##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q/A
 Amendment No. 1
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For
the Quarterly period ended September 30, 2008
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 Commission
File No. 000-50764
 CapTerra Financial Group, Inc.
  Colorado
    
    20-0003432(State or other jurisdiction
    
    (IRS Employer File Number)of incorporation)700 17th Street, Suite 1200Denver, Colorado
    
    80202(Address of principal executive offices)
    
    (zip code)
 
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ




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##### 



FORM 10-Q
CapTerra Financial Group, Inc.  TABLE OF CONTENTS
 PART I FINANCIAL INFORMATIONItem 1. Financial Statements for the period ended September 30, 2008
    
    
    3Balance Sheet (Unaudited)
    
    
    3Statements of Operations (Unaudited)
    
    
    4Statements of Cash Flows (Unaudited)
    
    
    5Notes to Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis and Plan of Operation
    
    
    15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    20Item 4. Controls and Procedures
    
    
    20Item 4T. Controls and Procedures
    
    
    20PART II OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    21Item 1A. Risk Factors
    
    
    21Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    26Item 3. Defaults Upon Senior Securities
    
    
    26Item 4. Submission of Matters to a Vote of Security Holders
    
    
    26Item 5. Other Information
    
    
    26Item 6. Exhibits
    
    
    26Signatures
    
    
    27Exhibit 21Exhibit 31.1Exhibit 32.1
   2




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##### Table of Contents



In this quarterly report on Form 10-Q/A for the three months ended September 30, 2008, CapTerra Financial Group,
Inc. (Company, we) has restated its consolidated  Balance sheet and Statement of operations and Cash flows for
the nine months ended for the effects of the restatement of our financial statements for the year ended December
31, 2007 and the impact of the conversion expense which was restated in our form 10-Q/A for the quarter ended June
30, 2008.  The restatements corrected errors relating to the valuation allowance on our deferred tax asset and the
recalculation of the conversion expense related to the conversion of preferred stock and certain notes payable
during the quarter ended June 30, 2008.  See footnote 13 to our financial statements for the nine months ended
September 30, 2008. 
   
  September 30
    
    
    December 31,2008
    
    
    2007(unaudited)
    
    
    (audited)(as restated)
    
    
    (as restated)AssetsCash and Equivalents
    
    $
    781,048
    
    
    $
    2,035,620Deposits held by an affiliate
    
    
    707,292
    
    
    
    940,880Accounts Receivable, net
    
    
    78,385
    
    
    
    2,156,959Property and equipment, net
of accumulated depreciation
    
    
    98,461
    
    
    
    112,918Real estate held for sale
    
    
    14,627,963
    
    
    
    14,398,602Construction in progress
    
    
    2,376,675
    
    
    
    2,484,179Land held for development
    
    
    2,660,607
    
    
    
    5,388,089Deposits and prepaids
    
    
    35,611
    
    
    
    48,451Total assets
    
    $
    21,366,044
    
    
    $
    27,565,698Liabilities and Shareholders DeficitLiabilitiesAccounts payable
    
    $
    74,134
    
    
    $
    269,726Accrued liabilities
    
    
    57,884
    
    
    
    409,066Dividends payable
    
    
    
    
    
    
    78,187Senior subordinated note payable, related parties
    
    
    1,500,000
    
    
    
    7,000,000Senior subordinated revolving note, related parties
    
    
    14,242,835
    
    
    
    14,169,198Note payable
    
    
    6,308,617
    
    
    
    5,716,397Unearned Revenue
    
    
    
    
    
    
    522,841Total liabilities
    
    
    22,183,470
    
    
    
    28,165,415Minority interest
    
    
    
    
    
    
    4,594Shareholders deficitConvertible preferred stock, $.10 par value; 1,000,000 shares authorized,
517,000 shares issued and outstanding December 31, 2007, -0- shares
issued and outstanding September 30, 2008
    
    
    
    
    
    
    51,700Common stock, $.001 par value; 50,000,000 shares authorized,
8,018,313 shares issued and outstanding December 31, 2007
23,602,614 shares issued and outstanding September 30, 2008
    
