##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED
SEPTEMBER 30, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 COMMISSION FILE NUMBER: 0-50363
 GLADSTONE COMMERCIAL CORPORATION
  MARYLAND
    
    02-0681276(State or other jurisdiction of incorporation or
    
    (I.R.S. Employer Identification No.)organization)
 1521 WESTBRANCH DRIVE, SUITE 200
MCLEAN, VIRGINIA 22102   (703) 287-5800
 þ o
 þ o
 o þ




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##### 



GLADSTONE COMMERCIAL CORPORATION
 TABLE OF CONTENTS
 PAGEPART I FINANCIAL INFORMATIONItem 1.
    
    Consolidated Financial Statements (Unaudited)
    
    
    3Consolidated Balance Sheets as of September 30, 2005 and December 31, 2004Consolidated Statements of Operations for the three and nine months ended September 30, 2005 and 2004Consolidated Statements of Cash Flows for the nine months ended September 30, 2005 and 2004Notes to Financial StatementsItem 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    41Item 4.
    
    Controls and Procedures
    
    
    42PART II OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    43Item 2.
    
    Changes in Securities and Use of Proceeds
    
    
    43Item 3.
    
    Defaults Upon Senior Securities
    
    
    43Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    43Item 5.
    
    Other Information
    
    
    43Item 6.
    
    Exhibits
    
    
    43SIGNATURES
    
    
    45
 2




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##### 



GLADSTONE COMMERCIAL CORPORATION
 CONSOLIDATED BALANCE SHEETS
 (Unaudited)
 September 30, 2005
    
    
    December 31, 2004ASSETSReal estate, net
    
    $
    129,028,346
    
    
    $
    60,466,330Lease intangibles, net of accumulated
amortization of
$826,865 and $194,047, respectively
    
    
    11,062,110
    
    
    
    3,230,146Mortgage notes receivable
    
    
    21,047,274
    
    
    
    11,107,717Cash and cash equivalents
    
    
    364,282
    
    
    
    29,153,987Funds held in escrow
    
    
    1,723,782
    
    
    
    1,060,977Replacement reserve
    
    
    1,088,242
    
    
    
    Interest
receivable  mortgage note
    
    
    67,511
    
    
    
    64,795Interest
receivable  employees
    
    
    4,681
    
    
    
    4,792Deferred rent receivable
    
    
    2,460,616
    
    
    
    210,846Deferred financing costs
    
    
    1,486,841
    
    
    
    Prepaid expenses
    
    
    234,108
    
    
    
    170,685Deposits on real estate
    
    
    200,000
    
    
    
    50,000Other assets
    
    
    78,338
    
    
    
    64,819TOTAL ASSETS
    
    $
    168,846,131
    
    
    $
    105,585,094LIABILITIES AND STOCKHOLDERS EQUITYLIABILITIESDue to Adviser
    
    $
    164,189
    
    
    $
    129,231Accounts payable and accrued expenses
    
    
    435,962
    
    
    
    168,389Dividends payable
    
    
    
    
    
    
    920,040Mortgage notes payable
    
    
    42,158,247
    
    
    
    Borrowings under line of credit
    
    
    23,810,000
    
    
    
    Rent received in advance, security deposits
and funds held in escrow
    
    
    2,078,037
    
    
    
    1,674,741Total Liabilities
    
    
    68,646,435
    
    
    
    2,892,401STOCKHOLDERS EQUITYCommon stock, $0.001 par value, 20,000,000
shares authorized and 7,672,000 and 7,667,000
shares issued and outstanding, respectively
    
    
    7,672
    
    
    
    7,667Additional paid in capital
    
    
    105,502,544
    
    
    
    105,427,549Notes receivable  employees
    
    
    (432,906
    )
    
    
    (375,000
    )Distributions in excess of accumulated earnings
    
    
    (4,877,614
    )
    
    
    (2,367,523
    )Total Stockholders Equity
    
    
    100,199,696
    
    
    
    102,692,693TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    168,846,131
    
    
    $
    105,585,094
  3




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##### 



GLADSTONE COMMERCIAL CORPORATION
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 For the three
    
    
    For the three
    
    
    For the nine
    
    
    For the ninemonths ended
    
    
    months ended
    
    
    months ended
    
    
    months endedSeptember 30, 2005
    
    
    September 30, 2004
    
    
    September 30, 2005
    
    
    September 30, 2004OPERATING REVENUESRental income
    
    $
    3,453,777
    
    
    $
    1,066,076
    
    
    $
    7,536,025
    
    
    $
    1,667,538Interest income from mortgage
notes receivable
    
    
    553,968
    
    
    
    284,659
    
    
    
    1,351,197
    
    
    
    697,059Tenant recovery revenue
    
    
    28,208
    
    
    
    
    
    
    
    69,808
    
    
    
    Total
operating revenues
    
    
    4,035,953
    
    
    
    1,350,735
    
    
    
    8,957,030
    
    
    
    2,364,597OPERATING EXPENSESDepreciation and amortization
    
    
    1,140,181
    
    
    
    313,032
    
    
    
    2,374,912
    
    
    
    519,133Management advisory fee
    
    
    609,171
    
    
    
    333,825
    
    
    
    1,564,826
    
    
    
    843,360Professional fees
    
    
    99,799
    
    
    
    38,373
    
    
    
    447,802
    
    
    
    313,804Taxes and licenses
    
    
    37,399
    
    
    
    973
    
    
    
    191,112
    
    
    
    13,543Insurance
    
    
    70,244
    
    
    
    59,579
    
    
    
    207,648
    
    
    
    188,554Interest
    
    
    895,775
    
    
    
    
    
    
    
    1,186,798
    
    
    
    General and administrative
    
    
    107,059
    
    
    
    74,881
    
    
    
    337,722
    
    
    
    352,145Total operating expenses
    
    
    2,959,628
    
    
    
    820,663
    
    
    
    6,310,820
    
    
    
    2,230,539Income from operations
    
    
    1,076,325
    
    
    
    530,072
    
    
    
    2,646,210
    
    
    
    134,058Interest incomeInterest income from temporary
investments
    
    
    10,093
    
    
    
