futureplans, strategies and expectations of the Company.  They are generally identifiable by use of the words “believe”, “expect”,“intend”, “anticipate”, “estimate”, “project” or similar expressions. Thesestatements are not guarantees of future performance, events or results andinvolve potential risks and uncertainties. Accordingly, actual performance,events or results may differ materially from such forward-looking statements.Management undertakes no obligation to update publicly any forward-lookingstatements, whether as a result of new information, future events or otherwise.

 

Factors that could causeactual results to differ materially from current expectations include, but arenot limited to, changes in general economic conditions, changes in interestrates, legislative and regulatory changes, changes in monetary and fiscalpolicies of the U.S. government, including policies of the U.S. Treasury andthe Federal Reserve Board, changes in local real estate conditions (includingrental rates and competing properties), changes in industries in which theCompany’s principal tenants compete, the failure to timely lease unoccupiedspace, the failure to timely re-lease occupied spaced upon expiration ofleases, the inability to generate sufficient revenues to meet debt servicepayments and operating expenses, the unavailability of equity and debtfinancing, unanticipated costs associated with the Company’s acquisitions,potential liability under environmental or other laws and regulations,expanding a new line of business, customer demand for online services andproducts, uncertainty of emerging online services, ability to meet competition,loss of existing key personnel, ability to hire and retain future personnel,the failure of the Company to manage its growth effectively and the other risksidentified in  this filingor other reports of the Company filed with the Securities and ExchangeCommission. These risks and uncertainties should be considered in evaluatingforward—looking statements and undue reliance should not be placed on suchstatements. Further information concerning the Company and its business,including additional factors that could materially affect the Company’sfinancial results is included in other Company filings with the Securities andExchange Commission.

 

**Overview**

 

The Company is a real estate and technologycompany separated into two business segments: a commercial real estate segmentwhich acquires, owns and operates commercial real estate and a technologysegment which provides document management solutions and information technologyconsulting.

 

The Company was formed on March 15, 1994 as aMaryland real estate investment trust. The Company has operated as atraditional real estate investment trust by buying, selling, owning, andoperating commercial and residential properties. The Company derivedsubstantially all of its revenues since inception through February 2000 fromthese real estate operations.

 

In February 2000, theCompany acquired Stonehaven Technologies, Inc. (formerly, RESoft, Inc.)  (“Stonehaven Technologies”), a Minnesotacorporation that has developed software applications and that provides informationtechnology services useful in real estate and other industries. During theremainder of 2000 and through July 10, 2001, the Company developed StonehavenTechnologies’ additional product offerings and included in its overall businessfocus the development and sale of Stonehaven Technologies’ software product andservices. On July 10, 2001, Stonehaven Technologies sold all of its interest inits SmartCabinet software code (software technology replicating and mapping acompany’s business logic in web base format) and related assets, including itsREDocs initiatives, to

 

18

----

Stellent, Inc., a Minnesotacompany (NASDAQ:STEL) (“Stellent”) pursuant to an Asset Purchase Agreementbetween the Company, Stonehaven Technologies and Stellent.

 

As a result of the operations of StonehavenTechnologies, the Company is no longer a REIT for federal tax purposes butmaintains its status as a REIT under Maryland law.   For the year ended December 31, 2001, the Company expects tohave taxable income as a result of the sale of certain assets on July 10, 2001,and as such, the Company expects to be subject to federal and state incometaxes.

 

As of September 30,2001, our unrestricted cash resources were $137,000 and our marketablesecurities available for sale were $2,880,000. The Company’s marketable securities represent 200,000 shares of commonstock of Stellent.  Such shares wereacquired on July 10, 2001, had a fair market value as of July 9, 2001aggregating $5,988,000 and were registered effective as of September 7, 2001with the Securities and Exchange Commission. We are dependent on the Stellentstock in order to meet our short-term liquidity needs.  As such, we believe, our Company’s futureperformance will be closely tied to the performance of Stellent.

