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EX-32 - PRINCIPAL FINANCIAL OFFICERS CERTIFICATION PURSUANT TO RULE 13A-14(B) UNDER THE SECURITIES EXCHANGE ACT OF 1934 - BLUE RIDGE REAL ESTATE COexhibit322.htm
EX-31 - PRINCIPAL FINANCIAL OFFICERS CERTIFICATION PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934 - BLUE RIDGE REAL ESTATE COexhibit312.htm
EX-31 - PRINCIPAL EXECUTIVE OFFICERS CERTIFICATION PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934 - BLUE RIDGE REAL ESTATE COexhibit311.htm
EX-32 - PRINCIPAL EXECUTIVE OFFICERS CERTIFICATION PURSUANT TO RULE 13A-14(B) UNDER THE SECURITIES EXCHANGE ACT OF 1934 - BLUE RIDGE REAL ESTATE COexhibit321.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 2

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2009

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No.:

Blue Ridge 0-28-44

 

Big Boulder 0-28-43

BLUE RIDGE REAL ESTATE COMPANY

BIG BOULDER CORPORATION

(exact name of Registrants as specified in their charters)

State or other jurisdiction of incorporation or organization: Pennsylvania

I.R.S. Employer Identification Number:

24-0854342 (Blue Ridge)

 

24-0822326 (Big Boulder)

Address of principal executive office:   Route 940 and Moseywood Road, Blakeslee, Pennsylvania

Zip Code:   18610

Registrants’ telephone number, including area code:  (570) 443-8433

     Indicate by check mark whether the registrants (1) have 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 period that the registrants were required to file such reports) and (2) have been subject to such filing requirements for the past 90 days.

ýYES          ¨NO

     Indicate by check mark whether the registrants have submitted electronically and posted on their corporate web sites, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files).  

¨YES          ¨NO

     Indicate by check mark whether the registrants are large accelerated filers, accelerated filers, non-accelerated filers or smaller reporting companies.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer ¨

Accelerated Filer                 ¨

Non-Accelerated filer   ý (Do not check if smaller reporting company)

Smaller reporting company ¨

     Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act).

¨YES          ýNO

      The number of shares of the registrants’ common stock outstanding as of the close of business on September 11, 2009 was 2,450,424 shares.*

*Under a Security Combination Agreement between Blue Ridge Real Estate Company (“Blue Ridge”) and Big Boulder Corporation (“Big Boulder”) (together, the “Companies”) and under the by-laws of the Companies, shares of the Companies are combined in unit certificates, each certificate representing the same number of shares of each of the Companies.  Shares of each Company may be transferred only together with an equal number of shares of the other Company.  For this reason, a combined Blue Ridge/Big Boulder Form 10-Q is being filed.  Except as otherwise indicated, all information applies to both Companies.  




Explanatory Note

Blue Ridge Real Estate Company and Big Boulder Corporation (together, the “Companies”) are filing this Amendment No. 2 on Form 10-Q/A to their Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2009 (the “Form 10-Q”) to include additional disclosures in connection with the restatement of their combined financial statements as of, and for the three and nine-month periods ended July 31, 2009.

As previously disclosed in the Companies’ Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on February 16, 2010, as amended by the Companies’ Form 8-K/A filed with the SEC on February 24, 2010, the Boards of Directors of each of the Companies determined that the carrying costs of certain of the Companies’ residential development assets were in excess of fair value and may not be recoverable.  Therefore, the Boards of Directors approved an impairment charge of $2,254,500 as of July 31, 2009 for the fiscal quarter ended July 31, 2009.  Amendment No. 1 on Form 10-Q/A (“Amendment No. 1”) to the Form 10-Q included financial statements reflecting the restated amounts resulting from the impairment charge.  However, Amendment No. 1 did not include certain related disclosures required under applicable accounting pronouncements.  Those disclosures appear in the following sections of this Amendment No. 2 on Form 10-Q/A (i) Item 1 of Part I, “Financial Statements,” (ii) Footnote 3 to such Financial Statements, “Restatement” (which is a new footnote added in this filing: therefore subsequent footnotes have been renumbered), (iii) Footnotes 7 and 11 to such Financial Statements and (iv) Item 2 of Part I “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” (which now includes a new section relating to the restatement immediately prior to the “Overview” section).

This Amendment No. 2 on Form 10-Q/A also reflects the deletion of references to our Financial Statements as “condensed.”

In addition, pursuant to the rules of the SEC, Item 6 of Part II of this Amendment No. 2 on Form 10-Q/A includes the currently-dated certifications from our Chief Executive Officer and Chief Financial Officer required under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.  These certifications are attached to this Form 10-Q/A as Exhibits 31.1, 31.2, 32.1 and 32.2.






INDEX



Page No.


PART I - FINANCIAL INFORMATION


Item 1.  Financial Statements

Combined Balance Sheets – July 31, 2009 (Restated) and October 31, 2008

1


Combined Statements of Operations - Three and Nine Months ended

July 31, 2009 (Restated) and 2008

2


Combined Statement of Changes in Shareholders’ Equity –

Nine months ended July 31, 2009 (Restated)

3


Combined Statements of Cash Flows - Nine Months Ended

July 31, 2009 (Restated) and 2008

4


Notes to Financial Statements

5


Item 2.  Management's Discussion and Analysis of Financial Condition and Results

of Operations

12


Item 4T.  Controls and Procedures

20




PART II - OTHER INFORMATION


Item 1.  Legal Proceedings

20


Item 1A.  Risk Factors

20


Item 6.  Exhibits

21








PART I – FINANCIAL INFORMATION


Item 1.   FINANCIAL STATEMENTS


BLUE RIDGE REAL ESTATE COMPANY and SUBSIDIARIES

BIG BOULDER CORPORATION and SUBSIDIARIES


COMBINED BALANCE SHEETS

 

(UNAUDITED)

 

ASSETS

7/31/09

(RESTATED)

10/31/08 

  Land and land development costs (4,971 acres per land ledger)

$ 21,847,189 

$23,952,717 

  Land improvements, buildings & equipment, net

26,764,471 

27,448,577 

  Land held for investment, (10,273 and 11,448 acres per land ledger)

