US Securities and Exchange Commission
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended June 30, 2005.
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Commission File Number 000-50764
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ACROSS AMERICA REAL ESTATE CORP.
--------------------------------------------
(Name of small business issuer in its charter)
Colorado 20-0003432
------------------------------ ------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1440 Blake Street, Suite 330, Denver, Colorado 80202
----------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number: (303) 893-1003
---------------
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports); and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
As of July 31, 2005, registrant had outstanding 16,036,625 shares of the
registrant's common stock, and the aggregate market value of such shares held by
non-affiliates of the registrant (based upon the closing bid price of such
shares as listed on the Over-the-Counter Bulletin Board on July 31, 2005) was
approximately $4,638,375.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements............................................... 3
Item 2. Management's Discussion and Analysis and Plan of Operation......... 14
Item 3. Controls and Procedures........................................... 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................. 17
Item 2. Changes in Securities............................................. 17
Item 3. Defaults Upon Senior Securities................................... 17
Item 4. Submission of Matters to a Vote of Security Holders............... 17
Item 5. Other Information................................................. 17
Item 6. Exhibits and Reports on Form 8-K.................................. 17
Signatures........................................................ 18
PART I. FINANCIAL INFORMATION
All references to "us", "we", or "the Company" refer to ACROSS AMERICA REAL
ESTATE CORP., and its subsidiaries.
ITEM 1. FINANCIAL STATEMENTS
ACROSS AMERICA REAL ESTATE CORP.
(formerly Across America Real Estate Development Corp.)
Condensed Consolidated Balance Sheet
(Unaudited)
June 30, 2005
Assets
Cash ............................................................ $ 164,634
Designated cash (Note 3) ........................................ 550,352
Property and equipment, net of accumulated depreciation ......... 6,195
Property held for sale (Note 2) ................................. 2,022,546
Construction in progress (Note 2) ............................... 2,008,985
Land held for development (Note 2) .............................. 6,891,544
Other assets .................................................... 12,165
------------
$ 11,656,421
============
Liabilities and Shareholders' Equity
Liabilities:
Accounts payable ............................................ $ 28,243
Accrued liabilities ......................................... 29,121
Note payable (Note 4) ....................................... 1,231,042
Indebtedness to related party (Note 3) ...................... 10,430,050
------------
Total liabilities ............................. 11,718,456
------------
Minority interests in consolidated subsidiaries (Note 6) ........ --
Shareholders' equity:
Preferred stock, $.10 par value; 1,000,000 shares authorized,
-0- shares issued and outstanding ........................ --
Common stock, $.001 par value; 50,000,000 shares authorized,
16,036,625 shares issued and outstanding ................. 16,037
Additional paid-in capital .................................. 161,938
Retained earnings ........................................... (240,010)
------------
Total shareholders' equity .................... (62,035)
------------
$ 11,656,421
============
See accompanying notes to condensed consolidated financial statements
3
ACROSS AMERICA REAL ESTATE CORP.
(formerly Across America Real Estate Development Corp.)
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- -----------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
Revenue:
Sales ................................... $ -- $ 687,141 $ -- $ 687,141
Rental income ........................... 42,651 5,589 42,651 5,589
Management fees ......................... -- 6,866 -- 6,866
------------ ------------ ------------ ------------
Total revenue ................... 42,651 699,596 42,651 699,596
------------ ------------ ------------ ------------
Operating expenses:
Cost of sales ........................... -- 617,556 -- 617,556
Selling, general and administrative ..... 165,368 35,287 245,750 57,928
Rent, related party (Note 3) ............ -- 750 -- 1,500
------------ ------------ ------------ ------------
Total operating expenses ........ 165,368 653,593 245,750 676,984
------------ ------------ ------------ ------------
Income/(loss) from operations ... (122,717) 46,003 (203,099) 22,612
Non-operating income:
Interest income ......................... -- 223 -- 446
Interest expense ........................ (34,861) -- (43,047) --
------------ ------------ ------------ ------------
Income/(loss) before income taxes
and minority interest ........ (157,578) 46,226 (246,146) 23,058
Income tax provision (Note 5) ............... -- -- -- --
------------ ------------ ------------ ------------
Income/(loss) before
minority interest ............ (157,578) 46,226 (246,146) 23,058
Minority interest in income of
consolidated subsidiaries (Note 6) ...... 583 (15,035) 2,498 (15,035)
------------ ------------ ------------ ------------
Net income/(loss) ......... $ (156,995) $ 31,191 $ (243,648) $ 8,023
============ ============ ============ ============
Basic and diluted income/(loss) per share ... $ (0.01) $ 0.00 $ (0.02) $ 0.00
------------ ------------ ------------ ------------
Basic and diluted weighted average common
shares outstanding ...................... 16,036,625 16,036,625 16,036,625 16,036,625
============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements
4
ACROSS AMERICA REAL ESTATE CORP.