    
    23,603
    
    
    
    8,018Additional paid-in-capital
    
    
    16,019,438
    
    
    
    6,448,417Accumulated deficit
    
    
    (16,860,467
    )
    
    
    (7,112,446
    )Total shareholders deficit
    
    
    (817,426
    )
    
    
    (599,717
    )Total liabilities and shareholders deficit
    
    $
    21,366,044
    
    
    $
    27,565,698
   3




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##### Table of Contents



Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(as restated)
    
    
    
    
    
    
    (as restated)Revenue:Sales
    
    $
    3,171,409
    
    
    $
    815,000
    
    
    $
    4,381,723
    
    
    $
    5,739,336Financing activities
    
    
    45,691
    
    
    
    10,314
    
    
    
    38,090
    
    
    
    58,487Rental income
    
    
    116,570
    
    
    
    51,283
    
    
    
    224,048
    
    
    
    103,487Management fees
    
    
    
    
    
    
    148,383
    
    
    
    
    
    
    
    362,981Total revenue
    
    
    3,333,670
    
    
    
    1,024,980
    
    
    
    4,643,861
    
    
    
    6,264,291Operating expenses:Cost of sales
    
    
    2,954,748
    
    
    
    815,000
    
    
    
    4,118,748
    
    
    
    5,460,324Impairment loss on real estate
    
    
    4,156,444
    
    
    
    (40,868
    )
    
    
    4,752,312
    
    
    
    1,898,645Conversion expense
    
    
    
    
    
    
    
    
    
    
    2,518,750
    
    
    
    Selling, general and administrative
    
    
    579,167
    
    
    
    748,078
    
    
    
    1,943,805
    
    
    
    2,655,984Total operating expenses
    
    
    7,690,359
    
    
    
    1,522,210
    
    
    
    13,333,615
    
    
    
    10,014,953Loss from operations
    
    
    (4,356,689
    )
    
    
    (497,230
    )
    
    
    (8,689,754
    )
    
    
    (3,750,662
    )Non-operating expense:Interest income
    
    
    931
    
    
    
    6,641
    
    
    
    9,394
    
    
    
    7,535Interest expense
    
    
    (278,133
    )
    
    
    
    
    
    
    (912,987
    )
    
    
    (275,730
    )Other income (expense)
    
    
    
    
    
    
    (100,413
    )
    
    
    
    
    
    
    (1,570
    )Loss before income taxes
and non controlling interest
    
    
    (4,633,891
    )
    
    
    (591,002
    )
    
    
    (9,593,347
    )
    
    
    (4,020,427
    )Income tax benefit
    
    
    
    
    
    
    (360,880
    )
    
    
    
    
    
    
    (1,527,480
    )Loss before
minority interest
    
    
    (4,633,891
    )
    
    
    (230,122
    )
    
    
    (9,593,347
    )
    
    
    (2,492,947
    )Minority interest in income of
consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,751Net loss
    
    $
    (4,633,891
    )
    
    $
    (230,122
    )
    
    $
    (9,593,347
    )
    
    $
    (2,566,698
    )Preferred stock dividends
    
    
    
    
    
    
    (78,186
    )
    
    
    (154,675
    )
    
    
    (232,012
    )Net loss available to common shareholders
    
    $
    (4,633,891
    )
    
    $
    (308,308
    )
    
    $
    (9,748,022
    )
    
    $
    (2,798,710
    )Basic and diluted loss per common share
    
    $
    (0.20
    )
    
    $
    (0.04
    )
    
    $
    (0.73
    )
    
    $
    (0.35
    )Basic and diluted weighted average common shares outstanding
    
    
    23,602,614
    
    
    
    8,018,313
    
    
    
    13,328,519
    
    
    
    8,018,313
   4




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Nine months endedSeptember 30,2008
    
    
    2007(as restated)Cash flows from operating activities:Net loss
    
    $
    (9,593,347
    )
    
    $
    (2,566,698
    )Adjustments to reconcile net income to net cash used by operating activities:Depreciation
    
    
    25,854
    
    
    
    28,472Impairment of assets
    
    
    4,752,312
    
    
    