8,145,500 

8,194,827 

  Land held for recreation (514 acres per land ledger)

8,693,860 

8,693,860 

  Net investment in direct financing leases

8,313,642 

8,324,258 

  Cash and cash equivalents

198,097 

225,083 

  Cash held in escrow

723,949 

232,059 

  Prepaid expenses and other assets

1,204,204 

1,430,068 

  Accounts receivable and mortgages receivable

629,302 

532,167 

 

 $76,520,214 

$79,033,616 


LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

LIABILITIES:

 

 

  Debt

$31,347,777 

$31,273,294 

  Accounts payable

425,542 

1,264,556 

  Accrued liabilities

472,945 

628,325 

  Deferred income

888,595 

866,660 

  Amounts due to related parties

20,416 

48,959 

  Deferred income taxes

 6,198,987 

6,750,000 

  Accrued pension expense

1,179,643 

1,179,643 

  Total liabilities

 40,533,905 

42,011,437 

 

 

 

Commitments and contingencies

 

 

 

 

 

COMBINED SHAREHOLDERS’ EQUITY:

 

 

   Capital stock, without par value, stated value $0.30 per
    combined share, Blue Ridge and Big Boulder each
    authorized 3,000,000 shares, each issued 2,732,442

819,731 

819,731 

   Capital in excess of stated value

19,817,697 

19,785,264 

   Earnings retained in the business

 18,128,755 

19,197,058 

   Accumulated other comprehensive loss

(694,467)

(694,467)

 

 38,071,716 

39,107,586 

     Less cost of 282,018 shares of capital stock in treasury

2,085,407 

2,085,407 

   Total shareholders’ equity

 35,986,309 

37,022,179 

 

 $76,520,214 

$79,033,616 

See accompanying notes to unaudited financial statements.



- 1 -



BLUE RIDGE REAL ESTATE COMPANY and SUBSIDIARIES

BIG BOULDER CORPORATION and SUBSIDIARIES


COMBINED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED
JULY 31, 2009 and 2008

 

 

 

 

(UNAUDITED)

Three Months Ended

Nine Months Ended

 

7/31/09

(RESTATED)

7/31/08

7/31/09

(RESTATED)

7/31/08

Revenues:

 

 

 

 

        Real estate management

$363,084 

$932,889 

$1,275,573 

$3,835,162 

        Summer recreation operations

353,178 

280,843 

403,891 

320,678 

        Land resource management

2,104,395 

849,886 

4,214,294 

1,412,128 

        Rental income

586,401 

603,214 

1,784,653 

1,804,712 

 

3,407,058 

2,666,832 

7,678,411 

7,372,680 

Costs and expenses:

 

 

 

 

        Real estate management

449,628 

1,086,795 

1,622,876 

4,148,003 

        Summer recreation operations

452,740 

573,188 

931,454 

1,117,861 

        Land resource management

2,436,322 

633,012 

4,257,530 

1,166,144 

        Rental income

305,909 

350,784 

887,178 

1,008,200 

        General and administration

333,349 

286,512 

1,051,858 

900,313 

        Loss on sale of assets

15,640 

10,643 

38,673 

 

3,977,948 

2,945,931 

8,761,539 

8,379,194 

          Operating loss

(570,890) 

(279,099)

(1,083,128) 

(1,006,514)

 

 

 

 

 

Other income (expense):

 

 

 

 

        Interest and other income

79,661 

79,102 

249,141 

238,248 

        Interest expense (net of capitalized interest
       for the three and nine months ended
       July 31, 2009 and 2008 of $152,274,
       $111,713, $377,452 and $424,329,
       respectively.)

(283,963)

(245,243)

(785,316)

(749,170)

 

(204,302)

(166,141)

(536,175)

(510,922)

 

 

 

 

 

Loss from continuing operations before income taxes

(775,192) 

(445,240)

(1,619,303) 

(1,517,436)

 

 

 

 

 

Credit for income taxes

(264,000) 

(151,500)

(551,000) 

(515,900)

 

 

 

 

 

Net loss

($511,192) 

($293,740)

($1,068,303) 

($1,001,536)

 

 

 

 

 

Basic loss per weighted average combined share

($0.21) 

($0.12)

($0.44) 

($0.41)

 

 

 

 

 

Diluted loss per weighted average combined share

($0.21) 

($0.12)

($0.44) 

($0.41)

See accompanying notes to unaudited financial statements.



- 2 -



BLUE RIDGE REAL ESTATE COMPANY and SUBSIDIARIES

BIG BOULDER CORPORATION and SUBSIDIARIES


COMBINED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE NINE MONTHS ENDED JULY 31, 2009

(UNAUDITED)

 

 

 

 

 

Accumulated

 

 

 

Capital Stock (a)

Capital in Excess of

Earnings Retained in

Other Comprehensive

Capital Stock in

 

 

Shares

Amount

Stated Par

the Business

Loss

Treasury (b)

Total

 

 

 

 

 

 

 

 

Balances, October 31, 2008

2,732,442 

$819,731 

$19,785,264 

$19,197,058 

($694,467)

($2,085,407)

$37,022,179 

 

 

 

 

 

 

 

 

Net loss (Restated)

 

 

 

($1,068,303) 

 

 

(1,068,303) 

 

 

 

 

 

 

 

 

Compensation recognized
under employee stock plan

 

 

32,433 

 

 

 

32,433 

 

 

 

 

 

 

 

 

Balances, July 31, 2009 (Restated)

2,732,442 

$819,731 

$19,817,697 

$18,128,755 

($694,467)

($2,085,407)

$35,986,309 


(a) Capital stock, at stated value of $0.30 per combined share

(b) 282,018 shares held in treasury, at cost



See accompanying notes to unaudited financial statements



- 3 -



BLUE RIDGE REAL ESTATE COMPANY and SUBSIDIARIES

BIG BOULDER CORPORATION and SUBSIDIARIES


COMBINED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED

 

 

JULY 31, 2009 and 2008

 

 

(UNAUDITED)

 

 

 

2009

(RESTATED)