 

Our current overallobjective is to focus on meeting current liquidity requirements in order tomaximize shareholder value.  Our effortsin this regard have been significantly impaired by the deteriorating market conditionsresulting from the general decline of business conditions over the last year asevidenced by the decline in the value of Stellent’s common stock.

 

In order to meetongoing obligations of the Company and transaction costs associated with thesale of certain assets of Stonehaven Technologies, as of  September 30, 2001 a Trustee of the Companymade a loan to the Company in the amount of $67,000 and subsequent to September30, 2001 an Officer of the Company made a loan to the Company of approximately$100,000 and the Company sold 30,000 shares of common stock of Stellent.  Additionally, the Company has reserved50,000 shares of common stock of Stellent to meet its future obligations.

 

We intend to maintain andoperate our remaining commercial properties, which are 88.4% leased atSeptember 30, 2001, due to the expected cash flow results.  However, the cash flow from our propertiesis not expected to fully fund our future liquid requirements, including amongother factors, our ongoing general and administrative costs and our dividendcommitment to our Class A Preferred shareholders.

 

We further intend to continue to operate as adocument management consulting and development company, however, in a much morelimited capacity. Since the sale of certain assets of Stonehaven Technologieson July 10, 2001, our ability to market our licensing agreements and otherrelated assets has been significantly impaired primarily due to the fact thatStellent has become an active competitor to our licensed technology. Stellentand other competitors have substantially greater resources, financial andotherwise, than we do.

 

On October 22, 2001, the Company declared a dividend of $0.475 per sharewith respect to the Class A Preferred Shares. The dividend with respect to Class A Preferred Shares will be paid on November19, 2001 to shareholders of record on November 5, 2001.

 

Wecontinue to explore and evaluate all available alternatives, including, amongothers, to buy or sell additional properties or assets, to develop andsell future technology products or expand through the acquisition of newtechnology products, to pursue additional or alternate financing, whether debtor equity, or to continue to meet theongoing dividend requirement of our Class A Preferred Shares.****There can be no assurance that anyof the alternatives will be adopted, or if adopted, will be successful.  Additionally, we may determine not to adoptany additional business initiative.

 

 

19

----

**Real Estate Segment**

 

As of September 30, 2001,the Company owned the following four commercial real estate propertiescontaining approximately 129,000 rentable square feet:

 
| • | A 26,186 square-foot light  industrial facility in Plymouth, Minnesota   |
|--------|--------------------------------------------------------------------------|
|   |                                                                     |
| • | A 26,186 square-foot light  industrial facility in Plymouth, Minnesota   |
|   |                                                                     |
| • | A 26,186 square-foot light  industrial facility in Plymouth, Minnesota   |
|   |                                                                     |
| • | A 50,291 square-foot light  industrial facility in Burnsville, Minnesota |

 

 TheCompany’s interest in the real properties is held through Wellington PropertiesInvestments, LP (the “Operating Partnership”). The Company is the sole general partner of the Operating Partnershipand, as of September 30, 2001, held a 92.9% interest in the OperatingPartnership.

 

On March 31, 2001, the Company sold the St. Cloud, Minnesota realproperty to an unrelated third party. In exchange for the real property, the Company received approximately$8.3 million in cash.  In addition, theCompany retired the related mortgage indebtedness of approximately $7.3million.  The Company has recorded aloss on the sale of the investment in the real estate of approximately $166,000as of September 30, 2001.

 

**Technology Segment**

 

As of September 30, 2001, the Company holdsStonehaven Technologies which, since 1991, has offered various information technologyservices and has been a reseller of various computer hardware and softwareproducts. Stonehaven Technologies, through July 10, 2001, has continued toprovide similar service offerings and in addition, introduced a proprietaryproduct, REDocsTM, that adds certain features to existing document managementsoftware products.  On July 10, 2001, Stonehaven Technologiessold all of its interest in SmartCabinet software code (software technologyreplicating and mapping a company’s business logic in web base format) andrelated assets including its REDocs initiatives, to Stellent pursuant to anAsset Purchase Agreement between the Company, Stonehaven Technologies andStellent.