    1,898,645Allowance for bad debt
    
    
    
    
    
    
    215,953Conversion expense
    
    
    2,518,750
    
    
    
    Stock option compensation expense
    
    
    43,570
    
    
    
    98,297Minority interest
    
    
    (4,594
    )
    
    
    Changes in operating assets and operating liabilities:Construction in progress
    
    
    107,504
    
    
    
    (4,354,196
    )Real estate held for sale
    
    
    (229,361
    )
    
    
    (9,706,445
    )Land held for development
    
    
    (2,024,830
    )
    
    
    661,932Accounts receivable
    
    
    2,078,574
    
    
    
    (255,958
    )Deposits and prepaids
    
    
    12,840
    
    
    
    34,567Accounts payable and accrued liabilities
    
    
    (546,775
    )
    
    
    551,658Income tax assets and liabilities
    
    
    
    
    
    
    (1,475,897
    )Unearned revenue
    
    
    (522,841
    )
    
    
    Net cash (used in) operating activities
    
    
    (3,382,345
    )
    
    
    (14,869,670
    )Cash flows from investing activities:Payment of deposits
    
    
    
    
    
    
    86,791Cash collections on notes receivable
    
    
    365,025
    
    
    
    Issuance of notes receivable
    
    
    (131,437
    )
    
    
    Cash paid for property and equipment
    
    
    (11,397
    )
    
    
    (57,296
    )Net cash provided by investing activities
    
    
    222,191
    
    
    
    29,495Cash flows from financing activities:Preferred stock dividends paid
    
    
    (78,187
    )
    
    
    (233,711
    )Proceeds from issuance of related party loans
    
    
    12,638,861
    
    
    
    12,200,000Repayment of related party loans
    
    
    (11,247,313
    )
    
    
    (3,400,000
    )Proceeds from issuance of notes payable
    
    
    3,016,292
    
    
    
    8,854,866Repayment of notes payable
    
    
    (2,424,072
    )
    
    
    (1,961,403
    )Net cash provided by financing activities
    
    
    1,905,581
    
    
    
    15,459,752Net change in cash
    
    
    (1,254,572
    )
    
    
    619,577Cash and cash equivalents, beginning of the period
    
    
    2,035,620
    
    
    
    1,097,440Cash and cash equivalents, end of the period
    
    $
    781,048
    
    
    $
    1,717,017Supplemental disclosure of cash flow information:Cash paid during the year for:Income taxes
    
    $
    
    
    
    $
    1,000Interest
    
    $
    
    
    
    $
    780,981Supplemental disclosure of non-cash investing and financing activitiesPreferred stock dividends declared but not paid
    
    $
    
    
    
    $
    232,012Conversion of related notes payable to common stock
    
    $
    6,817,912
    
    
    $
    
   5




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##### Table of Contents



(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
    
    OwnershipAARD-Cypress Sound, LLC (Cypress Sound)
    
    
    51.00
    %AARD-TSD-CSK Firestone, LLC (Firestone)
    
    
    51.00
    %South Glen Eagles Drive, LLC (West Valley)
    
    
    51.00
    %53rd and Baseline, LLC (Baseline)
    
    
    51.00
    %Hwy 278 and Hwy 170, LLC (Bluffton)
    
    
    51.00
    %State and 130th, LLC (American Fork)
    
    
    51.00
    %Hwy 46 and Bluffton Pkwy, LLC (Bluffton 46)
    
    
    51.00
    %AARD Bader Family Dollar Flat Shoals, LLC (Flat Shoals)
    
    
    51.00
    %AARD Westminster OP7, LLC (Westminster OP7)
    
    
    51.00
    %Eagle Palm I, LLC (Eagle)
    
    
    51.00
    %AARD Econo Lube Stonegate, LLC (Econo Lube)
    
    
    51.00
    %AARD Bader Family Dollar MLK, LLC (MLK)
    
    
    51.00
    %AARD-Charmar Greeley, LLC (Starbucks)
    
    
    51.00
    %AARD-Charmar Greeley Firestone, LLC
    
    
    51.00
    %AARD 5020 Lloyd Expy, LLC (Evansville)
    