2008

Cash Flows Provided By (Used In) Operating Activities:

 

 

       Net income (loss)

($1,068,303) 

($1,001,536)

       Adjustments to reconcile net income (loss) to net cash provided by
       (used in) operating activities:

 

 

          Depreciation

1,059,600 

1,049,598 

          Impairment

2,254,500

0

          Net book value of rental properties sold

483,121 

          Deferred income taxes

 (551,013) 

(515,900)

          Loss on sale/disposition of assets

10,643 

38,673 

          Compensation cost under employee stock plans

32,432 

105,179 

          Changes in operating assets and liabilities:

 

 

               Cash held in escrow

(491,890)

(231,722)

               Accounts receivable and mortgages receivable

(97,135)

110,423 

               Prepaid expenses and other assets

225,863 

543,255 

               Land and land development costs

(364,943)

(3,356,025)

               Accounts payable and accrued liabilities

(1,022,936)

(1,032,680)

               Deferred income

21,936 

255,750 

Net cash provided by (used in) operating activities

8,754 

(3,551,864)

Cash Flows Used In Investing Activities:

 

 

       Proceeds from disposition of assets

22,475 

       Additions to properties

(56,071)

(436,979)

       Payments received under direct financing lease arrangements, net

10,616 

12,840 

Net cash used in investing activities

(45,455)

(401,664)

Cash Flows Provided By Financing Activities:

 

 

       Proceeds from debt

6,993,598 

11,149,991 

       Payment of debt

(6,919,115)

(7,151,379)

       Deferred financing costs

(64,768)

Net cash provided by financing activities

9,715 

3,998,612 

Net (decrease) increase in cash and cash equivalents

(26,986)

45,084 

Cash and cash equivalents, beginning

225,083 

189,702 

Cash and cash equivalents, ending

$198,097 

$234,786 

 

 

 

Supplemental disclosures of cash flow information:

 

 

   Cash paid during the period for:

 

 

       Interest

$1,174,579 

$1,187,543 

       Income taxes

$34,413 

$747 

 

 

 

Supplemental disclosures of non cash investing and financing activities:

 

 

   Reclassification of assets from land and land development costs to land
   held for investment and land improvements, buildings and equipment

$215,971 

$358,620 


See accompanying notes to unaudited financial statements.



- 4 -



NOTES TO UNAUDITED FINANCIAL STATEMENTS

1. Basis of Combination

     The  combined  financial  statements  include the accounts of Blue Ridge Real Estate Company and its wholly-owned  subsidiaries  (Northeast Land Company, Jack Frost Mountain Company, Boulder Creek Resort Company, Moseywood Construction Company, Jack Frost National Golf Course, Inc., Blue Ridge Acquisition Company, BRRE Holdings, Inc., Coursey Commons Shopping Center, LLC, Coursey Creek, LLC, Cobble Creek, LLC, Flower Fields Motel, LLC, Blue Ridge WNJ, LLC and Blue Ridge WMN, LLC) (“Blue Ridge”) and Big Boulder Corporation and its  wholly-owned  subsidiaries  (Lake  Mountain  Company and BBC  Holdings, Inc.) (“Big Boulder” and, together with Blue Ridge, the “Companies”).  

     The balance sheet as of October 31, 2008, which has been derived from audited financial statements, and the combined financial statements as of and for the nine month periods ended July 31, 2009 and 2008, which are unaudited, are presented pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, these combined financial statements should be read in conjunction with the combined financial statements and notes thereto contained in the Companies’ 2008 Annual Report on Form 10-K. In the opinion of management, the accompanying combined financial statements reflect all adjustments (which are of a normal recurring nature) necessary for a fair statement of the results for the interim periods.

     Due to intermittent revenues from land resource management, the results of operations for any interim period are not necessarily indicative of the results expected for the full fiscal year.

2. Significant Accounting Policies

     The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  For example, unexpected changes in market conditions or a downturn in the economy could adversely affect actual results.  Estimates are used in accounting for, among other things, land development costs, accounts and mortgages receivables, the unguaranteed residual value of assets under direct financing leasing arrangements, legal liability, insurance liability, depreciation, employee benefits, taxes, and contingencies.  Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the combined financial statements in the period they are determined to be necessary.

     Management believes that its accounting policies regarding revenue recognition, land development costs, long lived assets, net investment in direct financing leases, deferred income and income taxes among others, affect its more significant judgments and estimates used in the preparation of its combined financial statements.  For a description of these critical accounting policies and estimates, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. There are no significant changes in the Companies’ critical accounting policies or estimates since the Companies’ fiscal year ended October 31, 2008 (“Fiscal 2008”).

     Cash held in escrow represents deposits held by the Companies for real estate transactions or other funds placed into escrow with a third party intermediary for the purpose of an Internal Revenue Code Section 1031 tax deferred exchange.

     On November 1, 2008, the Companies adopted Financial Accounting Standards No. 157, Fair Value Measurements, (“SFAS 157”) which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value.  The provisions of SFAS 157 relating to financial assets and liabilities are effective for fiscal years beginning after November 15, 2007.  Financial Accounting Standards Board (“FASB”) Staff Position (“FSP”) 157-2 delays the effective date of SFAS 157 to fiscal years beginning after November 15, 2008 for non-financial assets and liabilities, except for those items that are recognized or disclosed at fair value on a recurring basis.  The Companies adopted the provisions of SFAS 157 related to financial assets and liabilities on November 1, 2008 with no effect to the consolidated financial position, results of operations, or


- 5 -



cash flows.  The Companies are currently evaluating the impact of adopting the provisions of SFAS 157 related to non-financial assets and liabilities on their consolidated financial statements.

     Effective November 1, 2008, the Companies adopted Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, (“SFAS No. 159”).  SFAS No. 159 permits entities to make an irrevocable election to value certain financial assets and financial liabilities, on an instrument by instrument basis, at fair value and include the related change in fair value in net income. The Companies did not elect the fair value option for eligible items.