 

In exchange for the SmartCabinet software code and related assets, Stonehaven Technologies received 200,000 unregistered shares of Stellent common stock (the “Stellent Shares”) with a market value aggregating approximately $5,988,000 (valued at $29.94 per share based on the NASDAQ closing quote per share on July 9, 2001).  Stellent subsequently registered the Stellent Shares with the Securities and Exchange Commission effective September 7, 2001.  Additionally, Stonehaven Technologies retained the right to continue to sell the SmartCabinet product with certain retained Stellent Expedio software licenses pursuant to a Value Added Reseller Agreement dated September 30, 2000 between Stonehaven Technologies and Stellent.  Stonehaven Technologies will also receive a 2% royalty fee for two years for sales of the SmartCabinet product by Stellent and a 5% referral fee on sales of the SmartCabinet product to customers referred to Stellent by Stonehaven Technologies.   The Company has recorded a gain on the sale of the investment of certain assets of Stonehaven Technologies of approximately $397,000 as of September 30, 2001, net of the unamortized costs of certain royalties, licensing agreements, and goodwill.

 

In connection with the transaction, Stonehaven Technologies and Mary Henschel, former President of Stonehaven Technologies, entered into a Separation Agreement.  Ms. Henschel and most of Stonehaven Technologies’ other employees are no longer employed by Stonehaven Technologies. Further, Duane H. Lund terminated his employment with Stonehaven Technologies as of September

 

20

9, 2001.  Associated costs in connection with the agreements have been accrued as of September 30, 2001.

 

Stonehaven Technologies also terminated itsExclusive Agency and Representation Agreement with Venture One Real Estate, LLC,in July 2001 and agreed to pay it a $262,500 termination fee.  Further in connection with the July 2001transaction, the warrants associated with certain intangible assets werecancelled.

 

**Income Taxes**

 

The Company is now subject to federal andstate income taxes.  See income taxdisclosure in Note 2 of the financial statements for effect on operations.

 

**Results of Operations**

 

TheCompany’s revenues include the following: rental revenues, tenant recoveries,revenues from technology consulting services, and revenues from sales ofhardware and software.

 

*Comparison of the Nine Month Period Ended September  30, 2001 and 2000:*  Rental revenue decreased byapproximately $1,543,000 or 63.3% for the nine month period ended September 30,2001 compared to the nine month period ended September 30, 2000. Tenantrecoveries decreased by approximately $845,000 or 59.8% for the nine monthperiod ended September 30, 2001 compared to the nine month period endedSeptember 30, 2000.  The decreased rental revenue and tenant recoverieswere primarily a result of the Company’s dispositions of Lake Pointe onJune 30, 2000, Thresher on December 31, 2000 and Cold Springs on March 30,2001, offset, in part, by the acquisition of the Plymouth Properties onFebruary 29, 2000.  Professionalservices and sales of hardware and software increased by approximately $107,000or 6.3% for the nine month period ended September 30, 2001 compared to the ninemonth period ended September 30, 2000. The increase is primarily the result of the Company’s increased salesduring 2001 offset in part by the disposition of certain assets of StonehavenTechnologies on July 10, 2001.  Interestincome and other income decreased by $102,000 during these same periods primarilydue to the use of cash and cash equivalents, offset, in part, by reimbursedexpenses received from Stellent in relation to the sale of certain assets ofStonehaven Technologies on July 10, 2001.

 

Total expenses decreased from approximately $9,091,000for the nine month period ended September 30, 2000 to $5,454,000 for the ninemonth period ended September 30, 2001, a net decrease of $3,637,000 asdescribed below.