    
    51.00
    %AARD 2245 Main Street, LLC (Plainfield)
    
    
    51.00
    %AARD-Buckeye, LLC (Buckeye)
    
    
    51.00
    %AARD Esterra Mesa 1, LLC (Esterra Mesa 1)
    
    
    51.00
    %AARD Esterra Mesa 2, LLC (Esterra Mesa 2)
    
    
    51.00
    %AARD Esterra Mesa 3, LLC (Esterra Mesa 3)
    
    
    51.00
    %AARD Esterra Mesa 4, LLC (Esterra Mesa 4)
    
    
    51.00
    %AARD MDJ Goddard, LLC (Goddard)
    
    
    51.00
    %AARD Charmar Arlington Boston Pizza, LLC (Charmar Boston Pizza)
    
    
    51.00
    %AARD LECA LSS Lonestar LLC
    
    
    51.00
    %AARD LECA VL1 LLC
    
    
    51.00
    %AARD NOLA St Claude LLC
    
    
    51.00
    %AARD ORFL FD Goldenrod LLC
    
    
    51.00
    %AARD SATX CHA LLC
    
    
    51.00
    %AARD JXFL UTC LLC
    
    
    51.00
    %
  6




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Use of Estimates
   Accounting Pronouncements
     7




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(2) Current Development Projects
  (3) Real Estate Held for Sale
   (4) Related Party Transactions
  GDBA
    
    
    BOCOInvestments
    
    
    Investments
    
    
    TotalRevolving Lines of Credit
    
    
    7,000,000
    
    
    
    7,000,000
    
    
    
    14,000,000BOCO Note Payable
    
    
    
    
    
    
    750,000
    
    
    
    750,000BOCO Note Payable
    
    
    
    
    
    
    750,000
    
    
    
    750,000Accrued Interest
    
    
    105,862
    
    
    
    136,973
    
    
    
    242,835Senior subordinated revolving notes related parties
    
    $
    7,105,862
    
    
    $
    8,636,973
    
    
    $
    15,742,835
 GDBA Investments, LLLP
     8




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BOCO Investments, LLC
     9




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10




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(5) Notes Receivable and Development Deposits
  (6) Property and Equipment
  Equipment
    
    $
    23,277Furniture and fixtures
    
    
    17,396Computers and related equipment
    
    
    35,414Software and intangibles
    
    
    91,964$
    168,051less accumulated depreciation and amortization
    
    
    (69,590
    )$
    98,461
  (7) Shareholders Equity
 Preferred Stock
  Series A Convertible Preferred Stock
   11




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Stock Based Compensation
    Options OutstandingWeighted
    
    
    WeightedAverage
    
    
    Remaining
    
    
    AggregateNumber
    
    
    Exercise
    
    
    Contractual
    
    
    Intrinsicof Options
    
    
    Price
    
    
    Term
    
    
    ValueBalance, at December 31, 2007
    
    
    214,375
    
    
    
    3.44
    
    
    
    3.9
    
    
    
    Activity during 2008:Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expired/Cancelled
    
    
    (152,500
    )
    
    
    3.32
    
    
    
    3.2Forfeited
    
    
    Exercised
    
    
    Balance, at September 30, 2008
    
    
    61,875
    
    
    
    3.62
    
    
    
    3.2
    
    
    
    
  12




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(8) Income Taxes
  Deferred tax assets:Impairment of asset
    
    $
    2,500,000Net operating loss and carry-forwards
    
    
    2,892,000Partnership income
    
    
    130,000Origination Fee Income
    
    
    (85,000
    )Fixed Assets
    
    
    (23,000
    )Other temporary differences
    
    
    (50,000
    )5,364,000Valuation Allowance
    
    
    (5,364,000
    )Total net deferred tax assets
    
    $
    
   (9) Minority Interests
  Balance
    
    
    
    
    
    
    
    
    
    
    BalanceDecember 31,
    
    
    Earnings allocated to
    
    
    Earnings disbursed/accrued for
    
    
    September 30,2007
    
    
    Minority Interest
    
    
    Minority Interest
    
    
    2008Cypress
    
    $
    4,594
    
    
    $
    
    
    