New Accounting Pronouncements

     In December 2008, the FASB issued FASB Staff Position (“FSP”) SFAS 132(R)-1, Employer’s Disclosures about Postretirement Benefit Plan Assets.  This FSP amends FASB Statement No. 132, Employer’s Disclosures about Pensions and Other Postretirement Benefits, to disclose more information about investment allocation decisions, major categories of plan assets, including concentrations of risk and fair value measurements, and the fair value techniques and inputs used to measure plan assets. The disclosures required by the FSP are required to be provided for fiscal years ending after December 15, 2009.  The Companies are in the process of evaluating the effect, if any, the adoption of this FSP will have on our financial statements.

     In April 2009, the FASB issued FSP SFAS No. 157-4, Determining Whether a Market Is Not Active and a Transaction Is Not Distressed (“FSP SFAS No. 157-4”). FSP SFAS No. 157-4 provides guidelines for making fair value measurements more consistent with principles presented in SFAS No. 157. FSP SFAS No. 157-4 provides additional authoritative guidance in determining whether a market is active or inactive, whether a transaction is distressed, is applicable to all assets and liabilities and will require enhanced disclosures. FSP SFAS No. 157-4 is effective for periods ending after June 15, 2009.  The Companies are in the process of evaluating the effect, if any, the adoption of the FSP will have on our financial statements.

     In April 2009, the FASB issued FSP SFAS No. 107-1 and Accounting Principles Board (“APB”) Opinion 28-1, Interim Disclosures About Fair Value of Financial Instruments (“FSP SFAS No. 107-1 and APB No. 28-1”). FSP SFAS No. 107-1 and APB No. 28-1 amend SFAS No. 107, Disclosures About Fair Value of Financial Instruments, to require disclosures about the fair value of financial instruments in interim as well as in annual financial statements, and APB No. 28, Interim Financial Reporting, to require those disclosures in all interim financial statements. FSP SFAS No. 107-1 and APB No. 28-1 are effective for periods ending after June 15, 2009.  The Companies are in the process of evaluating the effect, if any, the adoption of these pronouncements will have on our financial statements.

     In May 2009, the FASB issued Financial Accounting Standards No. 165, Subsequent Events, ("SFAS 165").  SFAS 165 establishes the period after the balance sheet date and the circumstances in which management should evaluate events or transactions for potential recognition or disclosure in financial statements.  SFAS 165 is effective for periods ending after June 15, 2009.

3.  Restatement

     As previously disclosed in the Companies’ Form 8-K filed with the SEC on February 16, 2010, as amended by the Companies’ Form 8-K/A filed with the SEC on February 24, 2010, the Boards of Directors of each of the Companies determined that the carrying costs of certain of the Companies’ residential development assets as of July 31, 2009 were in excess of fair value and may not be recoverable.  Therefore, the Boards of Directors approved an impairment charge of $2,254,500.  The amount of the impairment was erroneously not reflected in the Companies’ financial statements as of and for the three and nine-month periods ended July 31, 2009.  As a result of this error, the Boards of Directors determined that the financial statements included in the Companies’ Quarterly Report on Form 10-Q for the period ended July 31, 2009 should no longer be relied upon.  Accordingly, the Companies’ have restated their unaudited combined financial statements as of and for the three and nine-month periods ended July 31, 2009 to record adjustments for correction of the error.  As a result of the restatement, certain financial statement line items were adjusted as set forth in more detail below.

     The following information shows affected line items of the unaudited combined financial statements as of and for the three and nine-month periods ended July 31, 2009:



- 6 -



Combined Balance Sheet

 

(UNAUDITED)

 

7/31/09

 

As Reported

Adjustment

As Restated

Land and land development costs
(4,971 acres per land ledger)

$24,101,689 

($2,254,500)

$21,847,189 

Total assets

78,774,714 

(2,254,500)

76,520,214 

 

 

 

 

Deferred income taxes

6,965,987 

(767,000)

6,198,987 

Total liabilities

41,300,905 

(767,000)

40,533,905 

 

 

 

 

Earnings retained in the business

19,616,255 

(1,487,500)

18,128,755 

Total shareholders’ equity

37,473,809 

(1,487,500)

35,986,309 

Total liabilities and shareholders’ equity

$78,774,714 

($2,254,500)

$76,520,214 

Combined Statement of Operations

 

Three Months Ended

7/31/09

Nine Months Ended

7/31/09

 

As Reported

Adjustment

As Restated

As Reported

Adjustment

As Restated

Land resource management expense

$181,822 

$2,254,500 

$2,436,322 

$2,003,030 

$2,254,500 

$4,257,530 

Total costs and expenses

1,723,448 

2,254,500 

3,977,948 

6,507,039 

2,254.500 

8,761,539 

Operating profit (loss)

1,683,610 

(2,254,500)

(570,890)

1,171,372 

(2,254,500)

(1,083,128)

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes

1,479,308 

(2,254,500)

(775,192)

635,197 

(2,254,500)

(1,619,303)

 

 

 

 

 

 

 

Provision (credit) for income taxes

503,000 

(767,000)

(264,000)

216,000 

(767,000)

(551,000)

 

 

 

 

 

 

 

Net income (loss)

$976,308 

(1,487,500)

($511,192)

$419,197 

(1,487,500)

($1,068,303)

 

 

 

 

 

 

 

Basic earnings (loss) per weighted average combined share

$0.40 

($0.61)

($0.21)

$0.17 

($0.61)

($0.44)

 

 

 

 

 

 

 

Diluted earnings (loss) per weighted average combined share

$0.40 

($0.61)

($0.21)

$0.17 

($0.61)

($0.44)

Combined Statement of Cash Flows

 

For the Nine Months Ended

7/31/2009

 

As Reported

Adjustment

As Restated

Cash Flows Provided By (Used In) Operating Activities:

 

 

 

       Net income (loss)

$419,197 

($1,487,500)

($1,068,303) 

       Adjustments to reconcile net income (loss) to net
       cash provided by (used in) operating activities:

 

 

 

          Impairment

2,254,500 

2,254,500 

          Deferred income taxes

$215,987 

($767,000)

($551,013) 

See Note 11.



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4. Segment Reporting

     The Companies currently operate in three business segments, which consist of Real Estate Management/Rental Operations, Summer Recreation Operations and Land Resource Management segments.

