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 September 30, 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
Minnetonka, 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
September 30, 1996 was:
292,606 Shares of Common Stock Outstanding
Page 1 of 11
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
INDEX Page
No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheets
September 30, 1996 and December 31, 1995........................3
Statements of Income
Nine Month Periods Ending September 30, 1996 and 1995............4
Interim Three Month Periods Ending
September 30, 1996 and 1995....................................4
Period from May 27, 1994 (Date of Inception) to
September 30, 1996..............................................4
Statements of Cash Flows
Nine Months Ended September 30, 1996 and 1995.....................5
Period from May 27, 1994 (Date of Inception) to
September 30, 1996 ..............................................5
Statements of Stockholders Equity.................................6
Notes to Financial Statements.....................................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders......11
Item 6. Exhibits and Reports on Form 8-K.........................11
Signatures'..............................................11
Page 2 of 11
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
BALANCE SHEETS (A Development Stage Company)
<TABLE>
<CAPTION>
ASSETS September 30, 1996 December 31, 1995
<S> <C> <C>
Current Assets
Cash and equivalents $ 592,045 $ 135,282
Prepaid expenses 695 0
Current maturities of
loans receivable 33,722 0
------- -------
626,462 135,282
Loans Receivable, net of
current maturities 2,022,698 0
Bonds Receivable 72,805 0
Deferred Offering Costs 0 107,295
Organizational Expenses,
net of accumulated
amortization Sept. 30,
1996 $708; Dec. 31, 1995 $480 844 1,071
---------- ----------
$ 2,722,809 $ 243,648
========== ==========
LIABILITIES AND SHAREHOLDER'S
EQUITY:
Current Liabilities
Accounts payable $ 1,022 $ 49,493
Dividends payable 62,344 0
-------- ---------
Total Current Liabilities 63,366 49,493
Deferred Income $ 38,415 $ 0
Shareholder's Equity
Common stock, par value $.01
per share; authorized
30,000,000 shares; issued
and outstanding 292,606 shares
as of Sept. 30, 1996, 20,000
shares as of Dec. 31, 1995 2,926 200
Additional paid-in capital 2,663,104 199,800
Deficit accumulated during the
development stage (45,002) (5,845)
--------- ---------
Total shareholder's equity 2,621,028 194,155
$ 2,722,809 $ 243,648
<FN>
See Notes to Financial Statements
Page 3 of 11
</TABLE>
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
UNAUDITED STATEMENTS OF OPERATIONS (A Development Stage Company)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Period From
September 30th September 30th May 27, 1994 (Date of Inception)
to September 30th,
1996 1995 1996 1995 1996
<S> <C> <C> <C> <C> <C>
Revenues
Interest Income $ 57,756 $ 1,216 $ 125,073 $ 1,991 $ 130,240
Origination Income 1,613 0 4,640 0 4,640
------ ----- ------- ----- -------
59,369 1,216 129,713 1,991 134,880
Expenses
Professional fees 2,261 7,570 11,753 0 16,543
Director fees 800 0 0 0 2,000
Amortization 76 76 228 152 708
Escrow Interest
Expense 0 0 37,274 0 37,274
Other 7,169 701 10,603 567 14,345
------ ----- ------- ----- -------
10,306 8,347 59,858 719 70,870
Net Income (Loss) $ 49,063 $ (7,131) $ 69,855 $ 1,272 $ 64,010
====== ===== ======= ===== =======
Income (Loss) Per
Common Share $ .18 $ (.36) $ .27 $ .06 $ .97
Weighted Average
Common Shares
Outstanding 270,881 20,000 257,074 20,000 66,014
<FN>
See Notes to Financial Statements
</TABLE>
Page 4 of 11
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
UNAUDITED STATEMENTS OF CASH FLOWS (A Development Stage Company)
<TABLE>
<CAPTION>
For the Nine For the Nine Period From
Months Ended Months Ended May 27, 1994
September 30, September 30, (Date of Inception)
1996 1995 to September 30th,
1996
<S> <C> <C> <C>
Cash Flows From
Operating Activities
Net Income (Loss) $ 69,855 $ (5,858) $ 64,010
Adjustments to reconcile net
income (loss) to net cash
used in operating activities:
Amortization 228 228 708
Increase (Decrease) in
prepaid expenses (695) (348) (695)
Increase (Decrease) in
deferred income 38,415 0 38,415
Increase (Decrease) in
accounts payable (48,472) 17,700 (48,472)
------- ------ ---------
Net cash used in operating
activities 59,331 11,722 53,966
Cash Flows From Investing
Activities
Organizational expenses 0 (35) (1,551)
Investment in mortgage loans (2,070,288) 0 (2,070,288)
Collections of mortgage loans 13,868 0 13,868
Investment in bonds (72,805) 0 (72,805)
--------- ------ ---------
Net cash used for investing
activities (2,129,225) (35) (2,130,776)
Cash Flows From Financing
Activities
Proceeds from stock offering 2,526,657 0 2,526,657