(formerly Across America Real Estate Development Corp.)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30,
--------------------------
2005 2004
----------- -----------
Net cash provided by (used in)
operating activities ...... $ 173,077 $ 11,427
----------- -----------
Cash flows from investing activities:
Payments for deposits .......................... (5,000) --
Restricted cash held in escrow ................. (550,352) --
Payments for land and construction in progress . (8,060,657) (505,654)
----------- -----------
Net cash used in
investing activities ...... (8,616,009) (505,654)
----------- -----------
Cash flows from financing activities:
Proceeds from note payable (Note 4) ............ 1,231,042 --
Proceeds from related party loans (Note 3) ..... 7,188,233 505,654
Payments on related party loans (Note 3) ....... (339,099) --
----------- -----------
Net cash provided by
financing activities ...... 8,080,176 505,654
----------- -----------
Net change in cash ........ (362,756) 11,427
Cash, beginning of period .......................... 527,390 160,177
----------- -----------
Cash, end of period ................................ $ 164,634 $ 171,604
=========== ===========
Supplemental disclosure of cash flow information:
Income taxes ................................... $ 1,000 $ --
=========== ===========
Interest ....................................... $ -- $ --
=========== ===========
See accompanying notes to condensed consolidated financial statements
5
ACROSS AMERICA REAL ESTATE CORP.
(formerly Across America Real Estate Development Corp.)
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) Nature of Business and Presentation
Basis of Presentation
The interim financial statements presented herein have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission ("SEC").
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. The
interim financial statements should be read in conjunction with Across America
Real Estate Corp.'s ("AARD" or the "Company") annual financial statements for
the year ended December 31, 2004, notes and accounting policies thereto included
in the Company's Form 10-KSB as filed with the SEC.
The accompanying condensed consolidated financial statements include the
accounts of Across America Real Estate Corp. and the following subsidiaries:
Percentage
Name of Subsidiary Ownership
------------------ ---------
CCI Southest, LLC ("CCISE") 100.00%
AARD-Belle Creek, LLC (Belle Creek") 100.00%
CCI Corona, LLC ("CCI Corona") 100.00%
Eagle Palm I, LLC ("Eagle") 100.00%
AARD-Greeley-Lot 3, LLC ("Greeley") 100.00%
AARD-Stonegate, LLC ("Stonegate") 100.00%
Cross Country Properties II, LLC ("CCPII") 80.00%
AARD-Charmar-Olive Branch, LLC ("Olive Branch") 51.00%
AARD-Cypress Sound, LLC ("Cypress Sound") 51.00%
AARD-TSD-CSK Firestone, LLC ("Firestone") 51.00%
South Glen Eagles Drive, LLC("West Valley") 51.00%
119th and Ridgeview, LLC ("Ridgeview") 51.00%
53rd and Baseline, LLC ("Baseline") 51.00%
Hwy 278 and Hwy 170, LLC ("Bluffton") 51.00%
State and 130th, LLC ("American Fork") 51.00%
Riverdale Carwash Lot 3A, LLC ("Riverdale") 50.10%
L-S Corona Pointe, LLC ("L-S Corona") 50.01%
Cross Country Properties III, LLC ("CCPIII") 50.00%
All significant intercompany accounts and transactions have been eliminated in
consolidation.
In the opinion of management, all adjustments (consisting only of normal
Percentage operating results for the interim periods presented have been made.
The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the year.
Interim financial data presented herein are unaudited.
6
ACROSS AMERICA REAL ESTATE CORP.
(formerly Across America Real Estate Development Corp.)
Notes to Condensed Consolidated Financial Statements
Nature of Business
The Company is a co-developer, principally as a financier, for built-to-suit
real estate development projects for retailers who sign long-term leases for use
of the property. The Company creates each project such that it will generate
income from the placement of the construction loan, rental income during the
period in which the property is held, and the capital appreciation of the
facility upon sale. Affiliates, subsidiaries and management of the Company will
develop the construction and permanent financing for the benefit of the Company.
