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SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly period ended March 31, 2009
 Commission File No. 000-50764
 CapTerra Financial Group, Inc.
  Colorado
    
    20-0003432(State or other jurisdiction
    
    (IRS Employer File Number)of incorporation)1440 Blake Street, Suite 310Denver, Colorado
    
    80202(Address of principal executive offices)
    
    (zip code)
   þ o
 Yes o No o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ
  o þ




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FORM 10-Q
CapTerra Financial Group, Inc.  TABLE OF CONTENTS
 PagePART I FINANCIAL INFORMATIONItem 1. Financial Statements for the period ended March 31, 2009Consolidated Balance Sheets
    
    
    3Consolidated Statements of Operations
    
    
    4Consolidated Statements of Cash Flows
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis and Plan of Operation
    
    
    12Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    15Item 4. Controls and Procedures
    
    
    15PART II OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    16Item 1A. Risk Factors
    
    
    16Item 2. Changes in Securities
    
    
    19Item 3. Defaults Upon Senior Securities
    
    
    20Item 4. Submission of Matters to a Vote of Security Holders
    
    
    20Item 5. Other Information
    
    
    20Item 6. Exhibits and Reports on Form 8-K
    
    
    20Signatures
    
    
    20Exhibit 4.3Exhibit 4.4Exhibit 31.1Exhibit 32.1
   2




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March 31,
    
    
    December 31,2009
    
    
    2008(unaudited)AssetsCash and equivalents
    
    $
    2,334,651
    
    
    $
    2,383,740Accounts receivable, net
    
    
    2,770,213
    
    
    
    2,562,089Property and equipment, net
of accumulated depreciation
    
    
    19,102
    
    
    
    39,432Real estate held for sale
    
    
    16,376,021
    
    
    
    17,333,027Deposits and prepaids
    
    
    54,854
    
    
    
    52,436Total assets
    
    $
    21,554,841
    
    
    $
    22,370,724Liabilities and Shareholders DeficitLiabilitiesAccounts payable
    
    $
    
    
    
    $
    38,414Accrued liabilities
    
    
    114,469
    
    
    
    128,944Senior subordinated revolving note, related parties
    
    
    22,114,041
    
    
    
    20,802,247Note payable
    
    
    6,079,016
    
    
    
    7,330,652Total liabilities
    
    
    28,307,526
    
    
    
    28,300,257Shareholders DeficitConvertible preferred stock, $.10 par value; 1,000,000 shares authorized, -0- shares
issued and outstanding December 31, 2008 and March 31, 2009
    
    
    
    
    
    
    Common stock, $.001 par value; 50,000,000 shares authorized,
23,602,614 shares issued and outstanding December 31, 2008
23,602,614 shares issued and outstanding March 31, 2009
    
    
    23,603
    
    
    
    23,603Additional paid-in-capital
    
    
    16,040,733
    
    
    
    16,024,577Accumulated deficit
    
    
    (22,817,021
    )
    
    
    (21,977,713
    )Total shareholders deficit
    
    
    (6,752,685
    )
    
    
    (5,929,533
    )Total liabilities and shareholders deficit
    
    $
    21,554,841
    
    
    $
    22,370,724
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For the Quarters EndedMarch 31,2009
    
    
    2008(as restated)Revenue:Sales
    
    $
    1,992,151
    
    
    $
    1,164,000Interest Income  note receivable
    
    
    127,981
    
    
    
    Rental income
    
    
    98,023
    
    
    
    26,405Total revenue
    
    
    2,218,155
    
    
    
    1,190,405Operating expenses:Cost of sales
    
    
    1,967,022
    
    
    
    1,164,000Impairment loss on real estate
    
    
    115,500
    
    
    
    Selling, general and administrative
    
    
    572,559
    
    
    
    688,004Total operating expenses
    
    
    2,655,081
    
    
    
    1,852,004Loss from operations
    
    
    (436,927
    )
    
    
    (661,599
    )Non-operating expense:Interest income
    
    
    2,057
    
    
    
    8,985Interest expense
    
    
    (378,655
    )
    
    
    (362,145
    )Other income (expense)
    
    
    (25,783
    )
    
    
    Loss before income taxes and minority interest
    
    
    (839,308
    )
    
    
    (1,014,759
    )Income tax provision
    
    
    
    
    
    
    Loss before minority interest
    
    
    (839,308
    )
    
    
    (1,014,759
    )Minority interest
    
    
    
    
    
