SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 1996
or
[ ] Transition Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Transition Period from ------------to------------
Commission File Number 33-87570
I.R.S. Employer Identification Number 41-1793975
American Church Mortgage Company
Incorporated Under the Laws of the State of Minnesota
10237 Yellow Circle Drive
Minneapolis, MN 55343
Telephone: (612) 945-9455
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 requirements for the past 90 days. Yes X No
The number of shares outstanding of the Registrant's stock as of May 1, 1996
was:
240,000 Shares of Common Stock Outstanding
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
INDEX Page
No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheets
March 31, 1996 and December 31, 1995 . . . . 3
Statements of Income
Quarters Ended March 31, 1996 and 1995
and Period from Inception (May 27, 1994)
through March 31, 1996 . . . . . . . . . . . 4
Statements of Cash Flows
Quarters Ended March 31, 1996 and 1995
and Period from Inception (May 27, 1994)
through March 31, 1996 . . . . . . . . . . . 5
Notes to Financial Statements . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . 7
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . 10
Signatures . . . . . . . . . . . . . . . . . 10
<PAGE>
<TABLE>
AMERICAN CHURCH MORTGAGE COMPANY (A Development Stage Company)
BALANCE SHEETS
<CAPITON>
March 31, 1996 December 31, 1995
(Unaudited)
<S> <C> <C>
ASSETS:
CASH and CASH EQUIVALENTS $ 136,000 $ 135,282
Prepaid Expenses 695 0
------- -------
136,695 135,282
Deferred Offering Costs 93,227 107,295
Organizational Expenses,
net of accumulated
amortization March 31, 1996
$556; December 31, 1995 $480 996 1,071
------- -------
$ 230,918 $ 243,648
LIABILITIES AND SHAREHOLDER'S
EQUITY:
Accounts Payable $ 37,890 $ 49,493
Note Payable $ 14,109 $ 0
Shareholder's Equity
Common stock, par value
$.01 per share; authorized
30,000,000 shares; issued
and outstanding
20,000 shares 200 200
Additional paid-in capital 199,800 199,800
Deficit accumulated during
the development stage (21,081) (5,845)
Total shareholder's equity 178,919 194,155
------- -------
$ 230,918 $ 243,648
<FN>
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
AMERICAN CHURCH MORTGAGE COMPANY (A Development Stage Company)
UNAUDITED STATEMENTS OF OPERATIONS
<CAPTION>
For the Three For the Three Period From
Months Ended Months Ended May 27, 1994
March 31, March 31, (Date of
1996 1995 Inception)
to March 31,
1996
<S> <C> <C> <C>
Interest Income $ 23,671 $ 787 $ 28,838
Expenses
Professional fees 15,378 0 20,169
Director fees 0 0 2,000
Amortization 76 76 556
Escrow Interest Expense 22,248 0 22,248
Other 1,205 294 4,946
--------- --------- ---------
38,907 370 49,919
Net Loss $ (15,236) $ 417 $ (21,081)
Income (Loss) Per Common
Share $ (.76) $ .02 $ (1.05)
Weighted Average Common
Shares Outstanding 20,000 20,000 20,000
<FN>
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
AMERICAN CHURCH MORTGAGE COMPANY (A Development Stage Company)
UNAUDITED STATEMENTS OF CASH FLOWS
<CAPTION>
For the Three For the Three Period From
Months Ended Months Ended May 27, 1994
March 31, March 31, (Date of Inception)
1996 1995 to March 31, 1996
<S> <C> <C> <C>
Cash Flows From Operating
Activities
Net Loss $ (15,236) $ 417 $ (21,081)
Adjustments to reconcile net
income (loss) to net cash
used in operating
activities:
Amortization 76 76 556
Increase in prepaid
expenses (695) (348) (695)
Increase (Decrease)
in notes payable 14,109 0 14,109
Increase (Decrease)
in accounts payable (11,604) 0 (11,604)
Net cash used in
operating activities (13,350) 145 (18,715)
Cash Flows From Investing
Activities
Amount received in payment
of common stock
subscription 0 0 200,000
Organization expenses 0 0 (1,551)
Cash Flows From Financing
Activities
Payment (Increase) of
deferred offering costs 14,068 (14,800) (43,734)
Net cash provided by
(used in) financing
activities 14,608 (14,800) 154,715
Net increase (decrease)
in cash 718 (14,655) 136,000
Cash
Beginning of period 135,282 149,023 0
End of period $ 136,000 $ 134,368 $ 136,000
Supplemental Schedule of
Noncash Financing
Activities
Deferred offering costs
financed through account
payable/notes payable $ 2,505 $ 16,299 $ 51,999
<FN>
See Notes to Financial Statements
</TABLE>
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY (A Development Stage Company)
NOTE TO UNAUDITED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with the instructions for interim statements and, therefore,
do not include all information and disclosures necessary for a fair
presentation of results of operations, financial position, and changes in
cash flow in conformity with generally accepted accounting principles.
