10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2014

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number 001-15409

PARAGON REAL ESTATE EQUITY AND INVESTMENT TRUST

(Exact name of registrant as specified in its charter)

Maryland	39-6594066
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

10011 Valley Forge Drive

Houston, Texas 77042

(Address of principal executive offices)

(440) 283-6319

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every interactive data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [  ] No [X]

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

Large accelerated filer [  ]	Accelerated filer [  ]
Non-accelerated filer   [  ]	Smaller reporting company [X]

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [X] No [  ]

The number of the registrant’s Common Shares outstanding as of April 7, 2014, was 405,096.

FORM 10-Q

INDEX

PART I. Financial Information
	Item 1. Financial Statements
	Condensed Consolidated Balance Sheets – March 31, 2014 (unaudited) and December 31, 2013	F-1
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) – Three months ended March 31, 2014 (unaudited) and March 31, 2013 (unaudited)	F-2
	Condensed Consolidated Statements of Cash Flows – Three months ended March 31, 2014 (unaudited) and March 31, 2013 (unaudited)	F-3
	Notes to Condensed Consolidated Financial Statements (unaudited)	F-4
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
	Item 4. Controls and Procedures	7
Part II. Other Information
	Item 1. Legal Proceedings	8
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	8
	Item 3. Defaults upon Senior Securities	8
	Item 5. Other Information	8
	Item 6. Exhibits	8
	Signatures	9

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PART I. Financial Information

Item 1. Financial Statements.

Paragon Real Estate Equity and Investment Trust

Condensed Consolidated Balance Sheets

March 31, 2014 and December 31, 2013

	March 31, 2014			December 31, 2013
	(unaudited)
Assets
Cash	$	11,331		$	9,643
Marketable securities		57,375			77,374
Other assets		6,496			8,826
Total Assets	$	75,202		$	95,843
Liabilities and Shareholders’ Equity
Liabilities:
Accounts payable and accrued expenses	$	2,333		$	833
Total liabilities		2,333			833
Commitments and Contingencies
Shareholders’ equity:
Preferred A Shares – $0.01 par value, 10,000,000 authorized: 258,236 Class A cumulative convertible shares issued and outstanding, $10.00 per share liquidation preference		2,583			2,583
Preferred C Shares – $0.01 par value, 300,000 authorized: 244,444 Class C cumulative convertible shares issued and outstanding, $10.00 per share liquidation preference		2,444			2,444
Common Shares - $0.01 par value, 100,000,000 authorized: 443,226 shares issued and 405,096 outstanding.		4,051			4,051
Additional paid-in capital		28,146,971			28,146,971
Accumulated deficit		(27,282,445	)		(27,260,304	)
Treasury stock, at cost, 38,130 shares		(800,735	)		(800,735	)
Total shareholders’ equity		72,869			95,010
Total Liabilities and Shareholders’ Equity	$	75,202		$	95,843

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

F-1

Paragon Real Estate Equity and Investment Trust
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(unaudited)

	For the three months ended March 31,
	2014			2013
Revenues
Interest/dividend income	$	2		$	446
Total revenues		2			446
Expenses
General and administrative		22,142			21,303
Total expenses		22,142			21,303
Income (loss) from operations		(22,140	)		(20,857	)
Gain (loss) on sale of marketable securities		--			2,773
Net income (loss) attributable to Common Shareholders		(22,140	)		(18,084	)
Net income (loss) attributable to Common Shareholders per Common Share: Basic and Diluted	$	(.05	)	$	(.04	)
Weighted average number of Common Shares outstanding: Basic and Diluted		405,096			405,096
Comprehensive income (loss):
Net income (loss)	$	(22,140	)	$	(18,084	)
Other comprehensive income (loss):
Reclassification adjustment for realized (gain) loss on sale of marketable securities		--			(2,773	)
Unrealized gain (loss) on marketable securities		--			7,794
Comprehensive income (loss)	$	(22,140	)	$	(13,063	)

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

F-2

Paragon Real Estate Equity and Investment Trust
Condensed Consolidated Statements of Cash Flows

(unaudited)

	For the three months ended March 31,
	2014			2013
Cash flows from operating activities:
Net income (loss)	$	(22,140	)	$	(18,084	)
Adjustments to reconcile net income (loss) to net cash used in continuing operations:
(Gain) loss on sale of marketable securities		--			(2,773	)
Net change in operating assets and liabilities:
Other assets		2,330			2,286
Accounts payable and accrued expenses		1,500			11,000
Net cash from (used for) continuing operations		(18,310	)		(7,571	)
Cash flows from investing activities:
Cash used for the purchase of marketable securities		(2	)		(53,967	)
Proceeds from the sale of marketable securities		20,000			76,341
Net cash from (used for) investing activities		19,998			22,374
Cash flows from financing activities:
Net cash from (used for) financing activities		--			--
Net increase (decrease) in cash		1,688			14,803
Cash
Beginning of period		9,643			15,337
End of period	$	11,331		$	30,140