    153,716
    
    
    
    117,806
    
    
    
    488,701Interest income  employee loans
    
    
    5,562
    
    
    
    1,250
    
    
    
    15,483
    
    
    
    1,250Total interest income
    
    
    15,655
    
    
    
    154,966
    
    
    
    133,289
    
    
    
    489,951Realized and unrealized loss from
foreign currencyNet realized loss from foreign
currency transactions
    
    
    (3,007
    )
    
    
    
    
    
    
    (5,943
    )
    
    
    Net unrealized appreciation
(depreciation) on
translation of assets and
liabilities in a foreign
currency
    
    
    (221,562
    )
    
    
    
    
    
    
    (221,428
    )
    
    
    Total net realized and
unrealized loss from
foreign currency
    
    
    (224,569
    )
    
    
    
    
    
    
    (227,371
    )
    
    
    NET INCOME
    
    $
    867,411
    
    
    $
    685,038
    
    
    $
    2,552,128
    
    
    $
    624,009Earnings per weighted average common
shareBasic
    
    $
    0.11
    
    
    $
    0.09
    
    
    $
    0.33
    
    
    $
    0.08Diluted
    
    $
    0.11
    
    
    $
    0.09
    
    
    $
    0.33
    
    
    $
    0.08Weighted average shares outstandingBasic
    
    
    7,672,000
    
    
    
    7,648,250
    
    
    
    7,669,619
    
    
    
    7,644,099Diluted
    
    
    7,725,667
    
    
    
    7,697,079
    
    
    
    7,718,441
    
    
    
    7,703,504
  4




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##### 



GLADSTONE COMMERCIAL CORPORATION
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 For the nine
    
    
    For the ninemonths ended
    
    
    months endedSeptember 30, 2005
    
    
    September 30, 2004Cash flows from operating activities:Net income
    
    $
    2,552,128
    
    
    $
    624,009Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    2,374,912
    
    
    
    519,133Changes in assets and liabilities:Amortization of deferred financing costs
    
    
    158,457
    
    
    
    Amortization of deferred rent asset
    
    
    114,700
    
    
    
    Increase in mortgage interest receivable
    
    
    (2,716
    )
    
    
    (61,840
    )Decrease (increase) in employee interest receivable
    
    
    111
    
    
    
    (1,250
    )Increase in prepaid expenses
    
    
    (63,423
    )
    
    
    (37,293
    )Increase in other assets
    
    
    (13,520
    )
    
    
    (25,319
    )Increase in deferred rent receivable
    
    
    (369,624
    )
    
    
    (100,110
    )Increase in replacement reserve
    
    
    (1,088,242
    )
    
    
    Increase in accounts payable and accrued expenses
    
    
    267,574
    
    
    
    11,898Increase (decrease) in due to Adviser
    
    
    34,958
    
    
    
    (124,656
    )(Decrease) increase in rent received in advance and
security deposits
    
    
    (259,509
    )
    
    
    475,515Net cash provided by operating activities
    
    
    3,705,806
    
    
    
    1,280,087Cash flows from investing activities:Acquisition of real estate
    
    
    (80,763,736
    )
    
    
    (45,756,858
    )Issuance of mortgage note receivable
    
    
    (10,000,000
    )
    
    
    (11,170,000
    )Deposit on future acquisition
    
    
    (200,000
    )
    
    
    (200,000
    )Principal repayments on mortgage note receivable
    
    
    60,443
    
    
    
    38,950Net cash used in investing activities
    
    
    (90,903,293
    )
    
    
    (57,087,908
    )Cash flows from financing activities:Offering costs
    
    
    
    
    
    
    (7,730
    )Proceeds from borrowings under mortgage note payable
    
    
    42,190,283
    
    
    
    Principal repayments on mortgage note payable
    
    
    (32,036
    )
    
    
    Borrowings from line of credit
    
    
    69,410,000
    
    
    
    Repayments on the line of credit
    
    
    (45,600,000
    )
    
    
    Principal repayments on employee loans
    
    
    17,094
    
    
    
    Payments for deferred financing costs
    
    
    (1,595,299
    )
    
    
    Dividends paid
    
    
    (5,982,260
    )
    
    
    (1,910,500
    )Net cash provided by (used in) financing activities
    
    
    58,407,782
    
    
    
    (1,918,230
    )Net decrease in cash and cash equivalents
    
    
    (28,789,705
    )
    
    
    (57,726,051
    )Cash and cash equivalents, beginning of period
    
    
    29,153,987
    
    
    
    99,075,765Cash and cash equivalents, end of period
    
    $
    364,282
    
    
    $
    41,349,714Cash paid during period for interest
    
    $
    1,028,341
    
    
    $
    NON-CASH FINANCING ACTIVITIESNotes receivable issued in exchange for common stock
associated with the exercise of employee stock options
    
    $
    75,000
    
    
    $
    375,000
  5




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##### 



GLADSTONE COMMERCIAL CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Organization and Significant Accounting Policies
  Subsidiaries
     Interim financial information
  Investments in real estate
 s
 6




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##### 



7




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##### 



September 30, 2005
    
    
    December 31, 2004In-place leases
    
    $
    4,228,962
    
    
    $
    1,929,800Leasing costs
    
    
    4,843,746
    
    
    
    1,494,393Customer relationships
    
    
    2,816,267
    
    
    
    Accumulated amortization
    
    
    (826,865
    )
    
    
    (194,047
    )$
    11,062,110
    
    
    $
    3,230,146
 Impairment
 Investments in Real Estate
  Provision for Loan Losses
  Cash and cash equivalents
  8




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##### 



Replacement reserve
  Deferred financing costs
  Revenue recognition
   Stock based compensation
   9




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##### 



For the three
    
    
    For the three
    
    
    For the nine
    
    
    For the ninemonths ended
    
    
    months ended
    
    
    months ended
    
    
    months endedSeptember 30, 2005
    
    
    September 30, 2004
    
    
    September 30, 2005
    
    
    September 30, 2004Net income, as reported
    
    $
    867,411
    
    
    $
    685,038
    
    
    $
    2,552,128
    
    
    $
    624,009Less: Stock-based compensation expense
determined using the fair value based method
    