5. Income Taxes

     The benefit for income taxes for the three and nine months ended July 31, 2009 and 2008 is estimated using the estimated annual effective tax rate for the years ending October 31, 2009 and 2008.  The effective income tax rate for the first nine months of the fiscal year ending October 31, 2009 (“Fiscal 2009”) and Fiscal 2008 was estimated at 34%.

     Effective November 1, 2007, the Companies adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 requires the Companies to clarify their accounting for uncertainty in income taxes recognized in its financial statements in accordance with FASB Statement No. 109. FIN 48 also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The adoption of FIN 48 had no impact on the combined financial statements of the Companies.

     The Companies’ continuing practice is to recognize interest and/or penalties related to income tax matters as income tax expense in its combined financial statements. As of and for the nine months ended July 31, 2009, no interest and penalties have been accrued in the combined balance sheet and no expense has been incurred in the combined statement of operations.

     At July 31, 2009, federal and state tax returns for years ending October 31, 2005 and later are subject to future examination by the respective tax authorities.

6.  Stock Based Compensation

     During the nine months ended July 31, 2009, no stock options were issued or exercised.

     The fair value of each option award is estimated at the date of grant using a Black-Scholes option pricing model.  Expected volatilities are based upon historical volatilities of the Companies’ stock.  The Companies use historical data to estimate option exercises and employee terminations with the valuation model.  The expected term of options granted is derived from the output of the valuation model and represents the period of time that options granted are expected to be outstanding.  The risk-free rate for periods within the contractual term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

     Option activity during the nine month period ended July 31, 2009 is as follows:

 

Shares

Weighted Average Exercise Price

Aggregate Intrinsic Value

Weighted Average Remaining Useful Life (in years)

Outstanding at October 31, 2008

64,600 

$36.93 

$2,385,600 

2.4 

Granted

 

Exercised

 

Canceled

 

Outstanding at July 31, 2009

64,600 

$36.93 

$2,385,600 

1.6 

 

 

 

 

 

Options exercisable at July 31, 2009

59,822 

36.76 

 

 

 

 

 

 

 

Option price range

$34.00-$39.00 

 

 

 




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       Activity related to non-vested options for the period ended July 31, 2009 is as follows:

 

 

Shares

 

Weighted Average Grant Date Fair Value Price

Non-vested at October 31, 2008

 

11,945 

 

$7.87 

Granted

 

 

Vested

 

(7,167)

 

(9.88)

Non-vested at July 31, 2009

 

4,778 

 

$4.86 

     No options were exercised during the nine months ended July 31, 2009 or 2008.  The Companies expect to recognize compensation expense related to non-vested awards totaling approximately $11,778 over the next two years based on graded average vesting.

     The Companies’ policy regarding the exercise of options is that optionees utilize an independent broker to manage the transaction, whereby, the broker sells the exercised shares on the open market.

7.  Land and Land Development Costs

     Land and improvements in progress held for development consists of the following:

 

7/31/2009

(Restated)

10/31/2008

Land unimproved designated for development

$461,686 

$461,186 

Residential development

11,006,516 

10,027,041 

Infrastructure development

10,378,987 

13,464,490 

 

$21,847,189 

$23,952,717 

     The increase in residential development costs and the decrease in infrastructure costs is primarily due to the closing and subsequent allocation of the capital jobs relating to site development in Woodsbluff Court ($525,000) located in the Laurelwoods II residential community and the Boulder Lake Village condominium project ($2,650,000) on Big Boulder Lake.

     Residential development costs were further increased by the continued construction of the 18 unit Boulder Lake Village condominium ($1,320,000) and four Woodsbluff Duplex Units ($325,000). This increase was offset by the sale of one Boulder Lake Village condominium unit ($415,000) and three Woodsbluff Duplex units ($1,159,000).

     The carrying value of the residential development assets reflects an impairment charge of $2,254,500 recorded for the fiscal quarter ended July 31, 2009.  See Note 3.

8.  Land

 

7/31/2009

10/31/2008

Land held for investment

 

 

  Land – Principally unimproved

$1,969,360 

$2,018,687 

  Land – Commercial rental properties

6,176,140 

6,176,140 

 

$8,145,500 

$8,194,827 

 

 

 

Land held for recreation

 

 

  Land – Golf course

$8,656,154 

$8,656,154 

  Land – Ski areas

37,706 

37,706 

 

$8,693,860 

$8,693,860 

9.  Pension Benefits

     Components of Net Periodic Benefit Cost:

 

Three Months Ended

Nine Months Ended

 

7/31/09

7/31/08

7/31/09

7/31/08

Service Cost

$32,019 

$45,185 

$101,019 

$135,185 

Interest Cost

86,346 

86,040 

265,846 

244,540 

Expected return on plan assets

(64,192)

(101,960)

(201,692)

(291,960)



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Three Months Ended

Three Months Ended

 

7/31/09

7/31/08

7/31/09

7/31/08

Net amortization and deferral:

 

 

 

 

   Amortization of transition obligation

717 

717 

2,151 

2,151 

   Amortization of prior service cost

67 

67 

207 

207 

   Amortization of accumulated gain

13,828 

7,744 

46,828 

7,744 

   Net amortization and deferral

14,612 

8,528 

49,186 

10,102 

   Total net periodic pension cost

$68,785 

$37,793 

$214,359 

$97,867 

     The Companies expect to contribute $362,058 their pension plan in Fiscal 2009.  As of July 31, 2009, the Companies made contributions totaling $261,272.  The Companies anticipate contributing an additional $100,786 to fund its pension in Fiscal 2009.

10.  Investment in Direct Financing Leases

     The Companies lease the Jack Frost and Big Boulder ski areas under direct financing leases through 2034.  The leases provide for minimum rental payments plus scheduled increases based upon the consumer price index, which increases shall not exceed 4% in any given year.  Minimum annual future lease payments due under those leases at July 31, 2009 is as follows:

2010

$254,523 

2011

260,886 

2012

267,408 

2013

274,094 

2014

280,946 

Thereafter

15,263,069 

TOTAL

$16,600,926 

     The Companies net investment in direct financing leases consists of the following as of July 31, 2009:

Minimum future lease payments

$8,170,047 

Unguaranteed residual value of lease properties

8,430,879 

Gross investment in lease

16,600,926 

Unearned income

(8,287,284)

Net investment in direct financing leases

$8,313,642 

     Unearned income is amortized into earnings using the interest method.  The scheduled payment increase over the terms of the leases have been accounted for on a straight line basis in accordance with generally accepted accounting principles.  The unguaranteed residual is evaluated on an ongoing basis.