However, in the opinion of management, such statements reflect all
adjustments (which include only normal recurring adjustments) necessary for
a fair presentation of the financial position, results of operations, and
cash flows for the period presented. The results of operations for the
three months ended March 31, 1996, are not indicative of the results of
operations to be expected for the full year ending December 31, 1996.
The unaudited consolidated financial statements of the Company should be
read in conjunction with its December 31, 1995, audited financial statements
included in the Company's Annual Report on Form 10-QSB, as filed with the
Securities and Exchange Commission for the year ended December 31, 1995.
Note 2. Subsequent Event
On or about April 15, 1996, the Company commenced active business operations
after it surpassed the "Minimum Amount" in its "best-efforts,
minimum/maximum" public offering of its common stock. Since April 15, 1996
and as of May 1, 1996 the Company has funded three first mortgage loans to
churches in the aggregate principal amount of $1,012,000.
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Plan of Operation
The Company was founded in May 1994, and as of March 31, 1996, had not
conducted active business operations, and, therefore, had no operating
revenues. However, the Company commenced active business operations on
approximately April 15, 1996 after completion of the "Minimum Amount" in
its public stock offering (described below). On July 11, 1995, the
Securities and Exchange Commission declared effective the Company's offering
of 2,000,000 common shares at a price of $10.00 per share ($20,000,000) under
SEC File 33-87570. The Company's offering is being underwritten and sold on
a "best efforts, minimum/maximum" basis under which at least 200,000 shares
($2,000,000) were required to be sold on or before April 15, 1996 to not less
than 100 individuals (the "Minimum Offering"). As of April 15, 1996,
approximately 216,000 shares ($2,160,000) were subscribed for and funds
received by the Escrow Agent, not including 20,000 shares ($200,000)
previously purchased by the Company's initial stockholder--DRM Holdings, Inc.
Until the Minimum Offering was achieved, the Company could not
commence its active business of making mortgage loans to churches.
Consequently, business operations from Inception (May 27, 1994) to completion
of the Minimum Offering (April 15, 1996) were limited to daily business
organizational efforts, reviewing potential candidates for church mortgage
loans to be made by the Company once the Minimum Offering was achieved, and
conducting informational meetings with brokers and broker-dealers identified
to the Company by the Underwriter--American Investors Group, Inc., an
affiliate of the Company. Since the Company began active business operations
on or about April 15, 1996, and as of May 1, 1996, it has funded three first
mortgage loans to churches, in the aggregate principal amount of $1,012,000.
The funding of additional first mortgage loans is expected to continue on an
on-going basis as the Company's investable assets become available either
through the sale of additional shares in the public offering; prepayment,
repayment at maturity and renewal of mortgage loans made by the Company;
borrowed funds; and through dividends reinvested under the Company's Dividend
Reinvestment Plan. The "best efforts" public offering of the Company's
shares is expected to continue through November 11, 1996, however, there can
be no assurance that all or a meaningful number of the remaining shares being
offered will be sold. The Company and the Dealer Manager (American Investors
Group, Inc.) may discontinue the public offering at any time.
Financial Condition
Total assets of the Company decreased $12,730 from December 31, 1995 to
March 31, 1996, primarily as a result of payment by the Company of a $14,109
offering expense, the result of which reduced Deferred Offering Costs and
created a Note Payable of $14,109, which note has since been repaid by the
Company.
Results of Operations
As of March 31, 1996, the Company had not commenced its business of making
mortgage loans to churches, pending achievement of the Minimum Offering.
As a result, income had been limited almost entirely to interest on cash
equivalents held by the Company in the form of a certificate of deposit.
Income for the quarter ended March 31, 1996 was $23,671.00. While the
Company's business of making mortgage loans had not yet commenced for the
reasons stated above, expenses related primarily to the Company's public
offering and limited loan processing and loan underwriting activities have
been incurred. For this reason, overall expenses of the Company (including a
$15,236 net loss for the quarter ended March 31, 1996) have continued,
resulting in an accumulated deficit of $21,081 as of March 31, 1996.