•                  Decreased costs of approximately $504,000, in costs related toprofessional services and sales of hardware and software, were primarily aresult of decreased costs relating to hardware sales and the disposition ofcertain assets of Stonehaven Technologies offset, in part, by the allocation ofcosts associated with personnel between costs related to professional servicesand sales of hardware and software and product development.

•                  Decreased costs of approximately $22,000, related to advertising andpromotion, were primarily a result of the disposition of certain assets ofStonehaven Technologies on July 10, 2001.

•                  Decreased costs of approximately $307,000, related to productdevelopment, were primarily a result of the allocation of costs associated withpersonnel between product development and costs related to professionalservices and sales of hardware and software.

•                  Decreased costs of approximately $547,000, $396,000, $121,000, $674,000and $783,000, related to property, operating and maintenance, property taxesand insurance, management fees, general and administrative and interestexpense, respectively, were primarily a result of the dispositions of LakePointe on June 30, 2000, Thresher on December 31, 2000, Cold Springs on March30, 2001 and certain assets of Stonehaven Technologies on July 10, 2001.  The decreases were offset, in part, by theacquisitions of the Plymouth Properties on February 29, 2000.

•                  Nonrecurring charges of approximately $318,000 incurred during 2000primarily related to costs associated with abandonment of projects and theseverance package associated with the

 

21

----

disposition of Lake Pointe on June 30, 2000.

•                  Depreciation and amortization increased fromapproximately $1,669,000 for the period ended September 30, 2000 to $1,704,000for the comparable period in 2001, an increase of $35,000 or 2.1%, primarily asa result of the Company’s amortization of the non-refundable prepaid minimumroyalties, and the increased depreciation from the Plymouth Properties acquiredin 2000.  All of these increases wereoffset, in part, by reduced depreciation resulting from the dispositions ofLake Pointe on June 30, 2000, Thresher on December 31, 2000, Cold Springs onMarch 30, 2001 and certain assets of Stonehaven Technologies on July 10, 2001.

 

There was no equity in income of unconsolidatedsubsidiary for the nine month period ended September 30, 2001 as compared to$2,912 for the nine month period ended September 30, 2000 due to the sale andtransfer of the Company’s 8% interest in Highlander on June 30, 2000.

 

The loss on sale of investment in real estate of $166,000was a result of the additional loss recognized on the sale of the St. Cloud,Minnesota property.   A portion of theloss from the sale of the St. Cloud, Minnesota property was accrued as ofDecember 31, 2000.

 

The gain on sale of certain assets of StonehavenTechnologies of $397,000 was a result of the disposition of certain assets ofStonehaven Technologies.

 

As a result of the above factors, the loss fromoperations before equity in income of unconsolidated subsidiary and lossallocated to minority interest decreased from approximately $3,274,000 for thenine month period ended September 30, 2000 to approximately $2,019,000 for thenine month period ended September 30, 2001. Additionally, the net loss available to Common Shareholders decreasedfrom approximately $3,601,000 for the nine month period ended September 30,2000 to $2,085,000 for the nine month period ended September 30, 2001.

 

*Comparison of the Three Month Period Ended September 30,2001 and 2000:*  Rental revenue decreased by approximately $509,000 or 71.6% forthe three month period ended September 30, 2001 compared to the three monthperiod ended September 30, 2000.  Tenantrecoveries decreased by approximately $377,000 or 74.6% for the three monthperiod ended September 30, 2001 compared to the three month period endedSeptember 30, 2000.  The decreased rental revenue and tenant recoverieswere primarily a result of the Company’s dispositions of Lake Pointe onJune 30, 2000, Thresher on December 31, 2000 and Cold Springs on March 30,2001, offset, in part, by the acquisition of the Plymouth Properties onFebruary 29, 2000.  Professionalservices and sales of hardware and software decreased by approximately $469,000or 71.4% for the three month period ended September 30, 2001 compared to thethree month period ended September 30, 2000. The decrease is primarily the result of the disposition of certainassets of Stonehaven Technologies on July 10, 2001.  Interest income and other income increased by $30,000 duringthese same periods primarily a result of reimbursed expenses received fromStellent in relation to the sale of certain assets of Stonehaven Technologieson July 10, 2001, offset, in part, by the use of cash and cash equivalents.