    
    (43,588
    )
    
    
    (159,343
    )
    
    
    (140,219
    )
    
    
    (530,399
    )Net income, pro-forma
    
    $
    823,823
    
    
    $
    525,695
    
    
    $
    2,411,909
    
    
    $
    93,610Basic, as reported
    
    $
    0.11
    
    
    $
    0.09
    
    
    $
    0.33
    
    
    $
    0.08Basic, pro-forma
    
    $
    0.11
    
    
    $
    0.07
    
    
    $
    0.31
    
    
    $
    0.01Diluted, as reported
    
    $
    0.11
    
    
    $
    0.09
    
    
    $
    0.33
    
    
    $
    0.08Diluted, pro-forma
    
    $
    0.11
    
    
    $
    0.07
    
    
    $
    0.31
    
    
    $
    0.01
  Income taxes
   10




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##### 



Segment information
  Foreign Currency Transactions
  Use of estimates
  Reclassifications
  2. Management Advisory Fee
  11




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##### 



For the three
    
    
    For the three
    
    
    For the nine
    
    
    For the ninemonths ended
    
    
    months ended
    
    
    months ended
    
    
    months endedSeptember 30, 2005
    
    
    September 30, 2004
    
    
    September 30, 2005
    
    
    September 30, 2004Allocated payroll and benefits
    
    $
    446,625
    
    
    $
    265,888
    
    
    $
    1,128,502
    
    
    $
    647,139Allocated overhead expenses
    
    $
    162,546
    
    
    $
    67,937
    
    
    $
    436,324
    
    
    $
    196,221Total management advisory fee
    
    $
    609,171
    
    
    $
    333,825
    
    
    $
    1,564,826
    
    
    $
    843,360
 12




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##### 



. Stock Options
   Number of
    
    
    Strike Price of
    
    
    Amount ofOptions
    
    
    Options
    
    
    Promissory
    
    
    
    
    
    
    Interest RateDate Issued
    
    Exercised
    
    
    Exercised
    
    
    Note
    
    
    Term of Note
    
    
    on NoteSep-04
    
    
    25,000
    
    
    $
    15.00
    
    
    $
    375,000
    
    
    9 years
    
    
    5.0
    %May-05
    
    
    5,000
    
    
    $
    15.00
    
    
    $
    75,000
    
    
    9 years
    
    
    6.0
    %
  4. Earnings Per Common Share
  For the three
    
    
    For the three
    
    
    For the nine
    
    
    For the ninemonths ended
    
    
    months ended
    
    
    months ended
    
    
    months endedSeptember 30, 2005
    
    
    September 30, 2004
    
    
    September 30, 2005
    
    
    September 30, 2004Net income
    
    $
    867,411
    
    
    $
    685,038
    
    
    $
    2,552,128
    
    
    $
    624,009Denominator for basic weighted average shares
    
    
    7,672,000
    
    
    
    7,648,250
    
    
    
    7,669,619
    
    
    
    7,644,099Dilutive effect of stock options
    
    
    53,667
    
    
    
    48,829
    
    
    
    48,822
    
    
    
    59,405Denominator for diluted weighted average shares
    
    
    7,725,667
    
    
    
    7,697,079
    
    
    
    7,718,441
    
    
    
    7,703,504Basic earnings per common share
    
    $
    0.11
    
    
    $
    0.09
    
    
    $
    0.33
    
    
    $
    0.08Diluted earnings per common share
    
    $
    0.11
    
    
    $
    0.09
    
    
    $
    0.33
    
    
    $
    0.08
 13




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##### 



5. Real Estate
  Square FootageDate Acquired
    
    Location
    
    (unaudited)
    