(2) Real Estate Development Projects
Following is a schedule of the Company's real estate development projects as of
June 30, 2005:
Property held Construction Land held for
Name of Subsidiary for Sale in Progress Development
------------------------- ---------- ---------- ----------
L-S Corona $ -- $1,033,113 $1,656,341
Riverdale 2,022,546 -- --
Ridgeview -- 135,382 1,606,526
Cypress Sound -- 43,104 1,440,865
Stonegate -- 181,546 743,284
Olive Branch -- 222,365 649,546
Belle Creek -- 260,881 599,982
Other projects in
preliminary development -- 132,594 195,000
---------- ---------- ----------
$2,022,546 $2,008,985 $6,891,544
========== ========== ==========
L-S Corona
On November 10, 2004, the Company (through its wholly-owned subsidiary, CCI
Corona, LLC) entered into an arrangement with Charmar Property Acquisitions,
Inc. ("Charmar"), an unaffiliated builder and developer of commercial property.
The Company and Charmar intend to develop a restaurant located in Corona,
California. The parties have formed a limited liability company for the
development of the identified property. The name of the limited liability
company is L-S Corona Pointe, LLC ("L-S Corona"). Charmar owns 49.99% of the LLC
and CCI Corona owns 50.01% of the LLC. The parties will allocate the profits
from the proceeds of the sale of the project after all development and
construction costs and interest and fee expenses are paid and settled. The
Company will receive the first $171,400 of profit; Charmar will receive the next
$80,000 of profit; then the entities will divide the remainder based upon a
50/50 profit split.
The Company arranged a construction loan from GDBA and financing from Vectra
Bank (see Note 4) to fund the construction of the restaurant. The GDBA
construction loan carries the same terms as the Agreement to Fund (see Note 3).
As of June 30, 2005, L-S Corona has received construction loan proceeds of
$2,585,784 and has disbursed $2,544,088 for the development of the restaurant
project. Accrued interest on the loan totaled $145,366 at June 30, 2005. The
total balance incurred on the project of $2,689,454 has been capitalized as
construction in progress in the accompanying condensed consolidated financial
statements.
7
ACROSS AMERICA REAL ESTATE CORP.
(formerly Across America Real Estate Development Corp.)
Notes to Condensed Consolidated Financial Statements
Riverdale
On October 1, 2004, the Company entered into an arrangement with S&O
Development, LLC ("S&O"), an unaffiliated builder and developer of commercial
property. The Company and S&O intend to develop an express tunnel carwash
located in Littleton, Colorado at an estimated cost of $1,874,573. The parties
have formed a limited liability company for the development of the identified
property. The name of the limited liability company is Riverdale Carwash Lot3A,
LLC ("Riverdale"). S&O owns 49.9% of the LLC and AARD owns 50.1% of the LLC. The
parties will allocate the profits from the proceeds of the sale of the project
after all development and construction costs and interest and fee expenses are
paid and settled. The Company will receive the first $60,000 of profit; S&O will
receive the next $60,000 of profit; then the entities will divide the remainder
based upon a 50/50 profit split.
The Company arranged a construction loan from GDBA to fund the construction of
the carwash. The construction loan carries the same terms as the Agreement to
Fund (see Note 3). As of June 30, 2005, Riverdale has received construction loan
proceeds of $1,943,812 and has disbursed $1,906,371 for the development of the
carwash project. Accrued interest on the loan totaled $116,175 at June 30, 2005.
The total balance incurred on the project of $2,022,546 was originally
capitalized as construction in progress. During the three months ended June 30,
2005, Riverdale completed construction of the carwash. As a result, the Company
has reclassified the project from construction in progress to property held for
sale in the accompanying consolidated financial statements.
On November 17, 2004, Riverdale signed a Purchase and Sale Agreement (the
"Agreement") with Eagle Palm I, LLC ("Eagle"), a company wholly-owned by AARD.
The Agreement was prepared as an assurance to S&O. The Agreement calls for Eagle
to purchase the completed project by July 13, 2005. The Company's management
plans to close the agreement with Eagle during the third quarter of 2005.
Because the Agreement is with a wholly-owned subsidiary, the project has been
accounted for consistent with the Company's other projects that have no Purchase
and Sale Agreement during development.