11.  Per Share Data

     Earnings per share (“EPS”) are based on the weighted average number of common shares outstanding during the period.  Diluted EPS assumes weighted average options have been exercised to purchase shares of common stock in the three and nine months ended July 31, 2009 and 2008, net of assumed repurchases using the treasury stock method. Certain unexercised stock options to purchase shares of the Companies’ common stock were excluded from the dilutive calculation for the three and nine months ended July 31, 2009 and 2008 due to the exercise price of the options being greater than the market price of the Companies’ common stock.

     Weighted average basic and diluted shares, taking into consideration shares issued, weighted average options used in calculating EPS and treasury shares repurchased, for each of the periods are presented  as follows:

 

 

Three Months Ended

Nine Months Ended

 

 

7/31/09

7/31/08

7/31/09

7/31/08

Weighted average combined shares of common stock outstanding
   used to compute basic earnings per combined share

 

2,450,424 

2,450,424 

2,450,424 

2,450,424 

Additional combined common shares to be issued assuming
    exercise of stock options, net of combined shares assumed
    reacquired

 

Combined shares used to compute dilutive effect  of stock option

 

2,450,424 

2,450,424 

2,450,424 

2,450,424 



- 10 -



     Basic loss per weighted average combined share from continuing operations is computed as follows:

 

 

Three Months Ended

Nine Months Ended

 

 

7/31/09

7/31/08

7/31/09

7/31/08

Net loss (Restated)

 

($511,192) 

($293,740)

($1,068,303) 

($1,001,536)

Weighted average combined shares of common stock outstanding

 

2,450,424 

2,450,424 

2,450,424 

2,450,424 

Basic loss per weighted average combined share (Restated)

 

($0.21) 

($0.12)

($0.44) 

($0.41)

     Diluted loss per weighted average combined share from continuing operations is computed as follows:

 

 

Three Months Ended

Nine Months Ended

 

 

7/31/09

7/31/08

7/31/09

7/31/08

Net loss (Restated)

 

($511,192) 

($293,740)

($1,068,303) 

($1,001,536)

Combined shares used to compute dilutive effect of stock option

 

2,450,424 

2,450,424 

2,450,424 

2,450,424 

Dilutive loss per weighted average combined share (Restated)

 

($0.21) 

($0.12)

($0.44) 

($0.41)

12. Subsequent Events

On August 10, 2009, the Companies closed on Assemblage A of the second Agreement of Sale with The Conservation Fund, or the Phase 2A Agreement, for the sale of 1,477 acres of land owned by the Companies located in Buck Township Luzerne County, Thornhurst Township, Lackawanna County, and Tobyhanna Township, Monroe County in Pennsylvania, for a total purchase price of $4,775,000.  Proceeds from the land sale were used to pay down debt.

On August 28, 2009 Blue Ridge Real Estate Company, through its wholly owned subsidiary, Blue Ridge WNJ, LLC, entered into a mortgage and security agreement and a $4,038,000 6.90% Senior Secured Note with Wells Fargo Bank Northwest, N.A.  The note is secured by the mortgage, which encumbers certain real property known as the Walgreens Store located in Dover Township, Ocean County, New Jersey.  A portion of the proceeds of the loan were used to payoff the note outstanding with State Farm Bank which encumbered the New Jersey Walgreens property. The remaining proceeds will be used to pay down debt.

On August 28, 2009 Blue Ridge Real Estate Company, through its wholly owned subsidiary, Blue Ridge WMN, LLC, entered into a mortgage and security agreement and a $4,340,000 6.90% Senior Secured Note with Wells Fargo Bank Northwest, N.A.  The note is secured by the mortgage, which encumbers certain real property known as the Walgreens Store located in White Bear Lake, Washington County, Minnesota.  A portion of the proceeds of the loan were used to payoff the note outstanding with State Farm Bank which encumbered the Minnesota Walgreens property. The remaining proceeds will be used to pay down debt.



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Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Special Note Regarding Forward-Looking Statements

Some of the statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are made based upon, among other things, current assumptions by management, expectations and beliefs concerning future developments and their potential effect on the Companies.  In some cases you can identify forward-looking statements where statements are preceded by, followed by or include the words “believes,” “expects,” “anticipates,” “plans,” “future,” “potential,” “probably,” “predictions,” “continue” or the negative of such terms or similar expressions.  All statements, other than statements of historical fact, regarding the Companies’ strategy, future operations, financial position, estimated revenue, projected costs, projected savings, prospects, plans, opportunities and objectives constitute “forward-looking statements,” including but not limited to statements regarding the current and future real estate market in the Pocono Mountains; the timing of the agreements of sale with The Conservation Fund, the timing and outcome of the Companies’ planned land development; compensation expense related to non-vested awards; contributions to the Companies’ pension plan; the Companies’ land development and infrastructure plans in and around Jack Frost Mountain and Big Boulder Lake and Ski Resort; and the Companies’ anticipated cash needs.