    
    Net loss
    
    $
    (839,308
    )
    
    $
    (1,014,759
    )Preferred stock dividends
    
    
    
    
    
    
    (77,338
    )Net loss available to common shareholders
    
    $
    (839,308
    )
    
    $
    (1,092,097
    )Basic and diluted loss per common share
    
    $
    (0.04
    )
    
    $
    (0.07
    )Basic and diluted weighted average common shares outstanding
    
    
    23,602,614
    
    
    
    16,036,625
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For the Quarters EndedMarch 31,2009
    
    
    2008Cash flows from operating activities:Net loss
    
    $
    (839,308
    )
    
    $
    (1,014,759
    )Adjustments to reconcile net income to net cash used by operating activities:Deferred income taxes
    
    
    
    
    
    
    9,165Depreciation and write-off of assets
    
    
    20,330
    
    
    
    22,143Impairment of assets
    
    
    115,500
    
    
    
    Warrant expense
    
    
    16,156
    
    
    
    Changes in operating assets and operating liabilities:Construction in progress
    
    
    
    
    
    
    707,062Real estate held for sale
    
    
    841,507
    
    
    
    (1,323,977
    )Land held for development
    
    
    
    
    
    
    536,636Accounts receivable
    
    
    (208,124
    )
    
    
    2,059,972Deposits and prepaids
    
    
    (2,418
    )
    
    
    (1,778
    )Accounts payable and accrued liabilities
    
    
    (52,890
    )
    
    
    (504,559
    )Unearned revenue
    
    
    
    
    
    
    55,658Net cash provided by (used in) operating activities
    
    
    (109,247
    )
    
    
    545,563Cash flows from investing activities:Cash collections on notes receivable
    
    
    
    
    
    
    65,000Issuance of notes receivable
    
    
    
    
    
    
    (62,442
    )Cash paid for property and equipment
    
    
    
    
    
    
    (11,397
    )Net cash (used in) investing activities
    
    
    
    
    
    
    (8,839
    )Cash flows from financing activities:Preferred stock dividends paid
    
    
    
    
    
    
    (77,337
    )Proceeds from issuance of related party loans
    
    
    
    
    
    
    924,952Repayment of related party loans
    
    
    (1,251,636
    )
    
    
    (2,567,054
    )Proceeds from issuance of notes payable
    
    
    1,311,794
    
    
    
    570,070Repayment of notes payable
    
    
    
    
    
    
    (791,613
    )Net cash provided by (used in) financing activities
    
    
    60,158
    
    
    
    (1,940,982
    )Net change in cash
    
    $
    (49,089
    )
    
    $
    (1,404,258
    )Cash and cash equivalents, beginning of the period
    
    $
    2,383,740
    
    
    $
    2,035,620Cash and cash equivalents, end of the period
    
    $
    2,334,651
    
    
    $
    631,362Supplemental disclosure of cash flow information:Cash paid during the year for:Interest
    
    $
    
    
    
    $
    548,975Supplemental disclosure of non-cash investing and financing activitiesPreferred stock dividends declared but not paid
    
    $
    
    
    
    $
    77,338
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(1) Nature of Organization and Summary of Significant Accounting Policies
 Organization and Basis of Presentation
  Principles of Consolidation
  Name of Subsidiary Ownership
 Name of Subsidiary
    
    OwnershipSouth Glen Eagles Drive, LLC
    
    
    51
    %Hwy 46 and Bluffton Pkwy, LLC
    
    
    51
    %AARD LECA LSS Lonestar, LLC
    
    
    51
    %AARD LECA VL1, LLC
    
    
    51
    %AARD-Charmar Greeley, LLC
    
    
    51
    %AARD-Charmar Greeley Firestone, LLC
    
    
    51
    %AARD-Econo Lube Stonegate, LLC
    
    
    51
    %Buckeye AZ, LLC
    
    
    51
    %AARD-Cypress Sound, LLC
    
    
    51
    %AARD ORFL FD Goldenrod, LLC
    
    
    51
    %AARD Esterra Mesa 1, LLC
    
    
    51
    %CapTerra Fund I, LLC
    
    
    100
    %
  Revenue Recognition
   Use of Estimates
    6




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Fair Value of Financial Instruments
  Recent Accounting Pronouncements
     (2) Going Concern
    (3) Real Estate Held for Sale
   7




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(4) Related Party Transactions
  GDBA
    