Ridgeview
On May 20, 2005, the Company entered into an arrangement with Automotive
Development Group, LLC ("ADG"), an unaffiliated builder and developer of
commercial property. The Company and ADG intend to develop a car wash and lube
facility located in Olathe, Kansas. The parties have formed a limited liability
company for the development of the identified property. The name of the limited
liability company is 119th and Ridgeview LLC ("Ridgeview"). ADG owns 49% of the
LLC and AARD owns 51% of the LLC. The parties will allocate the profits from the
proceeds of the sale of the project after all development and construction costs
and interest and fee expenses are paid and settled. The Company will receive the
first $250,000 of profit; ADG will receive the next $250,000 of profit; then the
entities will divide the remainder based upon a 50/50 profit split.
The Company arranged a construction loan from GDBA to fund the construction of
the project. The construction loan carries the same terms as the Agreement to
Fund (see Note 3). As of June 30, 2005, Ridgeview has received construction loan
proceeds of $1,725,506 and has disbursed $1,725,506 for the development of the
project. Accrued interest on the loan totaled $16,402 at June 30, 2005. The
total balance incurred on the project of $1,741,908 has been capitalized as
construction in progress in the accompanying condensed consolidated financial
statements.
8
ACROSS AMERICA REAL ESTATE CORP.
(formerly Across America Real Estate Development Corp.)
Notes to Condensed Consolidated Financial Statements
Cypress Sound
On March 22, 2005, the Company entered into an arrangement with Mr. Daniel S.
Harper ("Harper"), an unaffiliated builder and developer of commercial property.
The Company and Harper intend to develop and construct a six unit, three-story
condominium project located in Orlando, Florida. The parties have formed a
limited liability company for the development of the identified property. The
name of the limited liability company is AARD-Cypress Sound LLC ("Cypress
Sound"). Harper owns 49% of the LLC and AARD owns 51% of the LLC. The parties
will allocate the profits from the proceeds of the sale of the project equally
after all development and construction costs and interest and fee expenses are
paid and settled.
The Company arranged a construction loan from GDBA to fund the construction of
the project. The construction loan carries the same terms as the Agreement to
Fund (see Note 3). As of June 30, 2005, Cypress Sound has received construction
loan proceeds of $1,440,750 and has disbursed $1,437,397 for the development of
the project. Accrued interest on the loan totaled $46,572 at June 30, 2005. The
total balance incurred on the project of $1,483,969 has been capitalized as
construction in progress in the accompanying condensed consolidated financial
statements.
Stonegate
On May 20, 2005, the Company (through its wholly-owned subsidiary,
AARD-Stonegate, LLC) entered into an agreement with Castle Brae Development LLC
("Castle"), an unaffiliated builder and developer of commercial property. Under
the agreement, Castle will develop a car wash facility located in Parker,
Colorado at an estimated total cost of $2,463,000.
The Company arranged a construction loan from GDBA to fund the construction of
the project. The construction loan carries the same terms as the Agreement to
Fund (see Note 3). As of June 30, 2005, Stonegate has received construction loan
proceeds of $920,174 and has disbursed $919,278 for the development of the
project. Accrued interest on the loan totaled $5,552 at June 30, 2005. The total
balance incurred on the project of $924,830 has been capitalized as construction
in progress in the accompanying condensed consolidated financial statements.
Olive Branch
On March 7, 2005, the Company entered into an arrangement with Charmar Property
Acquisitions, Inc. ("Charmar"), an unaffiliated builder and developer of
commercial property. The Company and Charmar intend to develop an IHOP
restaurant located in Olive Branch, Mississippi. The parties have formed a
limited liability company for the development of the identified property. The
name of the limited liability company is AARD-Charmar-Olive Branch, LLC ("Olive
Branch"). Charmar owns 49% of the LLC and AARD owns 51% of the LLC. The parties
will allocate the profits from the proceeds of the sale of the project evenly,
after all development and construction costs and interest and fee expenses are
paid and settled.
The Company arranged a construction loan from GDBA to fund the construction of
the restaurant. The construction loan carries the same terms as the Agreement to
Fund (see Note 3). As of June 30, 2005, Olive Branch has received construction
loan proceeds of $847,227 and has disbursed $840,034 for the development of the
restaurant. Accrued interest on the loan totaled $31,877 at June 30, 2005. The
total balance incurred on the project of $871,911 has been capitalized as
construction in progress in the accompanying condensed consolidated financial
statements.
Belle Creek
On February 8, 2005, the Company (through its wholly-owned subsidiary, AARD -
Belle Creek, LLC) entered into an arrangement with Mercury Car Wash, Inc.