Amounts received in payment of
common stock subscription 0 0 200,000
Payment of deferred offering
costs 0 (25,772) (57,802)
--------- ------- ---------
Net cash from (used for)
financing activities 2,526,657 (25,772) 2,668,855
Net increase (decrease) in cash 456,763 (14,085) 592,045
Cash
Beginning of period 135,282 149,023 0
End of period $ 592,045 $ 134,938 $ 592,045
======== ======= =======
<FN>
See Notes to Financial Statements
</TABLE>
Page 5 of 11
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY (A Development Stage Company)
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Stock Paid-In Development
Shares Amount Capital Stage
<S> <C> <C> <C> <C>
Balance, May 27, 1994
(Date of Inception) 0 $ 0 $ 0 $ 0
Issuance of 20,000
shares of
common stock 20,000 200 199,800
Net loss (4,522)
------ ------ -------- --------
Balance, December
31, 1994 20,000 200 199,800 (4,522)
Net loss (1,323)
------ ------ --------- --------
Balance, December
31, 1995 20,000 200 199,800 (5,845)
Issuance of 272,606
shares of
common stock 272,606 2,726 2,463,104
Net Income 69,855
Dividends Declared (109,012)
------- ------- --------- ---------
Balance, September
30, 1996
(unaudited) 292,606 $ 2,926 $ 2,663,104 $ (45,002)
======= ====== ========= =========
<FN>
See Notes to Financial Statements
</TABLE>
Page 6 of 11
<PAGE>
AMERICAN CHURCH MORTGAGE 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 nine months ended September 30,
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 September
30, 1996 the Company has funded six first mortgage loans to churches in the
aggregate principal amount of $2,070,288 and purchased $100,000 principal
amount of mortgage secured church bonds for $72,805.
Page 7 of 11
<PAGE>
AMERICAN CHURCH MORTGAGE COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Plan of Operation
The Company was founded in May 1994, began a "best efforts" offering
of its common stock on July 11, 1995, and commenced active business operations
on approximately April 15, 1996 after completion of the "Minimum Amount" in
its public offering (described below). Consequently, for the years ended
December 31, 1994 and 1995, the Company had no operating revenues.
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. The Company achieved the Minimum Offering of at least
200,000 shares ($2,000,000) sold to not less than 100 individuals (the
"Minimum Offering") on April 15, 1996. As of such date the Company has sold
272,000 shares to approximately 240 individuals, 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, activities relating to the offering, 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.
Between the date upon which the Company began active business
operations (April 15, 1996), and the end of the its last fiscal quarter
(September 30, 1996), it funded six first mortgage loans to churches, in the
aggregate principal amount of $2,070,288 and purchased $100,000 principal
amount of church-issued, mortgage-secured bonds for an aggregate purchase
price of $72,805. Funding of additional first mortgage loans is expected
to continue on an on-going basis as the Company's investable assets become
available through (I) the sale of additional shares in the public offering;
(ii) prepayment and repayment at maturity of existing loans; (iv) borrowed
funds; and (v) 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 8, 1996, however, there can be no assurance that
a meaningful number of the remaining shares being offered will be sold. As of
September 30, 1996, a total of 292,606 shares of the Company's common stock
were issued and outstanding held by approximately 241 investors. The Company
and the Dealer Manager (American Investors Group, Inc.) may discontinue the
public offering at any time.
Results of Operations
The Company's business is to extend mortgage loans to churches and
other non-profit religious organizations and to purchase for investment
mortgage secured bonds issued by churches and other non-profit religious
organizations, and to operate as a real estate investment trust for tax
purposes by distributing at least 95% of taxable income to shareholders in
the form of dividends. As of September 30, 1996, the Company had funded six
first mortgage loans to churches for an aggregate amount of $2,070,288 and
purchased $100,000 principal amount of church-issued mortgage-secured bonds
for a purchase price of $72,805. The loans made by the Company range in
interest rate charged to the borrowers from 9.25% for annually adjustable, 20
year amortized loans, to 11.25% for 15 year fixed interest rate loans. As of
September 30, 1996, the average, principal-adjusted interest rate on the
Company's portfolio of loans was 10.76%. The Company's portfolio of bonds has
a current yield of 11.68% and a yield to maturity of 16.78%.