    
    BOCO
    
    
    TotalSubordinated notes
    
    $
    7,500,000
    
    
    $
    13,750,000
    
    
    $
    21,250,000Accrued interest
    
    
    319,233
    
    
    
    544,808
    
    
    
    864,041Total senior subordinated revolving notes
    
    $
    7,819,233
    
    
    $
    14,294,808
    
    
    $
    22,114,041
 GDBA Investments, LLLP
     BOCO Investments, LLC
        8




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(5) Property and Equipment
  Equipment
    
    $
    21,706Furniture and fixtures
    
    
    2,547Computers and related equipment
    
    
    13,113Software and intangibles
    
    
    16,668$
    54,034less accumulated depreciation and amortization
    
    
    (34,932
    )$
    19,102
  (6) Shareholders Equity
 Preferred Stock
  Common Stock
  Warrants
  (7) Notes Receivable
   9




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(8) Income Taxes
  Deferred tax assets:Impairment of asset
    
    
    3,910,000Net operating loss and carry-forwards
    
    
    3,476,000Allowance for Doubtful Accounts
    
    
    305,000Partnership income
    
    
    130,000Origination Fee Income
    
    
    (85,000
    )Fixed Assets
    
    
    (4,000
    )Other temporary differences
    
    
    (67,000
    )7,665,000Valuation Allowance
    
    
    (7,665,000
    )Total net deferred tax assets
    
    
    
   (9) Notes Payable
 Vectra Bank Senior Credit Facility:
     10




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United Western Bank Senior Credit Facility
    (10) Impairment of Assets
    11




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
  Forward-Looking Statements
  Overview and History
        12




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Results of Operations
        13




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Liquidity and Capital Resources
         Recently Issued Accounting Pronouncements
     14




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Seasonality
  Critical Accounting Policies
    
   
      15




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
    
    our ability to find suitable real estate projects; and
 
    
    our ability to generate sufficient revenues from those projects.
       16




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
    
    increase our vulnerability to general adverse economic and industry conditions;
    
    require us to dedicate a substantial portion of our cash flow from operations
to payments on our indebtedness if we do not maintain specified financial
ratios, thereby reducing the availability of our cash flow for other purposes;
or
    
    limit our flexibility in planning for, or reacting to, changes in our business
and the industry in which we operate, thereby placing us at a competitive
disadvantage compare to our competitors that may have less indebtedness.
    
    
    incur additional indebtedness;
    
    make capital expenditures and other investments above a certain level;
    
    merge, consolidate or dispose of our assets or the capital stock or assets of any subsidiary;
    
    pay dividends, make distributions or redeem capital stock in certain circumstances;
    
    enter into transactions with our affiliates;
    
    grant liens on our assets or the assets of our subsidiaries; and
    
    make or repay intercompany loans.
       17




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18




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
    
    actual or anticipated fluctuations in our operating results;
 
    
    change in financial estimates by securities analysts or our failure to perform in line with such estimates;
 
    
    changes in market valuations of other real estate oriented companies, particularly those that market
services such as ours;
 
    
    announcements by us or our competitors of significant innovations, acquisitions, strategic partnerships,
joint ventures or capital commitments;
 
    
    introduction of technologies or product enhancements that reduce the need for our services;
 
    
    the loss of one or more key customers; and
 
    
    departures of key personnel.
       
    19




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Exhibits4.3
    
    
    Warrant dated February 25, 2009 for BOCO INVESTMENTS, LLC., as revised4.4
    
    
    Warrant dated March 31, 2009 for BOCO INVESTMENTS, LLC., as revised21
    *
    
    List of Subsidiaries31.1
    
    
    Certification of Chief Executive/Financial Officer pursuant to Rule 13a-14(a)/15(d)-14(a)32.1
    
    
    Certification of Chief Executive/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
  
   CAPTERRA FINANCIAL GROUP, INC.Dated: May 15, 2009
    By:
    /s/ James W Creamer IIIJames W Creamer IIIPresident, Chief Executive Officer,

Treasurer, Chief Financial Officer  20




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EXHIBIT INDEX
 Exhibit No.
    
    Description4.3
    
    
    Warrant dated February 25, 2009 for BOCO INVESTMENTS, LLC., as revised4.4
    
    
    Warrant dated March 31, 2009 for BOCO INVESTMENTS, LLC., as revised21
    
    
    List of Subsidiaries31.1
    
    
    Certification of Chief Executive/Financial Officer pursuant to Rule 13a-14(a)/15(d)-14(a)32.1
    
    
    Certification of Chief Executive/Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  21