("Mercury"), an affiliated builder and developer of automated car washes. The
Company intends to develop a tunnel car wash located in Commerce City, Colorado.
All profits will be allocated to the Company from the proceeds of the sale of
the project after all development and construction costs and interest and fee
expenses are paid and settled.
9
ACROSS AMERICA REAL ESTATE CORP.
(formerly Across America Real Estate Development Corp.)
Notes to Condensed Consolidated Financial Statements
The Company arranged a construction loan from GDBA to fund the construction of
the car wash. The construction loan carries the same terms as the Agreement to
Fund (see Note 3). As of June 30, 2005, Belle Creek has received construction
loan proceeds of $823,310 and has disbursed $823,310 for the development of the
car wash project. Accrued interest on the loan totaled $37,553 at June 30, 2005.
The total balance incurred on the project of $860,863 has been capitalized as
construction in progress in the accompanying condensed consolidated financial
statements.
(3) Related Party Transactions
Office Lease
The Company signed a noncancellable operating lease to rent office space from
GDBA, its majority shareholder. The term of the lease commenced June 1, 2003 and
expired December 31, 2004. Payments required under the operating lease were $250
per month. As of June 30, 2005, the Company owed the shareholder $4,750 for
unpaid lease payments. This balance is included in the accompanying consolidated
financial statements as "Indebtedness to related party".
The Company acquired its own office space subject to a noncancellable office
lease agreement with an unrelated third party, signed on December 6, 2004.
Agreement to Fund
On November 26, 2004, AARD and GDBA entered into a three-year "Agreement to
Fund" the Company's real estate projects. Under the agreement, the Company could
borrow up to $7,000,000 for its real estate projects. On June 2, 2005, the
parties amended the agreement to allow AARD to borrow up to $10 million. Each
loan is secured only by the properties against which the loans are made. The
Company has not provided any loan guarantees. The interest rate on the loans and
other terms are negotiated with each loan transaction based on the then current
market rates. GDBA has also agreed, if necessary, to assist the Company with
obtaining additional capital over and above the $10,000,000, up to an additional
maximum amount of $18,000,000 from an institutional lender of construction
financing by co-signing on the Company's behalf. This additional amount would be
available for the three years of the agreement and after depletion of the
original $10,000,000 under the Agreement to Fund. As of June 30, 2005, the
Company owed GDBA a total of $10,038,426 for the following projects:
10
ACROSS AMERICA REAL ESTATE CORP.
(formerly Across America Real Estate Development Corp.)
Notes to Condensed Consolidated Financial Statements
Outstanding Outstanding
Debt at Debt at
December 31, June 30,
Project 2004 Proceeds Repayments 2005
------------ ------------ ------------ ------------
L-S Corona ........................ $ 1,693,841 $ -- $ (339,099) $ 1,354,742
Riverdale ......................... 1,305,451 638,361 -- 1,943,812
Ridgeview ......................... -- 1,725,506 -- 1,725,506
Cypress Sound ..................... -- 1,440,750 -- 1,440,750
Stonegate ......................... -- 912,874 -- 912,874
Olive Branch ...................... -- 847,227 -- 847,227
Belle Creek ....................... 25,000 797,166 -- 822,166
Funds to support future projects .. 165,000 826,349 -- 991,349
------------ ------------ ------------ ------------
$ 3,189,292 $ 7,188,233 $ (339,099) 10,038,426
============ ============ ============ ============
Accrued interest payable on the debt totaled $391,303 at June 30, 2005.
As of June 30, 2005, the $10,038,426 borrowed by the Company exceeded the
$10,000,000 maximum balance under the Agreement to Fund with GDBA. The Agreement
to fund does not address the issue of excess borrowings and Company has not
received any correspondence from GDBA regarding the issue.
Designated Cash
As of June 30, 2005, the Company held $550,352 in cash designated for the
acquisition and development of current and future real estate development
projects.
(4) Note Payable
On April 25, 2005, the Company received a $10 million financing commitment under
a Credit Agreement from Vectra Bank of Colorado ("Vectra Bank"). This commitment
permits the Company to fund construction notes for build-to-suit real estate
projects for national and regional chain retailers. The financing is provided
through a series of promissory notes. A separate note is issued for individual
projects under the facility and must be underwritten and approved by Vectra Bank
and has a term of 12 months with one allowable extension not to exceed 6 months,
subject to approval. Interest is funded from an interest reserve established
with each construction loan. Each loan is for an amount, determined by Vectra
Bank, not to exceed the lesser of 75% of the appraised value of the Real
Property under the Approved Appraisal for the Project or 75% of the Project
Costs. The Company must provide the remaining costs. Principal on each note is
due at maturity, with no prepayment penalty. Vectra Bank retains a First Deed of
Trust on each property financed and has the personal guarantees of GDBA and its
owners.