These statements involve known and unknown risks, uncertainties and other factors that may cause the Companies’ or their industry’s actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements.  Because forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements, including but not limited to:

·

Changes in market demand and/or economic conditions within the Companies’ local region and nationally, including changes in consumer confidence, volatility of mortgage interest rates and inflation;

·

The status of the current and future real estate market in the Pocono Mountains;

·

An increase in borrowing costs, and the Companies’ ability to generate cash flow to pay interest and scheduled debt payments as well as the Companies’ ability to refinance such indebtedness;

·

The Companies’ ability to continue to generate sufficient working capital to meet the Companies’ operating requirements;

·

The Companies’ ability to obtain and maintain approvals from local, state and federal authorities on regulatory issues;

·

The Companies’ ability to provide competitive pricing to sell homes;

·

The Companies’ ability to achieve gross profit margins to meet operating expenses;

·

Fluctuations in the price of building materials;

·

The Companies’ ability to effectively manage the Companies’ business;

·

The Companies’ ability to attract and retain qualified personnel in the Companies’ business;

·

The Companies’ ability to negotiate leases for the future operations of our facilities;

·

The Companies’ relations with the Companies’ controlling shareholder, including its continuing willingness to provide financing and other resources;

·

Actions by the Companies’ competitors;

·

Effects of changes in accounting policies, standards, guidelines or principles; and

·

Terrorist acts, acts of war and other factors over which the Companies have little or no control.

As a result of these factors, the Companies cannot assure you that the forward-looking statements in this Quarterly Report on Form 10-Q will prove to be accurate.  Furthermore, if the Companies’ forward-looking statements prove to be inaccurate, the inaccuracy may be material.  In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by the Companies or any other person that the Companies will achieve their objectives and plans in any specified time frame, if at all.  

The Companies may not update these forward-looking statements, even though their situation may change in the future.



- 12 -



The Companies qualify all the forward-looking statements contained in this Quarterly Report on Form 10-Q by the foregoing cautionary statements.

Restatement

The combined financial statements included in this Amendment No. 2 to Form 10-Q/A have been restated to correct an error in such financial statements as initially filed.  See Note 3 to the combined financial statements included in this Amendment No. 2 to Form 10-Q/A for further information.

The following discussion and analysis of financial condition and results of operations reflects the restated amounts.

Overview

Since the early 1980s, the Companies have developed five resort communities in close proximity to their Jack Frost Mountain and Big Boulder Ski Area resorts.  The Companies’ resorts are located in the Pocono Mountains of Pennsylvania, an area which offers year-round regional tourist appeal and a quiet, relaxing vacation environment.

The Companies own 15,745 acres of land in Northeastern Pennsylvania, along with 13 acres in various other states.  Of these land holdings, the Companies’ have designated 4,971 acres as held for development.  It is expected that all of the Companies’ planned developments will be subdivided and sold as parcels of land, while others will be developed into single and multi-family housing.

The Companies believe the real estate market in the Pocono Mountains continues to offer an attractive investment alternative for buyers seeking a second home in a resort community.  The Companies believe this is partially attributable to current moderate mortgage interest rates and a challenging economy that may be facilitating more regional tourist destinations.

The Companies are constructing Phase I and II of the Laurelwoods II community of single family and multi-family homes and a condominium project known as Boulder Lake Village.  Plans to develop residential communities near Jack Frost Mountain and Big Boulder ski resorts are in place in anticipation of an economic recovery.  This is part of the Companies’ comprehensive plan for their “core land” development in and around their two ski areas.  Management is very cautious, in the unpredictable housing market, not to commence any residential developments until the market stabilizes.

For the fiscal year ended October 31, 2009, or Fiscal 2009, management intends to continue selective sales of land, some of which may be treated as section 1031 tax deferred exchanges under the Internal Revenue Code.

Management is also taking various steps to attract new home and land sale customers. For example, purchasers who want to purchase newly constructed single family homes in the Companies’ Laurelwoods II community development and can make a down payment of at least 20%, have the option of financing their mortgage through Big Boulder Corporation with interest only payments for five years.  The Companies are also offering a one year membership with the Lake Mountain Club and complimentary passes to the Jack Frost National Golf Course to the purchasers of the existing Laurelwoods II single family and duplex townhomes.  The Companies are also offering to pay six months’ of homeowner’s association fees on behalf of any current homeowner in the Blue Heron, Midlake Condominium, Laurelwoods Community and Snow Ridge Village developments that provide a purchaser referral which results in the sale of an existing Laurelwoods II single family home.  The Companies have instituted discount price incentives for the 18 units to be sold in Building J of the Boulder Lake Village condominiums.  For the first six units sold, a 3% discount will apply, for the next six units sold, a 2% discount will apply, and for the final six units sold, a 1% discount will apply. The Companies are also offering financing opportunities for the purchase of selected tracts of land.

The Companies also generate revenue by the selective timbering of their land.  Management relies on the advice of their forester, who is engaged on a consulting basis and who receives a commission on each stumpage contract, for the timing and selection of certain parcels for timbering whereby significant attention is given to protecting the environment and retaining the value of these parcels for future timber harvests.  The Companies’ forester is in the process of updating the inventory of the Companies’ timber resources to aid in land valuations so that management will have more current valuation information before entering into future timber agreements.



- 13 -



The Jack Frost National Golf Course opened in the spring of 2007.  The golf course is managed by Billy Casper Golf, LLC, a nationally-recognized golf course management company.

Plans are in place for a community surrounding the Jack Frost National Golf Course.  This community is expected to be comprised of single family homes and multi-family units, as well as golf club amenities and the necessary infrastructure.

The Companies also intend to advertise certain subdivisions for sale to recognized land developers in order to facilitate the market for housing and to reduce the inherent risk associated with land development.

Recent Developments

On May 22, 2009, the Companies entered into a Deed of Trust and Security Agreement and Real Estate Lien Note with Barbers Hill Bank, a branch of Anahuac National Bank, in the amount of $1,050,000, which encumbers certain real property owned by Blue Ridge Real Estate Company located in Chambers County, Texas.  This property is currently leased to Jack in the Box Eastern Division, L.P. The loan has a term of five years and requires monthly payments in the amount of $7,254 beginning June 22, 2009 and ending May 22, 2014, at which time the remaining principal balance and all interest accrued shall become due and payable.  The proceeds of the loan will be used to fund the completion of Building J of the Boulder Lake Village condominium project and general operations.  The interest rate is fixed at 6.75%.

In May 2009, the Companies created two single purpose entities for the sole purpose of ownership of the Companies’ Walgreens properties located in Minnesota and New Jersey.  On August 28, 2009, Blue Ridge WMN, LLC, a Minnesota limited liability company, became the sole owner of the Walgreens property located in White Bear Lake, Washington County, Minnesota and Blue Ridge WNJ, LLC, a New Jersey limited liability company, became the sole owner of the Walgreens property located in Tom’s River, Ocean County, New Jersey.  Both limited liability companies are wholly owned subsidiaries of Blue Ridge Real Estate Company.