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

F-3

Paragon Real Estate Equity and Investment Trust
Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 1 – Organization

Paragon Real Estate Equity and Investment Trust (the “Company,” “Paragon,” “we,” “our,” or “us”) is a Maryland shell corporation primarily focused on maintaining its corporate existence and SEC reporting history to enable it, in the future, to raise additional capital and make real estate investments. Future real estate investments may include acquisition and development of retail, office, office warehouse, industrial, multifamily, hotel, other commercial properties, acquisition of or merger with a REIT or real estate operating company and joint venture investments. Excess funds are invested in an insured deposit account at a securities brokerage firm.

Note 2 – Basis of Presentation

Condensed Consolidated Financial Statement Presentation

We have prepared the condensed consolidated financial statements without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. However, we believe that the included disclosures are adequate to make the information presented not misleading. In our opinion, all adjustments (consisting solely of normal recurring items) necessary for a fair presentation of our financial position as of March 31, 2014, the results of our operations for the three month periods ended March 31, 2014 and 2013, and of our cash flows for the three month periods ended March 31, 2014 and 2013 have been included. The results of operations for interim periods are not necessarily indicative of the results for a full year. For further information, please see our consolidated financial statements and footnotes included in the Annual Report on Form 10-K for the year ended December 31, 2013.

The Company presents its financial statements on a consolidated basis because it combines its accounts with a wholly-owned subsidiary that ceased operations in 2002. All significant intercompany transactions are eliminated in consolidation.

Going Concern

The financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the continued operations as a public company and paying liabilities in the normal course of business. The Company is being maintained as a corporate shell that is current in its SEC filings. Operations consist only of investment of cash in an insured deposit account at a securities brokerage firm at the present time, and previously, on a temporary basis, in publicly traded real estate companies, while management and the board evaluate real estate opportunities to put into the Company or decide to sell the entity to a party that needs a public shell.

At March 31, 2014, our cash in the operating account was $11,331. The increase in cash during the first three months of 2014 was $1,688. In the first three months of 2014, we transferred $20,000 to the operating account from the insured deposit account at the securities brokerage firm. The cash in both the operating account and the insured deposit account is available to pay expenses to keep the Company currently filed as a public company. Expenses, such as salaries and rent, have been eliminated so that the only expenses being incurred are to keep the Company current in its SEC filings, such as accounting and audit fees. Our ability to continue as a going concern will be dependent upon acquiring assets to generate cash flow because our investment of cash in an insured deposit account is our only revenue generating asset and will not generate enough cash flow to allow us to continue as a going concern.

F-4

There can be no assurance that the Company will be able to acquire an operating company, be acquired by or merge with another company, raise capital or otherwise continue to exist as a going concern. Even if our management is successful in closing a transaction, investors may not value the transaction in the same manner as we did, and investors may not value the transaction as they would value other transactions or alternatives. Failure to obtain external sources of capital and complete a transaction will materially and adversely affect the Company’s ability to continue operations.

Note 3 – Marketable Securities

All of the Company’s investments in marketable securities were sold during the first quarter of 2013 and the funds were deposited in an insured deposit account at a securities brokerage firm.

As of March 31, 2014, our marketable securities had a fair market value of $57,375 and was in the form of cash in an insured deposit account at the brokerage firm. The $2 of income received was deposited into the insured deposit account at the securities brokerage firm and we transferred $20,000 from that account to the operating account in the first three months of 2014.

The Company recognizes gain or loss on the sale of marketable securities based upon the first-in-first-out method. During the three month period ended March 31, 2013, the Company sold $76,341 of marketable securities having a cost basis of $73,568 and recorded a gain of $2,773. The proceeds of $76,341 were deposited into an insured deposit account at a securities brokerage firm. The Company transferred $23,000 to the operating account and the difference of $53,341 plus the dividends earned on the marketable securities during the first quarter of 2013 of $626, for a total of $53,967, are shown as purchases in marketable securities.

Note 4 – Loss Per Share

Net loss per weighted average common share outstanding—basic and diluted are computed based on the weighted average number of common shares outstanding for the period. The weighted average number of common shares outstanding for the three months ended March 31, 2014 and March 31, 2013 were 405,096. Common share equivalents of 2,448,892 as of March 31, 2014 and March 31, 2013 include outstanding Class A Convertible Preferred Shares and Class C Convertible Preferred Shares and are not included in net loss per weighted average common share outstanding—diluted as they would be anti-dilutive.