On June 20, 2005, the Company drew down $1,231,042 under the financing agreement
to help fund the L-S Corona project (see Note 2). Principal and accrued interest
obligations under the financing agreement totaled $1,231,042 and $1,848,
respectively, at June 30, 2005.
11
ACROSS AMERICA REAL ESTATE CORP.
(formerly Across America Real Estate Development Corp.)
Notes to Condensed Consolidated Financial Statements
(5) Income Taxes
A reconciliation of the U.S. statutory federal income tax rate to the effective
tax rate is as follows:
Six Months
Ended
June 30,
2005
---------
U.S. Federal statutory graduated rate ................ 31.68%
State income tax rate,
net of federal benefit.............................. 3.16%
Net operating loss for which no tax
benefit is currently available...................... -34.84%
---------
0.00%
=========
At June 30, 2005, deferred tax assets consisted of a net tax asset of $83,633,
due to operating loss carryforwards of $240,010 which was fully allowed for, in
the valuation allowance of $83,633. The valuation allowance offsets the net
deferred tax asset for which there is no assurance of recovery. The change in
the valuation allowance for the six months ended June 30, 2005 totaled $83,633.
The current tax benefit also totaled $83,633 for the six months ended June 30,
2005. The net operating loss carryforward expires through the year 2025.
The valuation allowance will be evaluated at the end of each year, considering
positive and negative evidence about whether the deferred tax asset will be
realized. At that time, the allowance will either be increased or reduced;
reduction could result in the complete elimination of the allowance if positive
evidence indicates that the value of the deferred tax assets is no longer
impaired and the allowance is no longer required.
(6) Minority Interests in Consolidated Subsidiaries
Following is a summary of the minority interests in the equity of the Company's
subsidiaries. The Company establishes a subsidiary for each real estate project.
Ownership in the subsidiaries is allocated between the Company and the
co-developer/contractor.
Real Estate Projects
-----------------------------------------
Cypress
Riverdale Sound Firestone Stonegate Total
------- ------- ------- ------- -------
Minority Interest balance,
January 1, 2005 ........ $ -- $ -- $ -- $ -- $ --
Earnings(loss) allocated to
Minority Interest ...... (190) (1,699) (169) (440) (2,498)
Earnings(loss) disbursed to
Minority Interest ...... 190 1,699 169 440 2,498
------- ------- ------- ------- -------
Minority Interest balance,
June 30, 2005 .......... $ -- $ -- $ -- $ -- $ --
======= ======= ======= ======= =======
12
ACROSS AMERICA REAL ESTATE CORP.
(formerly Across America Real Estate Development Corp.)
Notes to Condensed Consolidated Financial Statements
(7) Concentration of Credit Risk for Cash
The Company has concentrated its credit risk for cash by maintaining deposits in
financial institutions, which may at times exceed the amounts covered by
insurance provided by the United States Federal Deposit Insurance Corporation
("FDIC"). The loss that would have resulted from that risk totaled $550,753 at
June 30, 2005, for the excess of the deposit liabilities reported by the
financial institution over the amount that would have been covered by FDIC. The
Company has not experienced any losses in such accounts and believes it is not
exposed to any significant credit risk to cash.
(8) Subsequent Events
On July 19, 2005, the Company changed its name from Across America Real Estate
Development Corp. to Across America Real Estate Corp.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
The following discussion of our financial condition and results of
operations should be read in conjunction with, and is qualified in its entirety
by, the consolidated financial statements and notes thereto included in Item 1
in this Quarterly Report on Form 10-QSB. This item contains forward-looking
statements that involve risks and uncertainties. Actual results may differ
materially from those indicated in such forward-looking statements.