 

Total expenses decreased from approximately $3,541,000for the three month period ended September 30, 2000 to $940,000 for the threemonth period ended September 30, 2001, a net decrease of $2,601,000 describedbelow.

•                  Decreased costs of approximately $112,000, related to advertising andpromotion, were primarily a result of the disposition of certain assets ofStonehaven Technologies on July 10, 2001.

•                  Decreased costs of approximately $534,000, in costs related toprofessional services and sales of hardware and software, were primarily aresult of decreased costs relating to hardware sales and the disposition ofcertain assets of Stonehaven Technologies offset, in part, by the allocation ofcosts associated with personnel between costs related to professional servicesand sales of hardware and software and product development.

•                  Decreased costs of approximately $128,000, related to productdevelopment, were primarily a result of the allocation of costs associated withpersonnel between product development and

 

22

----

costs related to professional services and sales ofhardware and software.

•                  Decreased costs of approximately $214,000, $178,000, $46,000, $412,000and $316,000, related to property, operating and maintenance, property taxesand insurance, management fees, general and administrative and interestexpense, respectively, were primarily a result of the dispositions of LakePointe on June 30, 2000, Thresher on December 31, 2000, Cold Springs on March30, 2001 and certain assets of Stonehaven Technologies on July 10, 2001.  The decreases were offset, in part, by theacquisitions of the Plymouth Properties on February 29, 2000.

•                  Nonrecurring charges of approximately $82,000 incurred during 2000primarily related to costs associated with abandonment of projects and theseverance package associated with the disposition of Lake Pointe on June 30,2000.

•                  Depreciation and amortization decreased fromapproximately $724,000 for the period ended June 30, 2000 to $145,000 for thecomparable period in 2001, an decrease of $579,000 or 80.0%, primarily as aresult of the Company’s sale of certain assets of Stonehaven Technologies, andreduced depreciation resulting from the dispositions of Lake Pointe, Thresherand Cold Springs.  All of the decreasedwere offset, in part, by amortization of the non-refundable prepaid minimumroyalties, and the increased depreciation from the Plymouth Properties acquiredin 2000.

 

The gain on sale of certain assets of StonehavenTechnologies of $397,000 was a result of the disposition of certain assets ofStonehaven Technologies.

 

As a result of the above factors, the loss fromoperations before (income) loss allocated to minority interest decreased fromapproximately $1,590,000 for the three month period ended September 30, 2000 toapproximately $314,000 for the three month period ended September 30,2001.  Additionally, the net lossavailable to Common Shareholders decreased from approximately $1,817,000 forthe three month period ended September 30, 2000 to net income available toCommon Shareholders of $17,000 for the three month period ended September 30,2001.

 

**Liquidity and Capital Resources**

*Short Term and Long Term Liquidity*

 

Cash provided by operations, equity transactions, andborrowings from affiliates and lending institutions have generally provided theprimary sources of liquidity to the Company. Historically, the Company has usedthese sources to fund operating expenses, satisfy its debt service obligationsand fund distributions to shareholders.

 

As of September 30,2001, our unrestricted cash resources were $137,000 and our marketablesecurities available for sale were $2,880,000. The Company’s marketable securities represent 200,000 shares of commonstock of Stellent.  Such shares wereacquired on July 10, 2001, had a fair market value as of July 9, 2001aggregating $5,988,000 and were registered effective as of September 7, 2001with the Securities and Exchange Commission. We are dependent on the Stellentstock in order to meet our short-term liquidity needs.  As such, we believe, our Company’s futureperformance will be closely tied to the performance of Stellent.