Note 5 – Fair Value Measurements

Except for those assets and liabilities which are required by authoritative accounting guidance to be recorded at fair value in our Condensed Consolidated Balance Sheets, we have elected not to record any other assets or liabilities at fair value. No events occurred during the first three months of 2014 which would require adjustment to the recognized balances of assets or liabilities which are recorded at fair value on a nonrecurring basis.

F-5

The following table provides information on those assets and liabilities measured at fair value on a recurring basis.

	Fair Value Measurement Using
		Level 1	Level 2	Level 3
Marketable Securities
March 31, 2014:
Cash Insured Deposits	$	57,375
Total March 31, 2014	$	57,375
December 31, 2013:
Cash Insured Deposits	$	77,374
Total December 31, 2013	$	77,374

The fair value of the marketable securities is based on the amount of cash in an insured deposit account at the brokerage firm.

F-6

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

Overview

Paragon Real Estate Equity and Investment Trust (the “Company,” “Paragon,” “we,” “our,” or “us”) is a Maryland shell corporation primarily focused on maintaining its corporate existence and SEC reporting history to enable it, in the future, to raise additional capital and make real estate investments. Future real estate investments may include acquisition and development of retail, office, office warehouse, industrial, multifamily, hotel, other commercial properties, acquisition of or merger with a REIT or real estate operating company and joint venture investments.

Presently, the Company is a corporate shell, current in its SEC filings, that may be used in the future for real estate opportunities or sold to another company. Because our cash and other liquid assets are not sufficient to allow us to continue operations, we have been reviewing other alternatives, including seeking additional investors or pursuing a business combination that would result in additional capitalization of the Company. There can be no assurance that we will be able to close a transaction or keep the Company currently filed with the SEC. Even if our management is successful in closing a transaction, investors may not value the transaction or the current filing status with the SEC in the same manner as we did, and investors may not value the transaction as they would value other transactions or alternatives. Failure to obtain external sources of capital will materially and adversely affect the Company’s ability to continue operations, as well as its liquidity and financial results.

Brief History

Paragon was formed on March 15, 1994 as a Maryland real estate investment trust (“REIT”).We operated as a traditional REIT by buying, selling, owning and operating commercial and residential properties through December 31, 1999.In 2000, the Company purchased a software technology company, resulting in the Company not meeting the Internal Revenue Code qualifications to be a REIT for federal tax purposes. In 2002, the Company ceased operating the technology segment.

Forward-Looking Information

This report on Form 10-Q contains “forward-looking” statements for the purposes of the Securities Act of 1933 and the Securities Exchange Act of 1934, and these statements and/or ownership of our securities may involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance, and achievements of the Company to be materially different from results, performance or achievements expressed or implied by such forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, there can be no assurance that these expectations will be realized. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events. Factors that could cause actual results to differ materially from management’s current expectations include, but are not limited to, our failure to obtain adequate financing to continue our operations, changes in general economic conditions, changes in real estate conditions, fluctuations in market prices if we invest, on a temporary basis, in publicly traded real estate companies, changes in prevailing interest rates, changes in our current filing status with the SEC, the cost or general availability of equity and debt financing, failure to acquire properties in accordance with our value added strategy, unanticipated costs associated with the acquisition and integration of our acquisitions, our ability to obtain adequate insurance for terrorist acts, and potential liability under environmental or other laws. For further information, refer to our consolidated financial statements and footnotes included in the Annual Report on Form 10-K for the year ended December 31, 2013.

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The following is a discussion of our results of operations for the three month periods ended March 31, 2014 and 2013 and financial condition, including:

● Explanation of changes in the results of operations in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three month period ended March 31, 2014 compared to the three month period ended March 31, 2013.

● Our critical accounting policies and estimates that require our subjective judgment and are important to the presentation of our financial condition and results of operations.

● Our primary sources and uses of cash for the three month periods ended March 31, 2014 and March 31, 2013, and how we intend to generate cash for long-term capital needs.

● Our current income tax status.

The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and notes thereto appearing elsewhere herein.

Results of Operations

Comparison of the Three Month Periods Ended March 31, 2014 and 2013

Revenues from Operations

Total revenues decreased $444 from $446 for the three month period ended March 31, 2013 to $2 for the three month period ended March 31, 2014. This decrease was the result of decreased amounts invested in publicly traded real estate companies paying dividends. The Company sold its investments in marketable securities during the first quarter of 2013 and is investing its funds in an insured deposit account at a securities brokerage firm.

Expenses from Operations

Total expenses, comprised of general and administrative expenses, increased $839 from $21,303 for the three month period ended March 31, 2013 to $22,142 for the three month period ended March 31, 2014. This net increase is the result of increased accounting and directors and officers liability insurance expenses of $1,973 offset by decreased legal fees, public company filing fees, and miscellaneous expenses of $1,134.