Forward-Looking Statements
This Quarterly Report on Form 10-QSB and the documents incorporated herein
by reference contain forward-looking statements that have been made pursuant to
the provisions of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are based on current expectations, estimates, and
projections about our industry, management beliefs, and certain assumptions made
by our management. Words such as "anticipates," expects," "intends," "plans,"
"believes," "seeks," "estimates," variations of such words, and similar
expressions are intended to identify such forward-looking statements. These
statements are not guarantees of future performance and are subject to certain
risks, uncertainties, and assumptions that are difficult to predict; therefore,
actual results may differ materially from those expressed or forecasted in any
such forward-looking statements. Unless required by law, we undertake no
obligation to update publicly any forward-looking statements, whether as a
result of new information, future events, or otherwise. However, readers should
carefully review the risk factors set forth in other reports and documents that
we file from time to time with the Securities and Exchange Commission,
particularly the Report on Form 10-SB, and future Annual Reports on Form 10-KSB
and any Current Reports on Form 8-K.
Overview and History
ACROSS AMERICA REAL ESTATE CORP. was incorporated under the laws of the
State of Colorado on April 22, 2003.
In 2003, we completed a registered offering of our common shares under the
provisions of the Colorado securities laws and under an exemption from the
federal securities laws. We raised a total of $34,325 in this offering.
Our principal business address is 1440 Blake Street, Suite 330, Denver,
Colorado 80202. We are in the business of financing built-to-suit real estate
projects for specific retailers who sign long-term leases for use of the
property.
We have not been subject to any bankruptcy, receivership or similar
proceeding.
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Results of Operations
We had total revenues for the three months ended June 30, 2005 of $42,651,
compared to total revenues of $699,596 for the three months ended June 30, 2004.
The revenues for the three months ended June 30, 2005 represented rental income
on our properties.
We had total revenues for the six months ended June 30, 2005 of $42,651,
compared to total revenues of $699,596 for the six months ended June 30, 2004.
The revenues for the six months ended June 30, 2005 also represented rental
income on our properties.
Our total operating expenses for the three months ended June 30, 2005 were
$165,368 compared to total operating expenses of $653,593 for the three months
ended June 30, 2004. Our total operating expenses for the six months ended June
30, 2005 were $245,750 compared to total operating expenses of $676,984 for the
six months ended June 30, 2004. The major components of operating expenses are
cost of sales, salaries, payroll taxes and professional fees. The cost of sales
for the three months ended June 30, 2005 were -0-, compared to cost of sales for
the three months ended June 30, 2004 of $617,556. Operating expenses include all
direct costs incurred in our operations. The difference between our gross
revenues and total operating expenses is our income (loss) before income taxes.
We had a net loss of $156,995, or $0.01 per share, for the three months
ended June 30, 2005 compared to a net profit of $31,191, or $0.00 per share, for
the three months ended June 30, 2004. Our loss for the six months ended June 30,
2005 was $243,648, or $0.02 per share, compared to a net profit of $8,023, or
$0.00 per share, for the six months ended June 30, 2004.
Our principal source of revenues are the sales of real estate projects. We
had no revenue from the sale of any real estate projects for either the three
months or the six months ended June 30, 2005. We have generated revenues from
our real estate development projects. We closed two projects in 2004. Our first
transaction was in June, 2004 and sold the project for $687,141. We closed our
second transaction in August, 2004 with sales revenue of approximately
$1,078,090. We currently have approximately fifteen active projects. It is too
early to know whether or not we will be profitable this year.
Liquidity and Capital Resources
Cash at June 30, 2005 was $164,634, compared to cash at June 30, 2004 of
$171,604.
Our net cash provided by operating activities was $173,077 for the six
months ended June 30, 2005, compared to $11,427 for the six months ended June
30, 2004.
Our net cash used in investing activities was $8,616,009 for the six months
ended June 30, 2005, compared to $505,654 for the six months ended June 30,
2004. The cash used for investing activities was related to progress payments on
our construction projects.
Our net cash provided by financing activities was $8,080,176 for the six
months ended June 30, 2005, compared to $505,654 for the six months ended June
30, 2004. The cash used for investing activities was related to progress
payments on our projects and payments to our lenders.
While we have been profitable in the past, we are not currently profitable
because we have not closed any real estate transactions this fiscal year. We
have a number of projects which are scheduled to close. Our profitability
depends upon our ability to develop and sell real estate projects on a timely
basis. We expect that we will develop a more consistent pipeline of activity as
we mature and, thereby, a more consistent source of revenues. If we succeed in
this effort and generate sufficient revenues, we can become profitable. We
cannot guarantee that we will continue to be profitable.
15
We feel that we are at the point of maximum leverage on our real estate
projects and are not actively pursuing additional projects. Once we have closed
some of our current projects, we plan to begin looking for additional ones.