    
    Property Description
    
    Net Real EstateDec-03
    
    Raleigh, North Carolina
    
    
    58,926
    
    
    Office
    
    $
    5,072,431Jan-04
    
    Canton, Ohio
    
    
    54,018
    
    
    Office and Warehouse
    
    
    3,512,179Apr-04
    
    Akron, Ohio
    
    
    83,891
    
    
    Office and Laboratory
    
    
    8,415,585Jun-04
    
    Charlotte, North Carolina
    
    
    64,500
    
    
    Office
    
    
    9,059,759Jul-04
    
    Canton, North Carolina
    
    
    228,000
    
    
    Commercial and Manufacturing
    
    
    5,040,926Aug-04
    
    Snyder Township, Pennsylvania
    
    
    290,000
    
    
    Commercial and Warehouse
    
    
    6,471,549Aug-04
    
    Lexington, North Carolina
    
    
    154,000
    
    
    Commercial and Warehouse
    
    
    2,900,312Sep-04
    
    Austin, Texas
    
    
    51,993
    
    
    Flexible Office
    
    
    7,159,424Oct-04
    
    Norfolk, Virginia
    
    
    25,797
    
    
    Commercial and Manufacturing
    
    
    908,789Oct-04
    
    Mt. Pocono, Pennsylvania
    
    
    223,275
    
    
    Commercial and Manufacturing
    
    
    6,041,608Oct-04
    
    Granby, Quebec
    
    
    99,981
    
    
    Commercial and Manufacturing
    
    
    2,976,064Oct-04
    
    Montreal, Quebec
    
    
    42,490
    
    
    Commercial and Manufacturing
    
    
    1,825,646Feb-05
    
    San Antonio, Texas
    
    
    60,245
    
    
    Flexible Office
    
    
    8,210,205Feb-05
    
    Columbus, Ohio
    
    
    39,000
    
    
    Industrial
    
    
    2,754,104Apr-05
    
    Big Flats, New York
    
    
    120,000
    
    
    Industrial
    
    
    6,684,741May-05
    
    Wichita, Kansas
    
    
    69,287
    
    
    Office
    
    
    11,168,009May-05
    
    Arlington, Texas
    
    
    64,000
    
    
    Warehouse and Bakery
    
    
    4,023,257Jun-05
    
    Dayton, Ohio
    
    
    59,894
    
    
    Office
    
    
    2,368,006Jul-05
    
    Eatontown, New Jersey
    
    
    30,268
    
    
    Office
    
    
    4,843,652Jul-05
    
    Franklin Township, New Jersey
    
    
    183,000
    
    
    Office and Warehouse
    
    
    8,169,812Jul-05
    
    Duncan, South Carolina
    
    
    278,020
    
    
    Office and Manufacturing
    
    
    15,211,744Aug-05
    
    Hazelwood, Missouri
    
    
    51,155
    
    
    Office and Warehouse
    
    
    3,031,623Sep-05
    
    Angola, Indiana
    
    
    52,080
    
    
    Industrial
    
    
    1,019,116Sep-05
    
    Angola, Indiana
    
    
    50,000
    
    
    Industrial
    
    
    1,140,689Sep-05
    
    Rock Falls, Illinois
    
    
    52,000
    
    
    Industrial
    
    
    1,019,116$
    129,028,346
  September 30, 2005
    
    
    December 31, 2004Real estate:Land
    
    $
    17,032,402
    
    
    $
    7,669,000Building
    
    
    112,074,922
    
    
    
    52,641,933Tenant improvements
    
    
    2,448,241
    
    
    
    940,522Accumulated depreciation
    
    
    (2,527,219
    )
    
    
    (785,125
    )Real estate, net
    
    $
    129,028,346
    
    
    $
    60,466,330
    14




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##### 



15




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##### 



Nine months ended September 30, 2005Tenant
    
    
    Lease
    
    
    Deferred
    
    
    Total PurchaseLand
    
    
    Building
    
    
    Improvements
    
    
    Intangibles
    
    
    Rent Asset
    
    
    PriceSan Antonio, Texas
    
    $
    843,000
    
    
    $
    6,817,984
    
    
    $
    718,439
    
    
    $
    664,218
    
    
    
    
    
    
    $
    9,043,641Columbus, Ohio
    
    
    410,000
    
    
    
    2,379,947
    
    
    
    5,161
    
    
    
    243,063
    
    
    
    395,000
    
    
    
    3,433,171Big Flats, New York
    
    
    275,000
    
    
    
    6,492,984
    
    
    
    
    
    
    
    337,589
    
    
    
    
    
    
    
    7,105,573Wichita Kansas
    
    
    1,525,000
    
    
    
    9,633,478
    
    
    
    119,182
    
    
    
    606,701
    
    
    
    1,587,822
    
    
    
    13,472,183Arlington, Texas
    
    
    635,964
    
    
    
    3,350,586
    
    
    
    68,246
    
    
    
    1,300,087
    
    
    
    12,024
    
    
    
    5,366,907
    (1)Dayton, Ohio
    
    
    525,000
    
    
    
    1,416,431
    
    
    
    444,137
    
    
    
    392,741
    
    
    
    
    
    
    
    2,778,309Eatontown, New Jersey
    
    
    1,350,630
    
    
    
    3,388,970
    
    
    
    131,091
    
    
    
    774,996
    
    
    
    
    
    
    
    5,645,687Franklin Township, New Jersey
    
    
    1,800,000
    
    
    
    6,410,908
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,210,908Duncan, South Carolina
    
    
    977,898
    
    
    
    14,325,669
    
    
    
    
    
    
    
    3,980,102
    
    
    
    
    
    
    
    19,283,669Hazelwood, Missouri
    
    
    763,178
    
    
    
    2,257,115
    
    
    
    21,463
    
    
    
    165,285
    
    
    
    
    
    
    
    3,207,041Angola, Indiana & Rock
Falls, Illinois
    
    
    257,732
    
    
    
    2,927,444
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,185,176$
    9,363,402
    
    
    $
    59,401,516
    
    
    $
    1,507,719
    
    
    $
    8,464,782
    
    
    $
    1,994,846
    
    
    $
    80,732,265
 
 (1)
    
    The purchase price allocation for this property was adjusted in July of 2005.  Year
    
    Rental Payments2005
    
    $
    3,509,1192006
    
    
    14,118,1652007
    
    
    14,355,6462008
    
    
    14,651,5912009
    
    
    13,752,844Thereafter
    
    
    80,049,268
   16




---



##### 



Location
    
    Real Estate TaxesRaleigh, North Carolina
    
    $
    45,743Canton, Ohio
    
    
    6,374Akron, Ohio
    
    
    81,933Charlotte, North Carolina
    
    
    56,438Canton, North Carolina
    
    
    47,877Snyder Township, Pennsylvania
    
    
    99,222Lexington, North Carolina
    
    
    21,102Austin, Texas
    
    
    167,499Norfolk, Virginia
    
    
    11,411Mt. Pocono, Pennsylvania
    
    
    115,232Granby, Quebec
    
    
    38,201Montreal, Quebec
    
    
    81,944San Antonio, Texas
    
    
    159,551Columbus, Ohio
    
    
    37,610Big Flats, New York
    
    
    24,594Wichita, Kansas
    
    
    5,222Arlington, Texas
    
    
    63,520Dayton, Ohio
    
    
    49,156Eatontown, New Jersey
    
    
    53,440Franklin Township, New Jersey
    
    
    140,280Duncan, South Carolina
    
    
    351,257Hazelwood, Missouri
    
    
    67,961Angola, Indiana & Rock Falls, Illinois
    
    
    43,591$
    1,769,158
 6. Mortgage Notes Receivable
   7. Dividends Declared per Share
  17




---



##### 



Record Date
    
    Payment Date
    
    Dividend per ShareJanuary 17, 2005
    
    January 31, 2005
    
    $
    0.06February 14, 2005
    
    February 25, 2005
    
    $
    0.06March 16, 2005
    
    March 30, 2005
    
    $
    0.06April 15, 2005
    
    April 29, 2005
    
    $
    0.08May 13, 2005
    
    May 27, 2005
    
    $
    0.08June 16, 2005
    
    June 30, 2005
    
    $
    0.08July 21, 2005
    
    July 29, 2005
    
    $
    0.08August 23, 2005
    
    August 31, 2005
    
    $
    0.08September 22, 2005
    
    September 30, 2005
    
    $
    0.08October 21, 2005
    
    October 31, 2005
    
    $
    0.10November 21, 2005
    
    November 30, 2005
    
    $
    0.10December 21, 2005
    
    December 30, 2005
    
    $
    0.10
 8. Segment Information
  As of and for the Three Months Ended September 30, 2005
    