Loss from Operations

As a result of the above, the loss from operations increased $1,283 from $20,857 for the three month period ended March 31, 2013 to $22,140 for the three month period ended March 31, 2014.

Gain/Loss on Sale of Marketable Securities

In the three month period ended March 31, 2014, investments in marketable securities was cash in an insured deposit account at a securities brokerage firm. While we transferred $20,000 from this account to the operating account in the three month period ended March 31, 2014, there was no gain or loss.

In the three month period ended March 31, 2013, we sold 3,325 shares of marketable securities of eight companies for $76,341, which had a cost basis of $73,568, and recorded a gain on the sale of marketable securities of $2,773.

Net Loss Attributable to Common Shareholders

As a result of the above, we had a net loss attributable to Common Shareholders of $22,140 for the three month period ended March 31, 2014 compared to a net loss attributable to Common Shareholders of $18,084 for the three month period ended March 31, 2013, an increase in net loss of $4,056.

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Critical Accounting Policies and Estimates

Our Condensed Consolidated Financial Statements are prepared in accordance with generally accepted accounting principles, which require us to make certain estimates and assumptions. A summary of our significant accounting policies is provided in Note 3 included in our Annual Report on Form 10-K for the year ended December 31, 2013. The following section is a summary of certain aspects of those accounting policies that both require our most subjective judgment and are most important to the presentation of our financial condition and results of operations. It is possible that the use of different estimates or assumptions in making these judgments could result in materially different amounts being reported in our Condensed Consolidated Financial Statements.

Valuation Allowance of Deferred Tax Asset

We account for income taxes using the liability method under which deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the period in which the differences are expected to affect taxable income. At March 31, 2014, we have a net operating loss and at December 31, 2013, we had net operating loss carry forwards totaling $2,450,000. While these losses created a deferred tax asset, a valuation allowance was applied against this asset because of the uncertainty of whether we will be able to use these loss carry forwards, which will expire in varying amounts through the year 2033.

We and our subsidiary are also subject to certain state and local income, excise and franchise taxes. The provision for state and local taxes has been reflected in general and administrative expense in the consolidated statements of operations and has not been separately stated due to its insignificance.

Liquidity and Capital Resources

Cash provided by operations, equity transactions, and borrowings from affiliates and lending institutions have generally provided the primary sources of liquidity to the Company. Historically, the Company has used these sources to fund operating expenses, satisfy its debt service obligations and fund distributions to shareholders. Presently, we are dependent on our existing cash, which was provided by three independent trustees contributing $500,000 in exchange for Class C Convertible Preferred Shares to maintain the Company as a corporate shell current in its SEC filings so that it may be used in the future for real estate transactions or sold to another company. We have kept the public entity available for value-added real estate opportunities, including acquisition and development of retail, office, office warehouse, industrial, multifamily, hotel, other commercial properties, acquisition of or merger with a REIT or real estate operating company, and joint venture investments. Excess funds are invested in an insured deposit account at a securities brokerage firm.

To further conserve cash, in 2006 each trustee signed a restricted share agreement with the Company to receive a total of 12,500 restricted Class C Convertible Preferred Shares in lieu of receiving fees in cash for service as a trustee for the two years ending September 29, 2008. The service period ending date and vesting period date for those agreements have been extended to September 30, 2014. Additionally, in 2006, James C. Mastandrea, our President, Chief Executive Officer, and Chairman of the Board of Trustees of the Company, signed a subscription agreement to purchase 44,444 restricted Class C Convertible Preferred Shares. The consideration for the purchase was Mr. Mastandrea’s services as an officer of Paragon until September 29, 2008. The service period ending date and vesting period date for this agreement have been extended to September 30, 2014, though the shares were fully amortized by the original date in 2008. Based on our current rate of operating expenses, we believe we can continue to maintain the Company as a corporate shell current in its SEC filings for approximately four quarters without raising additional capital.

Cash Flows

At March 31, 2014, our cash was $11,331 and an insured deposit account at a securities brokerage firm was $57,375. We are dependent on our existing cash, contributed by three independent trustees in exchange for Class C Convertible Preferred Shares, to meet our liquidity needs because we do not have cash from operations to meet our operating requirements. The cash in both the operating account and the insured deposit account is available to pay expenses to keep the Company current in its SEC filings.

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During the first quarter of 2013, we sold our investments in marketable securities for $76,341, which was deposited in an insured deposit account at a securities brokerage firm. During the three months ended March 31, 2014, we transferred $20,000 to the operating account. During the twelve months ended December 31, 2013, we transferred $53,000 to the operating account.