 

Our current overallobjective is to focus on meeting current liquidity requirements in order to maximize shareholder value.  Our efforts in this regard have been significantly impaired bythe deteriorating market conditions resulting from the general decline ofbusiness conditions over the last year as evidenced by the decline in the valueof Stellent’s common stock.

 

In order to meetongoing obligations of the Company and transaction costs associated with thesale of certain assets of Stonehaven Technologies, as of September 30, 2001 aTrustee of the Company made a loan to the Company in the amount of $67,000 andsubsequent to September 30, 2001 an Officer of the Company made a loan to theCompany of approximately $100,000 and the Company sold 30,000 shares of commonstock of Stellent.  Additionally, theCompany has reserved 50,000 shares of

 

 

23

----

common stock ofStellent to meet its future obligations.

 

We intend to maintain andoperate our remaining commercial properties, which are 88.4% leased atSeptember 30, 2001, due to the expected cash flow results.  However, the cash flow from our propertiesis not expected to fully fund our future liquid requirements, including amongother factors, our ongoing general and administrative costs, tenantimprovements and our dividend commitment to our Class A Preferred shareholders.

 

We further intend to continue to operate as adocument management consulting and development company, however, in a much morelimited capacity. Since the sale of certain assets of Stonehaven Technologieson July 10, 2001, our ability to market our licensing agreements and otherrelated assets has been significantly impaired primarily due to the fact thatStellent has become an active competitor to our licensed technology.  Stellent and other competitors havesubstantially greater resources, financial and otherwise, than we do.

 

On October 22, 2001, the Company declared a dividend of $0.475 per sharewith respect to the Class A Preferred Shares. The dividend with respect to Class A Preferred Shares will be paid onNovember 19, 2001 to shareholders of record on November 5, 2001.

 

Wecontinue to explore and evaluate all available alternatives, including, amongothers, to buy or sell additional properties or assets, to develop andsell future technology products or expand through the acquisition of newtechnology products, to pursue additional or alternate financing, whether debtor equity, or to continue to meet theongoing dividend requirement of our Class A Preferred Shares.****  There can be no assurance that any of the alternatives will beadopted, or if adopted, will be successful. Additionally, we may determine not to adopt any additional businessinitiative.

 

On April 19, 2001, the Company declared a dividend of$0.475 per share with respect to the Class A Preferred Shares.  The dividend with respect to the Class APreferred Shares was paid on May 15, 2001 to shareholders of record on April30, 2001.

 

**Cash Flows**

 

During the nine month period ended September 30, 2001,the Company generated (i) approximately $594,000 from net cash proceeds inconnection with the disposition of Cold Springs and (ii) $67,000 from proceedsfrom related party note payable.  Thesecash flows coupled with our unrestricted cash funds were used primarily for(i) cash used in operating activities of approximately $33,000, includingpayments of minimum royalty on licensing agreement totaling $1,350,000; (ii)acquisition of and additions to real estate properties of approximately$43,000; (iii) acquisition of computer hardware, software and other fixedassets of approximately $64,000; (iv) acquisition of licensing agreements ofapproximately $300,000; (v) costs associated with the disposition ofcertain assets of Stonehaven Technologies of approximately $828,000; (vi)payments on mortgage loans and notes payable of approximately $77,000; and(vii) distributions to holders of Class A Preferred Shares of approximately$815,000.  As a result, the Company’scash balance decreased by approximately $1,499,000 from approximately$1,636,000 at December 31, 2000 to $137,000 at September 30, 2001.