    $
    (4,594
    )
    
    $
    Total
    
    $
    4,594
    
    
    $
    
    
    
    $
    (4,594
    )
    
    $
    
 (10) Concentration of Credit Risk for Cash
  (11) Notes Payable
 Vectra Bank Senior Credit Facility:
    13




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United Western Bank Senior Credit Facility
    (12) Impairment of Assets
   (13) Restatement
 The Company has restated its December 31, 2007 financial statements to correct an error in accounting for an allowance
of our deferred tax asset. As of December 31, 2007 the Company recorded a deferred tax asset with no allowance.
Originally, we determined that the weighted evidence presented did not support a conclusion to record an allowance
against our deferred tax asset. After reviewing the evidence that was available for the period in question, we
concluded that we had likely under weighted our cumulative loss position and over weighted the fact that realization of
our deferred tax asset is dependant on a turn around in operating profitability. Given these factors we concluded that
it was in fact appropriate to record a full deferred tax allowance for the fiscal year ended December 31, 2007. The
recording of this full deferred tax allowance for the fiscal year ended December 31, 2007 will change the interim
financial statements for September 30, 2008. In addition, for the quarter ended June 30, 2008, we recognized a conversion expense for the conversion of convertible
preferred equity and subordinated debt into restricted common shares and calculated the expense by applying a discount
to market price of the stock to account for the large block of restricted stock issued and low volume with which our
stock traded. When reviewing this methodology during our year end, we were unable to substantiate our methodology with
specific guidance issued under GAAP. We therefore recalculated the conversion expense using the price of the last
trade prior to the conversion for the value of the stock. The following sets forth the effects of the restatement discussed above. Amounts reflected as As Previously Reported
represent those amounts included in the Companys Form 10-Q for the period ended September 30, 2008.  AsPreviouslyReported
    
    
    Adjustment
    
    
    As RestatedNet loss
    
    $
    (4,259,852
    )
    
    $
    (374,039
    )
    
    $
    (4,633,891
    )Basic and diluted loss per common share
    
    $
    (0.18
    )
    
    $
    (0.02
    )
    
    $
    (0.20
    )
  AsPreviouslyReported
    
    
    Adjustment
    
    
    As RestatedDeferred tax asset
    
    $
    3,364,000
    
    
    $
    (3,364,000
    )
    
    $
    Total assets
    
    $
    24,730,042
    
    
    $
    (3,363,998
    )
    
    $
    21,366,044Total shareholders equity
    
    $
    2,545,484
    
    
    $
    (3,362,910
    )
    
    $
    (817,426
    )Net loss
    
    $
    (6,401,768
    )
    
    $
    (3,191,579
    )
    
    $
    (9,593,347
    )Basic and diluted loss per common share
    
    $
    (0.27
    )
    
    $
    (0.46
    )
    
    $
    (0.73
    )
  14




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Form 10-Q.
 Forward-Looking Statements
  Overview and History
      15




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16




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Results of Operations
 Results of Operations
         17




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Liquidity and Capital Resources
     18




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Recently Issued Accounting Pronouncements
    Seasonality
   19




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Critical Accounting Policies
   
   
   
      20




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
    
    our ability to find suitable real estate projects; and
    
    our ability to generate sufficient revenues from those projects.
   21




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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 compared to our competitors that may have less indebtedness.
  22




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
    
    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.
       23




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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.
   25




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Exhibits21
    
    

List of Subsidiaries31.1
    
    
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15(d)-14(a)Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15(d)-14(a)32.1
    
    
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 Reports on Form 8-K
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##### Table of Contents



CAPTERRA FINANCIAL GROUP, INC.Dated: April 15, 2009
    
    By:
    
    /s/ James W. Creamer, III

James W. Creamer, III
President, Chief Executive Officer, 
Treasurer, Chief Financial Officer
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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description21
    
    
List of Subsidiaries31.1
    
    
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15(d)-14(a)Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15(d)-14(a)32.1
    
    
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  28