Liquidity and Capital Resources
Although as of March 31, 1996 the Company had not yet commenced the active
business of making mortgage loans, and, therefore, had no operating revenues,
officers of the Company's advisor (Church Loan Advisors, Inc.) had begun to
compile a list of potential borrowers desiring borrow funds. As of May 1,
1996, the Company has funded first mortgage loans to three churches in the
aggregate principal amount of $1,012,000. The Company anticipates
<PAGE>
that two additional first mortgage loans in the aggregate principal amount of
approximately $800,000 will be funded in May, 1996. Future first mortgage
loans will be funded as additional shares of the Company's common stock are
sold in the public offering. Notwithstanding the foregoing, there can be no
assurance that all or a substantial number of the remaining shares being
offered in the public offering will be sold. The offering period for the
public offering expires on or about November 11, 1996, however, the offering
may be discontinued at any time prior thereto at the option of the Company
and the Dealer Manager.
On March 31, 1996, the Company had no assets other than the $200,000 cash
paid by its promoter for the 20,000 shares owned by it ($10.00 per share) and
had incurred no material obligations, other than accumulated and unpaid
expenses pertaining to the public offering. The initial $200,000 capital
contribution by the promoter has been partially used to pay legal and
accounting costs relating to the organization of the Company, Independent
Director's fees and certain professional and other fees and costs associated
with the public offering. Subsequent to March 31, 1996, on or about April 15,
1996, the Company booked additional paid-in capital of $2,019,205 in
connection with the sale of Company's stock in the public offering.
The Company anticipates that its revenue will be derived principally from
interest income, and secondarily, origination fees, renewal fees and
"administrative" fees generated by mortgage loans made by it. The Company
will also earn income through interest on funds that are invested pending
their use in funding mortgage loans or distributions of dividends to its
shareholders, and on income generated on church bonds it may purchase and
own.
The Company began generating operating revenues shortly after April 15, 1996
upon completion of the Minimum Offering, through (i) permitted temporary
investments of the net proceeds from the sale of the shares, and (ii) through
implementation of its business plan of making mortgage loans to churches and
other non-profit religious organizations. The principal expenses of the
Company will be Advisory Fees, legal and accounting fees, communications with
its shareholders, and the expenses of its stock transfer agent, registrar and
dividend reinvestment agent.
The public offering of its shares is expected to continue on a "best
efforts" basis up to November 11, 1996. However, there can be no assurance
that all or significant number of the shares remaining in the public offering
will actually be sold. During and after sales of shares in its public
offering, the Company's capital needs are expected to be met by (i) continued
sale of the shares in the public offering until the maximum offering of
$20,000,000 is achieved (or at such earlier time as the Company may in its
discretion discontinue the public offering); (ii) prepayment, repayment at
maturity and renewal of mortgage loans made by the Company, and (iii) borrowed
funds. The Company believes that the "rolling" effect of mortgage loans
maturing, together with dividends reinvested under the Company's Dividend
Reinvestment Plan, will provide an on-going source of capital to fund its
business operations in future years. Nevertheless, the Company believes that
it may be desirable, if not necessary, to sell additional shares of common
stock, in order to enhance its capacity to make mortgage loans on a continuous
basis. There can be no assurance that the Company will be able to raise
additional capital on terms acceptable for such purposes. Although the
Company may borrow funds in an amount not to exceed 50% of its Average
Invested Assets in order to increase its lending capacity, it has not
secured a source for such borrowing.
Balance of page intentionally left blank
Page 8 of 9
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the quarter
ended March 31, 1996.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits filed with Form 10-QSB
None
b) The Company filed a report on Form 8-K dated March 13, 1996
(filed March 20, 1996) in which it reported a change in its
Certifying Accountants effective as of such date. As reported
therein, the Board of Directors of the Company approved the
dismissal of McGladrey & Pullen as the Company's Certifying
Accountants and the engagement of Boulay, Heutmaker, Zibell & Co.,
P.L.L.P. as the Company's new Certifying Accountants.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused the report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Dated: May 3, 1996
AMERICAN CHURCH MORTGAGE COMPANY
By: V. James Davis
V. James Davis
Chief Executive Officer, Treasurer
(and Chief Financial Officer)
By: David G. Reinhart
David G. Reinhart
Vice President and Secretary
Page 9 of 9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 136,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 136,695
<PP&E> 1,552
<DEPRECIATION> 556
<TOTAL-ASSETS> 230,918
<CURRENT-LIABILITIES> 51,999
<BONDS> 0
0
0
<COMMON> 200
<OTHER-SE> 178,719
<TOTAL-LIABILITY-AND-EQUITY> 230,918
<SALES> 0
<TOTAL-REVENUES> 23,671
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,248
<INCOME-PRETAX> (15,236)
<INCOME-TAX> 0
<INCOME-CONTINUING> (15,236)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,236)
<EPS-PRIMARY> (.76)
<EPS-DILUTED> (.76)
</TABLE>