    
    As of and for the Nine Months Ended September 30, 2005Real Estate
    
    
    Real Estate
    
    
    
    
    
    
    
    
    
    
    Real Estate
    
    
    Real EstateLeasing
    
    
    Lending
    
    
    Other
    
    
    Total
    
    
    Leasing
    
    
    Lending
    
    
    Other
    
    
    TotalRevenue
    
    $
    3,481,985
    
    
    $
    553,968
    
    
    $
    
    
    
    $
    4,035,953
    
    
    $
    7,605,833
    
    
    $
    1,351,197
    
    
    $
    
    
    
    $
    8,957,030Expenses
    
    
    1,410,209
    
    
    
    
    
    
    
    1,549,419
    
    
    
    2,959,628
    
    
    
    2,857,852
    
    
    
    
    
    
    
    3,452,968
    
    
    
    6,310,820Income (loss) from operations
    
    
    2,071,776
    
    
    
    553,968
    
    
    
    (1,549,419
    )
    
    
    1,076,325
    
    
    
    4,747,981
    
    
    
    1,351,197
    
    
    
    (3,452,968
    )
    
    
    2,646,210Other income (loss)
    
    
    (224,569
    )
    
    
    
    
    
    
    15,655
    
    
    
    (208,914
    )
    
    
    (227,371
    )
    
    
    
    
    
    
    133,289
    
    
    
    (94,082
    )Net income (loss)
    
    $
    1,847,207
    
    
    $
    553,968
    
    
    $
    (1,533,764
    )
    
    $
    867,411
    
    
    $
    4,520,610
    
    
    $
    1,351,197
    
    
    $
    (3,319,679
    )
    
    $
    2,552,128Total Assets
    
    $
    143,839,316
    
    
    $
    21,114,785
    
    
    $
    3,892,030
    
    
    $
    168,846,131
    
    
    $
    143,839,316
    
    
    $
    21,114,785
    
    
    $
    3,892,030
    
    
    $
    168,846,131
 As of and for the Three Months Ended September 30, 2004
    
    
    As of and for the Nine Months Ended September 30, 2004Real Estate
    
    
    Real Estate
    
    
    
    
    
    
    
    
    
    
    Real Estate
    
    
    Real EstateLeasing
    
    
    Lending
    
    
    Other
    
    
    Total
    
    
    Leasing
    
    
    Lending
    
    
    Other
    
    
    TotalRevenue
    
    $
    1,066,076
    
    
    $
    284,659
    
    
    $
    
    
    
    $
    1,350,735
    
    
    $
    1,667,538
    
    
    $
    697,059
    
    
    $
    
    
    
    $
    2,364,597Expenses
    
    
    313,032
    
    
    
    
    
    
    
    507,631
    
    
    
    820,663
    
    
    
    519,133
    
    
    
    
    
    
    
    1,711,406
    
    
    
    2,230,539Income (loss) from operations
    
    
    753,044
    
    
    
    284,659
    
    
    
    (507,631
    )
    
    
    530,072
    
    
    
    1,148,405
    
    
    
    697,059
    
    
    
    (1,711,406
    )
    
    
    134,058Other income
    
    
    
    
    
    
    
    
    
    
    154,966
    
    
    
    154,966
    
    
    
    
    
    
    
    
    
    
    
    489,951
    
    
    
    489,951Net income (loss)
    
    $
    753,044
    
    
    $
    284,659
    
    
    $
    (352,665
    )
    
    $
    685,038
    
    
    $
    1,148,405
    
    
    $
    697,059
    
    
    $
    (1,221,455
    )
    
    $
    624,009Total Assets
    
    $
    52,021,413
    
    
    $
    11,286,986
    
    
    $
    41,805,008
    
    
    $
    105,113,407
    
    
    $
    52,021,413
    
    
    $
    11,286,986
    
    
    $
    41,805,008
    
    
    $
    105,113,407
 9. Line of Credit
  18




---



##### 



10. Mortgage Notes Payable
     11. Subsequent Events
  19




---



##### 



20




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 The following analysis of our financial condition and results of operations should be read in
conjunction with our financial statements and the notes thereto contained elsewhere in this Form
10-Q.
 Forward-Looking Statements
 Some of the statements in this Quarterly Report on Form 10-Q constitute forward-looking
statements under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, including statements made with respect to possible or
assumed future results of our business, financial condition, liquidity, results of operations,
plans and objectives. When we use the words believe, expect, anticipate, estimate or
similar expressions, we intend to identify forward-looking statements. You should not place undue
reliance on these forward-looking statements. Statements regarding the following subjects are
forward-looking by their nature:
 
    
    our business strategy;
    
    pending transactions;
    
    our projected operating results;
    
    our ability to obtain future financing arrangements;
    
    estimates relating to our future distributions;
    
    our understanding of our competition;
    
    market trends;
    
    estimates of our future operating expenses, including payments to our Adviser under the
terms of our advisory agreement;
    
    projected capital expenditures; and
    
    use of the proceeds of our credit facilities, mortgage notes payable, offerings of equity
securities and other future capital resources, if any.
 These statements involve known and unknown risks, uncertainties and other factors that may cause
results, levels of activity, growth, performance, tax consequences or achievements to be materially
different from any future results, levels of activity, growth, performance, tax consequences or
achievements expressed or implied by such forward-looking statements.
 The forward-looking statements are based on our beliefs, assumptions and expectations of our future
performance, taking into account all information currently available to us. Although we believe
that these beliefs, assumptions and expectations are reasonable, we cannot guarantee future
results, levels of activity, performance, growth or achievements. These beliefs, assumptions and
expectations can change as a result of many possible events or factors, not all of which are known
to us. If a change occurs, our business, financial condition, liquidity and results of operations
may vary materially from those expressed in or implied by our forward-looking statements. You
should carefully consider these risks before you make an investment decision with respect to our
common stock, along with the following factors that could cause actual results to vary from our
forward-looking statements:
 
    
    the loss of any of our key employees, such as Mr. David Gladstone, our chairman and chief
executive officer, Mr. Terry Lee Brubaker, our president and chief operating officer, or Mr.
George Stelljes III, our executive vice president and chief investment officer;
    
    general volatility of the capital markets and the market price of our common stock;
    
    risks associated with negotiation and consummation of pending and future transactions;
    
    changes in our business strategy;
    
    availability, terms and deployment of capital, including the ability to maintain and
borrow under our existing credit facility, arrange for long-term mortgages on our properties;
secure one or more additional long-term credit facilities, and to raise equity capital;
    
    availability of qualified personnel;
    
    changes in our industry, interest rates, exchange rates or the general economy; and
    
    the degree and nature of our competition.
 We are under no duty to update any of the forward-looking statements after the date of this report
to conform such statements to actual results.
 21