We do not intend to pay dividends in the foreseeable future.
Recently Issued Accounting Pronouncements
We do not expect the adoption of any recently issued accounting
pronouncements to have a significant impact on our net results of operations,
financial position, or cash flows.
Seasonality
We do not expect our revenues to be impacted by seasonal demands for our
products or services.
Critical Accounting Policies
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires us to make a number of estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements. Such estimates and
assumptions affect the reported amounts of revenues and expenses during the
reporting period. On an ongoing basis, we evaluate estimates and assumptions
based upon historical experience and various other factors and circumstances. We
believe our estimates and assumptions are reasonable in the circumstances;
however, actual results may differ from these estimates under different future
conditions.
We believe that the estimates and assumptions that are most important to
the portrayal of our financial condition and results of operations, in that they
require our most difficult, subjective or complex judgments, form the basis for
the accounting policies deemed to be most critical to us. These critical
accounting policies relate to bad debts, impairment of intangible assets and
long lived assets, contractual adjustments to revenue, and contingencies and
litigation. We believe estimates and assumptions related to these critical
accounting policies are appropriate under the circumstances; however, should
future events or occurrences result in unanticipated consequences, there could
be a material impact on our future financial conditions or results of
operations.
ITEM 3. CONTROLS AND PROCEDURES
Within the 90 days prior to the date of this report, our Chief Executive
Officer and our Chief Financial Officer evaluated the effectiveness of the
design and operation of our disclosure controls and procedures pursuant to Rule
13a-15b under the Securities Exchange Act of 1934. Based on their review of our
disclosure controls and procedures, they have concluded that our disclosure
controls and procedures are effective in timely alerting each of them to
material information relating to us that is required to be included in our
periodic SEC filings. Further, there were no significant changes in the internal
controls or in other factors that could significantly affect these disclosure
controls after the evaluation date and the date of this report. Nor were there
any significant deficiencies or material weaknesses in such disclosure controls
and procedures requiring corrective actions. As a result, no corrective actions
were taken.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no legal proceedings, to which we are a party, which could have a
material adverse effect on our business, financial condition or operating
results.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We held our annual Shareholders Meeting on July, 19th, 2005. At the meeting
93.9% of the outstanding shares were represented in person or by proxy. At the
meeting, we elected Alexander V. Lagerborg, Charles J. Berling, Eric Balzer, and
Daniel J. Wilhelm to the Board of Directors, each to hold office until the 2006
annual meeting and until his successor is elected and qualified. We voted to
change our corporate name from Across America Real Estate Development to Across
America Real Estate Corp. Despite the name change, the trading symbol, AARD.OB,
will remain the same. Finally, we ratified Cordovano & Honeck, LLP, CPA's as
auditors for fiscal year ending December 31, 2005
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
--------
31.1 Certification of Chief Executive Officer pursuant to Rule
13a-14(a)/15(d)-14(a)
31.2 Certification of Chief Financial Officer pursuant to Rule
13a-14(a)/15(d)-14(a)
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Reports on Form 8-K
-------------------
We filed the following reports on Form 8-K during the fiscal quarter: April 28,
2005 relating to a new credit facility for $10,000,000 with Vectra Bank; May 2,
2005, relating to the increase of our current line of credit with GDBA from
$7,000,000 to $7,500,000; May 20, 2005, relating to the development of a project
to be known as Cypress Sound; and June 2, 2005, relating to the increase of our
current line of credit with GDBA to $10,000,000, and to the appointment of a new
outside director, Daniel J. Wilhelm.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ACROSS AMERICA REAL ESTATE CORP.
Dated: August 12, 2005 By: /s/ Alexander V. Lagerborg
------------------ ---------------------------
Alexander V. Lagerborg
President, Chief Executive Officer,
and Director
Dated: August 12, 2005 By: /s/ James W. Creamer, III
----------------- ---------------------------
James W. Creamer, III
Vice President,
Treasurer, Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2004
In connection with the Quarterly Report of ACROSS AMERICA REAL ESTATE CORP.
(the "Company") on Form 10-QSB for the period ending June 30, 2005 as filed with
the Securities and Exchange Commission on the date hereof (the "Report'), I,
Alexander V. Lagerborg, Chief Executive Officer of the Company, certify,
pursuant to 18 USC ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2004, that to the best of my knowledge and belief:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ Alexander V. Lagerborg
--------------------------
Alexander V. Lagerborg, Chief Executive Officer
Dated: 8/12/05
18