 

**PART II.  OTHER INFORMATION**

 

ITEM 1.  LEGALPROCEEDINGS

 

OnDecember 29, 2000, Stonehaven notified Odeh Muhawesh, a Trustee of the Company,that it was suspending its payment to him under a promissory note assumed byStonehaven Technologies. Stonehaven Technologies assumed the payment obligationin February 2000 pursuant to the terms of the merger agreement between theCompany, Stonehaven Technologies and NETLink International, Inc. (“NETLink”), acompany founded and owned by Mr. Muhawesh whereby NETLink was merged

 

 

24

----

intoStonehaven Technologies. Management of the Company believes Mr. Muhawesh is indefault under the merger agreement for, among other things, failure by him tocause to be transferred to Stonehaven Technologies 5% of the issued andoutstanding stock of MyFreeDesk.com, Inc.

 

On January 8, 2001, Mr.Muhawesh filed a complaint against Stonehaven Technologies in the DistrictCourt of Hennepin County, Minnesota alleging that Stonehaven Technologiesfailed to pay him $350,000 on January 1, 2001 under the terms of a promissorynote. The Company has filed a counterclaim against Mr. Muhawesh requesting,among other things, the repayment of amounts previously paid to him under thepromissory note.  The parties areconducting discovery proceedings.

 

ITEM 2.  CHANGESIN SECURITIES

 

a.             None

 

b.             None

 

c.             None

 

d.             None

 

ITEM 3.  DEFAULTSUPON SENIOR SECURITIES

 

None

 

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS

 

The following matters were submitted to avote of security holders on November 8, 2001:

 
| (a)    |   | Meeting type and date:                           |   | Annual Meeting of  Shareholders, November 8, 2001 |
|--------|--------|--------------------------------------------------|--------|---------------------------------------------------|
|   |   |                                             |   |                                              |
| (b)    |   | Trustees elected at  meeting:                    |   | Paul T. Lambert                                   |
|   |   |                                             |   |                                              |
| (c)    |   | Description of each matter  voted on at meeting: |   |                                              |

 

Results of vote:
| Paul T. Lambert                  |   |      |
|----------------------------------|--------|-----------|
| For                              |   | 4,654,546 |
| Against or withheld              |   | 153,862   |
| Abstentions and broker non-votes |   | 2,018,246 |

 

ITEM 5.  OTHERINFORMATION

 

None

 

 

25

----

ITEM6.  EXHIBITS AND REPORTS ON FORM 8-K

 

**(a) Exhibits**

 
| **Exhibit**

**Number** |   | **Exhibit****Description** |   |
|-------------------------|--------|----------------------------|--------|

** **
| 3.1    |   | Declaration of Trust  (filed with the Company’s Registration Statement on Form SB-2 (Commission  File No. 33-82888C) and incorporated herein by reference)                                                                                                                                                                                                                                                                                                                            |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 3.2    |   | Bylaws of the Company  (filed with the Company’s Registration Statement on Form SB-2 (Commission  file No. 33-82888C) and incorporated herein by reference)                                                                                                                                                                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 3.3    |   | Articles of Amendment and  Restatement of the Declaration of Trust (filed as Exhibit E with the  Company’s Schedule 14A on November 6, 1998 and incorporated herein by  reference)                                                                                                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.1   |   | Agreement of Limited  Partnership of the Operating Partnership dated as of August 31, 1998 (filed  as Exhibit C with the Company’s Schedule 14A on November 6, 1998 and  incorporated herein by reference)                                                                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.2   |   | Contribution Agreement  between the Operating Partnership and WMC dated as of August 31, 1998 (filed  as Exhibit B with the Company’s Schedule 14A on November 6, 1998 and  incorporated herein by reference)                                                                                                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.3   |   | Master Registration Rights  Agreement dated as of August 31, 1998 (filed as Exhibit E of Exhibit C with  the Company’s Schedule 14A on November 6, 1998 and incorporated herein by  reference)                                                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.4   |   | Amended and Restated  Contribution Agreement between the Company, the Operating Partnership, AREE  and other limited partnership Unit recipients dated as of August 31, 1998  (filed as Exhibit A with the Company’s Schedule 14A on November 6, 1998 and  incorporated herein by reference)                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.5   |   | Purchase Agreement by and  between Maple Grove Apartment Homes, Inc. and The Shelard Group, Inc., dated  July 2, 1999 (filed with the Company’s Current Report on Form 8-K on November  23, 1999 and incorporated herein by reference)                                                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.6   |   | Agreement and Plan of  Reorganization dated as of February 25, 2000, by and among the Company, NTLI  Acquisition Corporation, a Delaware corporation, NETLink International, Inc.,  a Minnesota corporation and Odeh A. Muhawesh, Mary Henschel, Alan Schmidt,  Ahmad Yassine, Patrick Archbold, Ann Wessels, Art Carruth, Patricia Hewitt,  Thomas walker and Sherry Ajax (filed as Exhibit 2.2 with the Company’s Form  8-K on March 17, 2000 and incorporated herein by reference) |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.7   |   | Contribution Agreement  between Wellington Partners, L.P., the Company and Plymouth Partners II, LLC  and other LP Unit Recipients dated as of February 29, 2000 (filed as Exhibit  2.3 with the Company’s Form 8-K on March 17, 2000 and incorporated herein by  reference)                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