---



##### 



Overview
    Recent Events
 Investments
   22




---



##### 



23




---



##### 



Mortgage Loans
  24




---



##### 



Expenses
   25




---



##### 



26




---



##### 



Critical Accounting Policies
  Revenue Recognition
  Investment Accounting
  Purchase Price Allocation
 
 27




---



##### 



Risk Rating
  28




---



##### 



First
    
    SecondOur
    
    Ratings
    
    RatingsSystem
    
    Agency
    
    Agency
    
    Description (a)>10
    
    Baa2
    
    BBB
    
    Probability of default during the
next ten years is 4% and the
expected loss is 1% or less10
    
    Baa3
    
    BBB-
    
    Probability of default during the
next ten years is 5% and the
expected loss is 1% to 2%9
    
    Ba1
    
    BB+
    
    Probability of default during the
next ten years is 10% and the
expected loss is 2% to 3%8
    
    Ba2
    
    BB
    
    Probability of default during the
next ten years is 16% and the
expected loss is 3% to 4%7
    
    Ba3
    
    BB-
    
    Probability of default during the
next ten years is 17.8% and the
expected loss is 4% to 5%6
    
    B1
    
    B+
    
    Probability of default during the
next ten years is 22% and the
expected loss is 5% to 6.5%5
    
    B2
    
    B
    
    Probability of default during the
next ten years is 25% and the
expected loss is 6.5% to 8%4
    
    B3
    
    B-
    
    Probability of default during the
next ten years is 27% and the
expected loss is 8% to 10%3
    
    Caa1
    
    CCC+
    
    Probability of default during the
next ten years is 30% and the
expected loss is 10% to 13.3%2
    
    Caa2
    
    CCC
    
    Probability of default during the
next ten years is 35% and the
expected loss is 13.3% to 16.7%1
    
    Caa3
    
    CC
    
    Probability of default during the
next ten years is 65% and the
expected loss is 16.7% to 20%0
    
    N/a
    
    D
    
    Probability of default during the
next ten years is 85%, or there is a
payment default, and the expected
loss is greater than 20%
 
 (a)
    
    the default rates set forth above assume a ten year lease or mortgage loan. If the particular
investment has a term other than ten years, the probability of default is adjusted to reflect the
reduced risk associated with a shorter term or the increased risk associated with a longer term.  29




---



##### 



Rating
    
    9/30/2005
    
    12/31/2004Average
    
    
    8.4
    
    
    
    7.8Weighted Average
    
    
    8.5
    
    
    
    7.6Highest
    
    
    10.0
    
    
    
    10.0Lowest
    
    
    6.0
    
    
    
    6.0
 Investments in Real Estate
     Provision for Loan Losses
  Accounting for Derivative Financial Investments and Hedging Activities
  30




---



##### 



Income Taxes
  Stock Based Compensation
 Accounting for Stock Issued
to Employees, Accounting for Certain Transactions involving Stock Compensation, an
interpretation of APB Opinion No. 25.
 31




---



##### 



Results of Operations
  For the three months ended
    
    
    For the nine months endedSeptember 30,
    
    
    September 30,
    
    
    
    
    
    
    
    
    
    
    September 30,
    
    
    September 30,2005
    
    
    2004
    
    
    $ Change
    
    
    % Change
    
    
    2005
    
    
    2004
    
    
    $ Change
    
    
    % ChangeOPERATING REVENUESRental income
    
    $
    3,453,777
    
    
    $
    1,066,076
    
    
    $
    2,387,701
    
    
    
    224
    %
    
    $
    7,536,025
    
    
    $
    1,667,538
    
    
    $
    5,868,487
    
    
    
    352
    %Interest income from mortgage note receivable
    
    
    553,968
    
    
    
    284,659
    
    
    
    269,309
    
    
    
    95
    %
    
    
    1,351,197
    
    
    
    697,059
    
    
    
    654,138
    
    
    
    94
    %Tenant recovery revenue
    
    
    28,208
    
    
    
    
    
    
    
    28,208
    
    
    
    100
    %
    
    
    69,808
    
    
    
    
    
    
    
    69,808
    
    
    
    100
    %Total operating revenues
    
    
    4,035,953
    
    
    
    1,350,735
    
    
    
    2,685,218
    
    
    
    199
    %
    
    
    8,957,030
    
    
    
    2,364,597
    
    
    
    6,592,433
    
    
    
    279
    %OPERATING EXPENSESDepreciation and amortization
    
    
    1,140,181
    
    
    
    313,032
    
    
    
    827,149
    
    
    
    264
    %
    
    
    2,374,912
    
    
    
    519,133
    
    
    
    1,855,779
    
    
    
    357
    %Management advisory fee
    
    
    609,171
    
    
    
    333,825
    
    
    
    275,346
    
    
    
    82
    %
    
    
    1,564,826
    
    
    
    843,360
    
    
    
    721,466
    
    
    
    86
    %Professional fees
    
    
    99,799
    
    
    
    38,373
    
    
    
    61,426
    
    
    
    160
    %
    
    
    447,802
    
    
    
    313,804
    
    
    
    133,998
    
    
    
    43
    %Taxes and licenses
    
    
    37,399
    
    
    
    973
    
    
    
    36,426
    
    
    
    3744
    %
    
    
    191,112
    
    
    
    13,543
    
    
    
    177,569
    
    
    
    1311
    %Insurance
    
    
    70,244
    
    
    