Future Obligations

Because the Company is a corporate shell that may be used in the future for real estate transactions or sold to another company, we have no cash from operations and have reduced our day-to-day overhead expenses and material future obligations. We have reduced overhead expenses by issuing stock for our CEO’s salary and trustee fees, placed our other employee on a part-time unpaid basis, and have not replaced employees who have left. We have eliminated our office space and rent, and reduced the use of outside consultants, negotiating discounts on prices wherever possible, and foregoing other expenses.

Long Term Liquidity and Operating Strategies

Our cash of $11,331 and our insured deposit account at a securities brokerage firm of $57,375 is sufficient to meet only the Company’s anticipated short-term obligations. We historically have financed our long term capital needs, including acquisitions, from borrowings from new loans; additional equity issuances of our common and preferred shares; and proceeds from the sales of our real estate, a technology segment, and marketable securities.

Because our unrestricted cash is not sufficient to allow us to continue operations, we have been reviewing other alternatives, including selling the corporate entity and seeking additional investors. In 2006 and 2007, the Company received total payments of $500,000 from three independent trustees for payment of Class C Convertible Preferred Shares. These funds have been and continue to be used to maintain Paragon as a corporate shell current in its SEC filings while it searches for and reviews other value added real estate opportunities. Excess funds are invested in cash in an insured deposit account at a securities brokerage firm. There can be no assurances that the Company will be able to maintain its current filing status or successfully close a future transaction.

Current Tax Status

At March 31, 2014, we have a net operating loss, and at December 31, 2013, we had net operating loss carry forwards totaling $2,450,000. While the losses created a deferred tax asset, a valuation allowance was applied against the asset because of the uncertainty of whether we will be able to use these loss carry forwards, which will expire in varying amounts through the year 2033. In the event of a change of ownership of the Company, our ability (or the ability of any company that acquires or merges with us) to use our net operating loss carryover will be limited by federal tax regulations.

We and our subsidiary are also subject to certain state and local income, excise and franchise taxes. The provision for state and local taxes has been reflected in general and administrative expense in the consolidated statements of operations and has not been separately stated due to its insignificance.

Interest Rates and Inflation

We were not significantly affected by inflation during the periods presented in this report due primarily to the relative low nationwide inflation rates and the Company being a corporate shell with minimal expenses.

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Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have, or are likely to have, a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

ITEM 4. CONTROLS AND PROCEDURES

As of March 31, 2014, the date of this report, James C. Mastandrea, our Chairman of the Board, Chief Executive Officer and President, and John J. Dee, our Chief Financial Officer and Senior Vice President, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rule 13a – 15(e) under the Securities Exchange Act of 1934, as amended. Based on this evaluation, Mr. Mastandrea and Mr. Dee each concluded that, as of March 31, 2014, our disclosure controls and procedures are effective.

Further, there was no change during the three months ended March 31, 2014 in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

Exhibits

Exhibit Number	Exhibit Description
31.1	Section 302 Certification pursuant to the Sarbanes-Oxley Act of 2002 – Chief Executive Officer
31.2	Section 302 Certification pursuant to the Sarbanes-Oxley Act of 2002 – Chief Financial Officer
32.1	CEO/CFO Certification under Section 906 of Sarbanes-Oxley Act of 2002.
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document

* The following financial information of the Registrant for the quarter ended March 31, 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets (unaudited), (ii) Condensed Consolidated Statements of Operations and Comprehensive Income (unaudited), (iii) Condensed Consolidated Statements of Cash Flows (unaudited), and (iv) Notes to Condensed Consolidated Financial Statements (unaudited).

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SIGNATURES

In accordance with the requirements of the Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Paragon real estate equity and investment trust
	By:	/s/ James C. Mastandrea
Date: April 18, 2014		James C. Mastandrea Chief Executive Officer (Principal executive officer)

	Paragon real estate equity and investment trust
	By:	/s/ John J. Dee
Date: April 18, 2014		John J. Dee Chief Financial Officer (Principal financial and accounting officer)

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EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, James C. Mastandrea, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Paragon Real Estate Equity and Investment Trust (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of trustees (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: April 18, 2014

By:	/s/ James C. Mastandrea
	James C. Mastandrea
	Chairman of the Board, Chief Executive Officer and President
	(Principal executive officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John J. Dee, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Paragon Real Estate Equity and Investment Trust (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of trustees (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: April 18, 2014

By:	/s/ John J. Dee
	John J. Dee
	Chief Financial Officer and Senior Vice President
	(Principal financial officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the filing of the Quarterly Report of Paragon Real Estate Equity and Investment Trust (the “Company”) on Form 10-Q for the period ending March 31, 2014 (the “Report”) with the Securities and Exchange Commission, I, James C. Mastandrea, Chairman of the Board, Chief Executive Officer and President and I, John J. Dee, Chief Financial Officer and Senior Vice President, of the Company, certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