 

26

----

 
|   |   |                                                                                                                                                                                                                                                                                                                                       |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.8   |   | Stock Exchange Agreement  between the Company and Wellington Management Corporation effective June 30,  2000 (filed with the Company’s Current Report on Form 8-K on July 14, 2000  and incorporated herein by reference)                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                       |
| 10.9   |   | Exclusive Agency and  Representation Agreement between RESoft, Inc. and Venture One Real Estate,  LLC (filed with the Company’s Quarterly Report for the period September 30,  2000 on Form 10-QSB filed on November 14, 2000 and incorporated herein by  reference)                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                       |
| 10.10  |   | Membership Unit Purchase  Agreement dated December 29, 2000, between the Company, Wellington Properties  Investments, L.P., and Steven B. Hoyt, Bruce K. Hoyt, Donald Ringrose, and  Richard Wolsfeld (filed with the Company’s Current Report as Exhibit 10.1 on  Form 8-K on January 16, 2001 and incorporated herein by reference) |
|   |   |                                                                                                                                                                                                                                                                                                                                       |
| 10.11  |   | Purchase Agreement between  CSC of Minnesota, LLC and IRET Properties dated January 8, 2001. (filed with  the Company’s Quarterly Report for the period June 30, 2001 on Form 10-QSB  filed August 14, 2001)                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                       |
| 10.12  |   | Asset Purchase Agreement  between the Company, RESoft, Inc., and IntraNet Solutions, Inc. (filed with  the Company’s Current Report Form 8-K filed on July 18, 2001 and incorporated  herein by reference)                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                       |
| 10.13  |   | Termination Agreement  between RESoft, Inc. and Venture One Real Estate, LLC (filed with the  Company’s Current Report Form 8-K filed on July 18, 2001 and incorporated  herein by reference)                                                                                                                                         |

 

**(b) Reports On Form 8-K**

 

During the three months ended September 30, 2001 andthrough March 18, 2002, the Company filed the following report:

 

On July 18, 2001, the Company reported the sale of StonehavenTechnologies Inc.’s (formerly RESoft, Inc.) interest in SmartCabinet softwarecode (software technology replicating and mapping a company’s business logic inweb base format) and related assets including its REDocs initiatives, toStellent, Inc. (formerly IntraNet Solutions, Inc.).

 

 

 

**SIGNATURES**

 

In accordance with the requirements of the Exchange Act,the registrant caused this report to be signed on its behalf by theundersigned, thereunto duly authorized.

 
|                 | Stonehaven Realty Trust |                                                             |
|----------------------|-------------------------|------------------------------------------------------------------|
|                 | By:                     | /s/ Duane H. Lund                                                |
| Date: March 18, 2002 |                    | Duane H. Lund*Chief Executive Officer  Chief Accounting Officer* |

 

 

 

27