    59,579
    
    
    
    10,665
    
    
    
    18
    %
    
    
    207,648
    
    
    
    188,554
    
    
    
    19,094
    
    
    
    10
    %Interest
    
    
    895,775
    
    
    
    
    
    
    
    895,775
    
    
    
    100
    %
    
    
    1,186,798
    
    
    
    
    
    
    
    1,186,798
    
    
    
    100
    %General and administrative
    
    
    107,059
    
    
    
    74,881
    
    
    
    32,178
    
    
    
    43
    %
    
    
    337,722
    
    
    
    352,145
    
    
    
    (14,423
    )
    
    
    -4
    %Total operating expenses
    
    
    2,959,628
    
    
    
    820,663
    
    
    
    2,138,965
    
    
    
    261
    %
    
    
    6,310,820
    
    
    
    2,230,539
    
    
    
    4,080,281
    
    
    
    183
    %Income from operations
    
    
    1,076,325
    
    
    
    530,072
    
    
    
    546,253
    
    
    
    103
    %
    
    
    2,646,210
    
    
    
    134,058
    
    
    
    2,512,152
    
    
    
    1874
    %Interest income from temporary investments
    
    
    10,093
    
    
    
    153,716
    
    
    
    (143,623
    )
    
    
    -93
    %
    
    
    117,806
    
    
    
    488,701
    
    
    
    (370,895
    )
    
    
    -76
    %Interest income  employee loans
    
    
    5,562
    
    
    
    1,250
    
    
    
    4,312
    
    
    
    345
    %
    
    
    15,483
    
    
    
    1,250
    
    
    
    14,233
    
    
    
    1139
    %Loss on foreign currency translation
    
    
    (224,569
    )
    
    
    
    
    
    
    (224,569
    )
    
    
    100
    %
    
    
    (227,371
    )
    
    
    
    
    
    
    (227,371
    )
    
    
    100
    %Other (loss) income
    
    
    (208,914
    )
    
    
    154,966
    
    
    
    (363,880
    )
    
    
    -235
    %
    
    
    (94,082
    )
    
    
    489,951
    
    
    
    (584,033
    )
    
    
    -119
    %NET INCOME
    
    $
    867,411
    
    
    $
    685,038
    
    
    $
    182,373
    
    
    
    27
    %
    
    $
    2,552,128
    
    
    $
    624,009
    
    
    $
    1,928,119
    
    
    
    309
    %
 Comparison of the three months ended September 30, 2005 to the three months ended September 30, 2004
 Revenues
    Expenses
  32




---



##### 



Interest Income
   33




---



##### 



Foreign Currency Loss
  Net Income
  Comparison of the nine months ended September 30, 2005 to the nine months ended September 30, 2004
 Revenues
    Expenses
  34




---



##### 



Interest Income
  35




---



##### 



Foreign Currency Loss
  Net Income
  Liquidity and Capital Resources
 Cash and Cash Equivalents
  Operating Activities
  36




---



##### 



Investing Activities
   Financing Activities
   Future Capital Needs
   37




---



##### 



Shelf Registration Statement
  Line of Credit
  Mortgage Notes Payable
   38




---



##### 



Contractual Obligations
  Payments Due by PeriodMore than 5Contractual Obligations
    
    Total
    
    
    Less than 1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    YearsLong-Term Debt Obligations
    
    
    42,158,247
    
    
    
    146,913
    
    
    
    586,481
    
    
    
    1,307,654
    
    
    
    40,117,199Interest on Long-Term Debt Obligations
    
    
    22,713,890
    
    
    
    2,207,991
    
    
    
    4,533,734
    
    
    
    4,420,333
    
    
    
    11,551,832Capital Lease Obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating Lease Obligations (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase Obligations (2)
    
    
    21,425,000
    
    
    
    21,425,000
    
    
    
    
    
    
    
    
    
    
    
    Other Long-Term Liabilities Reflected on the
Registrants Balance Sheet under GAAP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    86,297,137
    
    
    $
    23,779,904
    
    
    $
    5,120,215
    
    
    $
    5,727,987
    
    
    $
    51,669,031
 
 (1)
    
    This does not include the portion of the operating lease on office space that is allocated to us by our Adviser
in connection with our advisory agreement.(2)
    
    The purchase obligations reflected in the above table represents commitments outstanding at September 30, 2005 to purchase
real estate, $13.0 million of which was subsequently closed in October of 2005. Funds from Operations
    39




---



##### 



For the three
    
    
    For the three
    
    
    For the nine
    
    
    For the ninemonths ended
    
    
    months ended
    
    
    months ended
    
    
    months endedSeptember 30, 2005
    
    
    September 30, 2004
    
    
    September 30, 2005
    
    
    September 30, 2004Net income
    
    $
    867,411
    
    
    $
    685,038
    
    
    $
    2,552,128
    
    
    $
    624,009Real estate depreciation and amortization
    
    
    1,140,181
    
    
    
    313,032
    
    
    
    2,374,912
    
    
    
    519,133Funds from operations
    
    
    2,007,592
    
    
    
    998,070
    
    
    
    4,927,040
    
    
    
    1,143,142Weighted average shares outstanding  basic
    
    
    7,672,000
    
    
    
    7,648,250
    
    
    
    7,669,619
    
    
    
    7,644,099Weighted average shares outstanding  diluted
    
    
    7,725,667
    
    
    
    7,697,079
    
    
    
    7,718,441
    
    
    
    7,703,504Basic net income per weighted average common share
    
    $
    0.11
    
    
    $
    0.09
    
    
    $
    0.33
    
    
    $
    0.08Diluted net income per weighted average common share
    
    $
    0.11
    
    
    $
    0.09
    
    
    $
    0.33
    
    
    $
    0.08Basic funds from operations per weighted average
common share
    
    $
    0.26
    
    
    $
    0.13
    
    
    $
    0.64
    
    
    $
    0.15Diluted funds from operations per weighted average
common share
    
    $
    0.26
    
    
    $
    0.13
    
    
    $
    0.64
    
    
    $
    0.15
 40




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##### 



Item 3. Quantitative and Qualitative Disclosure About Market Risk
       41




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##### 



Item 4. Controls and Procedures
     42




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##### 



PART II  OTHER INFORMATION
 Item 1. Legal Proceedings
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Item 3. Defaults Upon Senior Securities
  Item 4. Submission of Matters to a Vote of Security Holders
  Item 5. Other Information
  Item 6. Exhibits
  Exhibit
    