Net income for the Company's fiscal quarter ended September 30, 1996,
reflecting 90 days of operations, was $49,063 on total revenues of $59,369.
Net Income for the Company's nine month period ending September 30, 1996 was
$69,855 on total revenues of $129,713. Interest income earned on the
Company's portfolio of loans for the three month period and nine month periods
ending September 30, 1996 were $57,756 and $125,073 respectively.
Page 8 of 11
<PAGE>
Excluded from revenue for the nine month period ending September 30, 1996 is
$38,415 of origination income, or "points," received by the Company,
recognition of which under generally accepted accounting principles ("GAAP")
must be deferred over the expected life of each loan. However, under tax
principles, origination income is recognized in the period received.
Accordingly, because the status of the Company as a real estate investment
trust requires, among other things, the distribution to shareholders of at
least 95% of "Taxable Income," the dividend declared and to be paid to
shareholders for the quarter ending September 30, 1996 includes origination
income even though it is not recognized in its entirety for the period under
GAAP.
The Company's Board of Directors declared a dividend of $.23125 for
each share held of record on September 30, 1996 for the fiscal quarter ending
September 30, 1996. During the Company's public offering, dividends are
computed and paid to each shareholder based on the number of days during a
quarter that the shareholder owned his or her shares. Based on the 90 day
quarter of operations, the Company's dividend represents a 9.25% annualized
yield to its shareholders.
Total assets of the Company increased from $243,648 as of December 31,
1995 to $2,722,809 as of September 30, 1996, primarily as a result of the sale
and issuance of the Company's common stock pursuant to its public offering.
Shareholders' Equity rose from $194,155 to $2,621,028 for the same reason.
Company liabilities at the end of the September 30, 1996 quarter are primarily
comprised of a "Deferred Income" item, reflecting the practice of the Company
of recognizing its origination income -- fees charged to borrowers at the
commencement of its loans -- over the life of each loan and dividends declared
and payable as of September 30, 1996.
Liquidity and Capital Resources
As of September 30, 1996, the Company had funded first mortgage loans to six
churches in the aggregate principal amount of $2,070,288. As additional
shares of the Company's common stock are sold in the public offering, the
Company intends to fund future first mortgage loans. Notwithstanding the
foregoing, there can be no assurance that the Company will sell any meaningful
number of the remaining shares in the public offering. The offering period
for the public offering expires on or about November 8, 1996, and the offering
could 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 recorded 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 generated by
mortgage loans that it has made. 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
completion of the Minimum Offering on April 15, 1996, through (I) permitted
temporary investments of the net proceeds from the sale of the shares, and
(ii) implementation of its business plan of making mortgage loans to churches.
The principal expenses of the Company will be Advisory Fees, legal and
accounting fees, director fees, costs associated with its communications with
shareholders, and the expenses of its stock transfer agent, registrar and
dividend reinvestment agent. Personnel, office space and other administrative
expenses are absorbed by the Advisor pursuant to the Advisory Agreement.
The public offering of up to 2,000,000 shares ($20,000,000) of the
Company's common stock is expected to continue on a "best efforts" basis up
to November 8, 1996. However, there can be no assurance that any meaningful
number of additional shares will actually be sold. After the initial offer
and sale of shares in its public offering, the Company's capital needs are
expected to be met in the future by (I) additional sales of its common stock);
(ii) prepayment, repayment at maturity and renewal of mortgage loans made by
the Company; (iii) borrowed funds, and (iv) the receipt of additional paid-in
capital through the reinvestment of dividends by shareholders pursuant to the
Company's Dividend Reinvestment Plan. 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
page 9 of 11
<PAGE>
of capital to fund its business operations for the foreseeable future.
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 and to maximize the
Company's earnings. 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 10 of 11
<PAGE> 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 September 30, 1996.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits filed with Form 10-QSB
None
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: November 1, 1996
AMERICAN CHURCH MORTGAGE COMPANY
By:____________________________________
V. James Davis
Chief Executive Officer, Treasurer
(and Chief Financial Officer)
By:____________________________________
David G. Reinhart
Vice President and Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 592,045
<SECURITIES> 0
<RECEIVABLES> 2,129,225
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 695
<PP&E> 1,552
<DEPRECIATION> (708)
<TOTAL-ASSETS> 2,722,809
<CURRENT-LIABILITIES> 63,366
<BONDS> 0
0
0
<COMMON> 2,926
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,722,809
<SALES> 0
<TOTAL-REVENUES> 129,713
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 22,584
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,274
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 69,855
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