	Paragon real estate equity and investment trust
	By:	/s/ James C. Mastandrea
Date: April 18, 2014		James C. Mastandrea Chairman of the Board, Chief Executive Officer and President

	Paragon real estate equity and investment trust
	By:	/s/ John J. Dee
Date: April 18, 2014		John J. Dee Chief Financial Officer and Senior Vice President

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Loss Per Share

3 Months Ended

Mar. 31, 2014

Earnings Per Share [Abstract]

Loss Per Share

Note 4 – Loss Per Share

Net loss per weighted average common share outstanding—basic and diluted are computed based on the weighted average number of common shares outstanding for the period. The weighted average number of common shares outstanding for the three months ended March 31, 2014 and March 31, 2013 were 405,096. Common share equivalents of 2,448,892 as of March 31, 2014 and March 31, 2013 include outstanding Class A Convertible Preferred Shares and Class C Convertible Preferred Shares and are not included in net loss per weighted average common share outstanding—diluted as they would be anti-dilutive.

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Marketable Securities

3 Months Ended

Mar. 31, 2014

Marketable Securities [Abstract]

Marketable Securities

Note 3 – Marketable Securities

All of the Company’s investments in marketable securities were sold during the first quarter of 2013 and the funds were deposited in an insured deposit account at a securities brokerage firm.

As of March 31, 2014, our marketable securities had a fair market value of $57,375 and was in the form of cash in an insured deposit account at the brokerage firm. The $2 of income received was deposited into the insured deposit account at the securities brokerage firm and we transferred $20,000 from that account to the operating account in the first three months of 2014.

The Company recognizes gain or loss on the sale of marketable securities based upon the first-in-first-out method. During the three month period ended March 31, 2013, the Company sold $76,341 of marketable securities having a cost basis of $73,568 and recorded a gain of $2,773. The proceeds of $76,341 were deposited into an insured deposit account at a securities brokerage firm. The Company transferred $23,000 to the operating account and the difference of $53,341 plus the dividends received on the marketable securities during the first quarter of 2013 of $626, for a total of $53,967, are shown as purchases in marketable securities.

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Condensed Consolidated Balance Sheets (USD $)	Mar. 31, 2014	Dec. 31, 2013
Assets
Cash	$ 11,331	$ 9,643
Marketable securities	57,375	77,374
Other assets	6,496	8,826
Total Assets	75,202	95,843
Liabilities:
Accounts payable and accrued expenses	2,333	833
Total liabilities	2,333	833
Shareholders' equity:
Preferred shares value
Common Shares - $0.01 par value, 100,000,000 authorized: 443,226 shares issued and 405,096 outstanding.	4,051	4,051
Additional paid-in capital	28,146,971	28,146,971
Accumulated deficit	(27,282,445)	(27,260,304)
Treasury stock, at cost, 38,130 shares	(800,735)	(800,735)
Total shareholders' equity	72,869	95,010
Total Liabilities and Shareholders' Equity	75,202	95,843
Redeemable Convertible Series A Preferred Stock [Member]
Shareholders' equity:
Preferred shares value	2,583	2,583
Redeemable Convertible Series C Preferred Stock [Member]
Shareholders' equity:
Preferred shares value	$ 2,444	$ 2,444

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Organization

3 Months Ended

Mar. 31, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization

Note 1 – Organization

Paragon Real Estate Equity and Investment Trust (the “Company,” “Paragon,” “we,” “our,” or “us”) is a Maryland shell corporation primarily focused on maintaining its corporate existence and SEC reporting history to enable it, in the future, to raise additional capital and make real estate investments. Future real estate investments may include acquisition and development of retail, office, office warehouse, industrial, multifamily, hotel, other commercial properties, acquisition of or merger with a REIT or real estate operating company and joint venture investments. Excess funds are invested in an insured deposit account at a securities brokerage firm.

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Basis of Presentation

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Basis of Presentation

Note 2 – Basis of Presentation

Condensed Consolidated Financial Statement Presentation

We have prepared the condensed consolidated financial statements without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. However, we believe that the included disclosures are adequate to make the information presented not misleading. In our opinion, all adjustments (consisting solely of normal recurring items) necessary for a fair presentation of our financial position as of March 31, 2014, the results of our operations for the three month periods ended March 31, 2014 and 2013, and of our cash flows for the three month periods ended March 31, 2014 and 2013 have been included. The results of operations for interim periods are not necessarily indicative of the results for a full year. For further information, please see our consolidated financial statements and footnotes included in the Annual Report on Form 10-K for the year ended December 31, 2013.

The Company presents its financial statements on a consolidated basis because it combines its accounts with a wholly-owned subsidiary that ceased operations in 2002. All significant intercompany transactions are eliminated in consolidation.