    Description of Document3.1
    
    Amended and Restated Articles of Incorporation, incorporated by
reference to Exhibit 3.1 to the Registration Statement on Form S-11
(File No. 333-106024), filed September 11, 2003.3.2
    
    Bylaws, incorporated by reference to Exhibit 3.2 to the Registration
Statement on Form S-11 (File No. 333-106024), filed September 11,
2003.10.2
    
    First Amendment to Credit Agreement and Waiver by and among Gladstone
Commercial Corporation, Gladstone Commercial Limited Partnership,
Branch Banking and Trust Company and certain other parties, dated as
of April 21, 2005, incorporated by reference to Exhibit 10.2 of the
Companys Quarterly Report on Form 10-Q for the quarter ended March
31, 2005, filed on May 4, 2005.10.3
    
    Second Amendment to Credit Agreement and Loan Documents by and among
Gladstone Commercial Corporation, Gladstone Commercial Limited
Partnership, Branch Banking and Trust Company, and certain other
parties, dated as of July 6, 2005, incorporated by reference to
Exhibit 10.3 of the Companys Quarterly Report on Form 10-Q for the
quarter ended June 30, 2005, filed on August 2, 2005.10.4
    
    Loan Agreement between AFL05 Duncan SC LLC and Little Arch Charlotte
NC LLC and Bank of America, N.A., dated as of August 25, 2005
        ,incorporated by reference to Exhibit 10.4 of the Companys Current
Report on Form 8-K (File No. 000-50363), filed on August 29, 2005.10.5
    
    Promissory Note between AFL05 Duncan SC LLC and Little Arch Charlotte
NC LLC and Bank of America, N.A., dated as of August 25, 2005,
incorporated by reference to Exhibit 10.5 of the Companys Current
Report on Form 8-K (File No. 000-50363), filed on August 29, 2005.10.6
    
    Mortgage and Security Agreement between 260 Springside Drive, Akron OH
LLC and JP Morgan Chase Bank, N.A., dated as of September 12, 2005,,
incorporated by reference to Exhibit 10.6 of the Companys Current
Report on Form 8-K (File No. 000-50363), filed on September 13, 2005.10.7
    
    Fixed Rate Note between 260 Springside Drive, Akron OH LLC and JP
Morgan Chase Bank, N.A., dated as of September 12, 2005, incorporated
by reference to Exhibit 10.7 of the Companys Current Report on Form
8-K (File No. 000-50363), filed on September 13, 2005.
 43




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##### 



Exhibit
    
    Description of Document11
    
    Computation of Per Share Increase in Stockholders Equity from
Operations (included in the notes to the unaudited financial
statements contained in this report).31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of
The Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of
The Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer pursuant to Section 906 of
The Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to Section 906 of
The Sarbanes-Oxley Act of 2002.
 
 
    
    Previously filed and incorporated by reference. 44




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##### 



Gladstone Commercial CorporationDate: October 31, 2005
    
    By:
    
    /s/ Harry BrillHarry BrillChief Financial Officer and Treasurer
 45




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##### 



Exhibit
    
    Description of Document3.1
    
    Amended and Restated Articles of Incorporation, incorporated by
reference to Exhibit 3.1 to the Registration Statement on Form S-11
(File No. 333-106024), filed September 11, 2003.3.2
    
    Bylaws, incorporated by reference to Exhibit 3.2 to the Registration
Statement on Form S-11 (File No. 333-106024), filed September 11,
2003.10.2
    
    First Amendment to Credit Agreement and Waiver by and among Gladstone
Commercial Corporation, Gladstone Commercial Limited Partnership,
Branch Banking and Trust Company and certain other parties, dated as
of April 21, 2005, incorporated by reference to Exhibit 10.2 of the
Companys Quarterly Report on Form 10-Q for the quarter ended March
31, 2005, filed on May 4, 2005.10.3
    
    Second Amendment to Credit Agreement and Loan Documents by and among
Gladstone Commercial Corporation, Gladstone Commercial Limited
Partnership, Branch Banking and Trust Company, and certain other
parties, dated as of July 6, 2005, incorporated by reference to
Exhibit 10.3 of the Companys Quarterly Report on Form 10-Q for the
quarter ended June 30, 2005, filed on August 2, 2005.10.4
    
    Loan Agreement between AFL05 Duncan SC LLC and Little Arch Charlotte
NC LLC and Bank of America, N.A., dated as of August 25, 2005,
incorporated by reference to Exhibit 10.4 of the Companys Current
Report on Form 8-K (File No. 000-50363), filed on August 29, 2005.10.5
    
    Promissory Note between AFL05 Duncan SC LLC and Little Arch Charlotte
NC LLC and Bank of America, N.A., dated as of August 25, 2005,
incorporated by reference to Exhibit 10.5 of the Companys Current
Report on Form 8-K (File No. 000-50363), filed on August 29, 2005.10.6
    
    Mortgage and Security Agreement between 260 Springside Drive, Akron OH
LLC and JP Morgan Chase Bank, N.A., dated as of September 12, 2005,,
incorporated by reference to Exhibit 10.6 of the Companys Current
Report on Form 8-K (File No. 000-50363), filed on September 13, 2005.10.7
    
    Fixed Rate Note between 260 Springside Drive, Akron OH LLC and JP
Morgan Chase Bank, N.A., dated as of September 12, 2005, incorporated
by reference to Exhibit 10.7 of the Companys Current Report on Form
8-K (File No. 000-50363), filed on September 13, 2005.11
    
    Computation of Per Share Increase in Stockholders Equity from
Operations (included in the notes to the unaudited financial
statements contained in this report).31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of
The Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of
The Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer pursuant to Section 906 of
The Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to Section 906 of
The Sarbanes-Oxley Act of 2002.
 
 
    
    Previously filed and incorporated by reference. 46