Going Concern

The financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the continued operations as a public company and paying liabilities in the normal course of business. The Company is being maintained as a corporate shell that is current in its SEC filings. Operations consist only of investment of cash in an insured deposit account at a securities brokerage firm at the present time, and previously, on a temporary basis, in publicly traded real estate companies, while management and the board evaluate real estate opportunities to put into the Company or decide to sell the entity to a party that needs a public shell.

At March 31, 2014, our cash in the operating account was $11,331. The increase in cash during the first three months of 2014 was $1,688. In the first three months of 2014, we transferred $20,000 to the operating account from the insured deposit account at the securities brokerage firm. The cash in both the operating account and the insured deposit account is available to pay expenses to keep the Company currently filed as a public company. Expenses, such as salaries and rent, have been eliminated so that the only expenses being incurred are to keep the Company current in its SEC filings, such as accounting and audit fees. Our ability to continue as a going concern will be dependent upon acquiring assets to generate cash flow because our investment of cash in an insured deposit account is our only revenue generating asset and will not generate enough cash flow to allow us to continue as a going concern.

There can be no assurance that the Company will be able to acquire an operating company, be acquired by or merge with another company, raise capital or otherwise continue to exist as a going concern. Even if our management is successful in closing a transaction, investors may not value the transaction in the same manner as we did, and investors may not value the transaction as they would value other transactions or alternatives. Failure to obtain external sources of capital and complete a transaction will materially and adversely affect the Company’s ability to continue operations.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	443,226	443,226
Common stock, shares outstanding	405,096	405,096
Treasury stock, at cost, shares	38,130	38,130
Redeemable Convertible Series A Preferred Stock [Member]
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	258,236	258,236
Preferred stock, shares outstanding	258,236	258,236
Preferred stock, liquidation preference	$ 10.00	$ 10.00
Redeemable Convertible Series C Preferred Stock [Member]
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	300,000	300,000
Preferred stock, shares issued	244,444	244,444
Preferred stock, shares outstanding	244,444	244,444
Preferred stock, liquidation preference	$ 10.00	$ 10.00

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Document and Entity Information	3 Months Ended
	Mar. 31, 2014	Apr. 07, 2014
Document And Entity Information
Entity Registrant Name	PARAGON REAL ESTATE EQUITY & INVESTMENT TRUST
Entity Central Index Key	0000928953
Document Type	10-Q
Document Period End Date	Mar. 31, 2014
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		405,096
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2014

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Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Revenues
Interest/dividend income	$ 2	$ 446
Total revenues	2	446
Expenses
General and administrative	22,142	21,303
Total expenses	22,142	21,303
Income (loss) from operations	(22,140)	(20,857)
Gain (loss) on sale of marketable securities		2,773
Net income (loss) attributable to Common Shareholders	(22,140)	(18,084)
Net income (loss) attributable to Common Shareholders per Common Share: Basic and Diluted	$ (0.05)	$ (0.04)
Weighted average number of Common Shares outstanding: Basic and Diluted	405,096	405,096
Comprehensive income (loss):
Net income (loss)	(22,140)	(18,084)
Other comprehensive income (loss):
Reclassification adjustment for realized (gain) loss on sale of marketable securities		(2,773)
Unrealized gain (loss) on marketable securities		7,794
Comprehensive income (loss)	$ (22,140)	$ (13,063)

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2014

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The following table provides information on those assets and liabilities measured at fair value on a recurring basis.

	Fair Value Measurement Using
		Level 1	Level 2	Level 3
Marketable Securities
March 31, 2014:
Cash Insured Deposits	$	57,375
Total March 31, 2014	$	57,375
December 31, 2013:
Cash Insured Deposits	$	77,374
Total December 31, 2013	$	77,374

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Basis of Presentation (Policies)

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Condensed Consolidated Financial Statement Presentation

Condensed Consolidated Financial Statement Presentation

We have prepared the condensed consolidated financial statements without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. However, we believe that the included disclosures are adequate to make the information presented not misleading. In our opinion, all adjustments (consisting solely of normal recurring items) necessary for a fair presentation of our financial position as of March 31, 2014, the results of our operations for the three month periods ended March 31, 2014 and 2013, and of our cash flows for the three month periods ended March 31, 2014 and 2013 have been included. The results of operations for interim periods are not necessarily indicative of the results for a full year. For further information, please see our consolidated financial statements and footnotes included in the Annual Report on Form 10-K for the year ended December 31, 2013.

The Company presents its financial statements on a consolidated basis because it combines its accounts with a wholly-owned subsidiary that ceased operations in 2002. All significant intercompany transactions are eliminated in consolidation.

Going Concern

Going Concern

The financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the continued operations as a public company and paying liabilities in the normal course of business. The Company is being maintained as a corporate shell that is current in its SEC filings. Operations consist only of investment of cash in an insured deposit account at a securities brokerage firm at the present time, and previously, on a temporary basis, in publicly traded real estate companies, while management and the board evaluate real estate opportunities to put into the Company or decide to sell the entity to a party that needs a public shell.

At March 31, 2014, our cash in the operating account was $11,331. The increase in cash during the first three months of 2014 was $1,688. In the first three months of 2014, we transferred $20,000 to the operating account from the insured deposit account at the securities brokerage firm. The cash in both the operating account and the insured deposit account is available to pay expenses to keep the Company currently filed as a public company. Expenses, such as salaries and rent, have been eliminated so that the only expenses being incurred are to keep the Company current in its SEC filings, such as accounting and audit fees. Our ability to continue as a going concern will be dependent upon acquiring assets to generate cash flow because our investment of cash in an insured deposit account is our only revenue generating asset and will not generate enough cash flow to allow us to continue as a going concern.

There can be no assurance that the Company will be able to acquire an operating company, be acquired by or merge with another company, raise capital or otherwise continue to exist as a going concern. Even if our management is successful in closing a transaction, investors may not value the transaction in the same manner as we did, and investors may not value the transaction as they would value other transactions or alternatives. Failure to obtain external sources of capital and complete a transaction will materially and adversely affect the Company’s ability to continue operations.

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Loss Per Share (Details Narrative)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Earnings Per Share [Abstract]
Weighted average number of Common Shares outstanding: Basic and Diluted (in Shares)	405,096	405,096
Common share equivalents excluded from EPS calculation due to antidilutive effect	2,448,892	2,448,892

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Basis of Presentation (Details Narrative) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013	Dec. 31, 2012
Accounting Policies [Abstract]
Cash	$ 11,331	$ 30,140	$ 9,643	$ 15,337
Net increase (decrease) in cash	1,688	14,803
Proceeds from the sale of marketable securities	$ 20,000	$ 76,341

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Marketable Securities (Details Narrative) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Marketable Securities [Abstract]
Marketable securities	$ 57,375		$ 77,374
Cash used for the purchase of marketable securities	2	53,967
Proceeds from the sale of marketable securities	20,000	76,341
Amount marketable securities sold for		76,341
Marketable securities cost basis		73,568
Gain (loss) on sale of marketable securities		2,773
Cash deducted from proceeds from the sale of marketable securities and transferred to operating account		23,000
Difference in proceeds from the sale of marketable securities		53,341
Dividends received during the period		$ 626

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Fair Value Measurements - Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) (USD $)	Mar. 31, 2014	Dec. 31, 2013	Mar. 31, 2014 Level 1 [Member]	Dec. 31, 2013 Level 1 [Member]	Dec. 31, 2013 Level 2 [Member]	Mar. 31, 2013 Level 2 [Member]	Mar. 31, 2014 Level 3 [Member]	Dec. 31, 2013 Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash insured deposits			$ 57,375	$ 77,374
Marketable securities	$ 57,375	$ 77,374	$ 57,375	$ 77,374

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Cash flows from operating activities:
Net income (loss)	$ (22,140)	$ (18,084)
Adjustments to reconcile net income (loss) to net cash used in continuing operations:
(Gain) loss on sale of marketable securities		(2,773)
Net change in operating assets and liabilities:
Other assets	2,330	2,286
Accounts payable and accrued expenses	1,500	11,000
Net cash from (used for) continuing operations	(18,310)	(7,571)
Cash flows from investing activities:
Cash used for the purchase of marketable securities	(2)	(53,967)
Proceeds from the sale of marketable securities	20,000	76,341
Net cash from (used for) investing activities	19,998	22,374
Cash flows from financing activities:
Net cash from (used for) financing activities
Net increase (decrease) in cash	1,688	14,803
Cash
Beginning of period	9,643	15,337
End of period	$ 11,331	$ 30,140

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Fair Value Measurements

3 Months Ended

Mar. 31, 2014

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 5 – Fair Value Measurements

Except for those assets and liabilities which are required by authoritative accounting guidance to be recorded at fair value in our Condensed Consolidated Balance Sheets, we have elected not to record any other assets or liabilities at fair value. No events occurred during the first three months of 2014 which would require adjustment to the recognized balances of assets or liabilities which are recorded at fair value on a nonrecurring basis.

The following table provides information on those assets and liabilities measured at fair value on a recurring basis.

	Fair Value Measurement Using
		Level 1	Level 2	Level 3
Marketable Securities
March 31, 2014:
Cash Insured Deposits	$	57,375
Total March 31, 2014	$	57,375
December 31, 2013:
Cash Insured Deposits	$	77,374
Total December 31, 2013	$	77,374

The fair value of the marketable securities is based on the amount of cash in an insured deposit account at the brokerage firm.