On June 24, 2009, the Companies closed on the first Agreement of Sale with The Conservation Fund, or the Phase 1 Agreement, for the sale of 1,175 acres located in Monroe and Lackawanna Counties, Pennsylvania, for a total purchase price of $2,100,000.  Proceeds from the land sale were used to pay down debt.

On July 17, 2009, the Companies entered into the First Amendment to the Phase 2 Agreement of Sale with The Conservation Fund which provides for the extension of the inspection period for Assemblage B, or Phase 2B, from July 9, 2009 to October 30, 2009 and the extension of the closing on Assemblage B to October 30, 2009. The Phase 2B Agreement is for the sale of approximately 1,320 acres for the purchase price of $3,375,000, located in Bear Creek Township, and Buck Township, in Luzerne County, Pennsylvania. The Companies also intend to use the proceeds of this land sale to pay down debt.

On July 31, 2009, the Companies entered into an Agreement of Sale with RCG Ventures I, LLC to sell the Wal-Mart property, together will all buildings and improvements, located in Laurens, South Carolina for the sum of $1,325,000.  Closing is expected to take place in mid-September 2009.

Due to the recent decline in the housing market nationwide, the Companies continue to monitor the progress of residential home sales within the northeast region.  No new residential development projects will be started until the market stabilizes.

The Companies continue to research income producing investment properties for potential acquisition.

Critical Accounting Policies and Significant Judgments and Estimates

The Companies have identified the most critical accounting policies upon which the Companies’ financial status depends.  The critical policies and estimates were determined by considering accounting policies that involve the most complex or subjective decisions or assessments.  The most critical accounting policies identified relate to net deferred tax assets and liabilities, net investment in direct financing leases, the valuation of land development costs and long-lived assets, and revenue recognition.

Revenues are derived from a wide variety of sources, including sales of real estate, management of investment properties, home construction, property management services, golf activities, timbering and leasing activities.  Revenues are recognized as services are performed, except as noted below.



- 14 -



Timbering revenues from stumpage contracts are recognized at the time a stumpage contract is signed in accordance with Staff Accounting Bulletin No. 104 – Revenue Recognition, (“SAB 104”). At the time a stumpage contract is signed, the risk of ownership is passed to the buyer at a fixed, determinable cost.  There is no transfer of title in connection with these contracts.  Reasonable assurance of collectibility is determined by the date of signing and, at that time, the obligations of the Companies’ are satisfied.  Therefore, full accrual recognition at the time of contract execution is appropriate under SAB 104 guidance.

The Companies recognize income on the disposition of real estate in accordance with the provisions of Statement of Financial Accounting Standards No. 66, "Accounting for Sales of Real Estate" (“SFAS 66”) using the full accrual method.  The full accrual method is appropriate at closing when the sales contract has been signed, the buyer has arranged permanent financing and the risks and rewards associated with ownership have been transferred to the buyer.  In the few instances that the Companies finance the sale, more than a 20% down payment is required from the buyers.  The remaining financed purchase price is not subject to subordination.  Down payments of less than 20% are accounted for as deposits as required by SFAS 66.

The costs of developing land for resale as resort homes and the costs of constructing certain related amenities are allocated to the specific parcels to which the costs relate. Such costs, as well as the costs of construction of the resort homes, are charged to operations as sales occur. Land held for resale and resort homes under construction are stated at lower of cost or market.

The Companies recognize revenue on custom home construction in accordance with SFAS 66.  Under the provisions of SFAS 66, revenues and costs are recognized using the percentage of completion method of accounting when construction is beyond the preliminary stage, the buyer is committed and may only require a refund in the event of non-delivery, if the sales proceeds are collectible and if the aggregate sales proceeds and the total cost of the project can be reasonably estimated.  Total estimated revenues and construction costs are reviewed periodically, and any change is applied prospectively.

Management’s estimate of deferred tax assets and liabilities is primarily based on the difference between the tax basis and financial reporting basis of depreciable assets and the net investment in direct financing leases, like-kind exchanges of assets, net operating losses, stock options and accruals.  Valuation allowances are established when necessary to reduce tax assets to the amount expected to be realized.

The Companies have capitalized as the net investment in direct financing leases that portion of the leased premises pertaining to Jack Frost Mountain and Big Boulder Ski Areas, which met the criteria for accounting for a portion of the lease transactions as direct financing leases.  The accounting was based on estimates and assumptions about the fair values and estimated useful lives of the leased properties, as well as the collectibility of lease payments and recoverability of the unguaranteed residual value of the leased properties.  The Companies periodically review the net investment in direct financing leases for events or changes in circumstances that may impact collectibility, and recoverability of the unguaranteed residual value of leased properties.

The Companies capitalize as land and land development costs, the original acquisition cost, direct construction and development costs, property taxes, interest incurred on costs related to land under development and other related costs (engineering, surveying, landscaping, etc.) until the property reaches its intended use.  The cost of sales for individual parcels of real estate or condominium units within a project is determined using the relative sales value method.  Revenue is recognized upon signing of the closing documents.  At closing, a binding contract is in effect, the buyer has arranged for permanent financing and the Companies are assured of payment in full.  Also at the time of closing, the risks and rewards associated with ownership have been transferred to the buyer.  Selling expenses are recorded when incurred.

Long-lived assets, namely properties, are recorded at cost. Depreciation and amortization is provided principally using the straight-line method over the estimated useful life of the asset. Upon sale or retirement of the asset, the cost and related accumulated depreciation are removed from the related accounts, and resulting gains or losses are reflected in income.

Interest, real estate taxes, and insurance costs, including those costs associated with holding unimproved land, are normally charged to expense as incurred. Interest cost incurred during construction of facilities is capitalized as part of the cost of such facilities. Maintenance and repairs are charged to expense, and major renewals and betterments are added to property accounts.



- 15 -



The Companies review their long-lived assets whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. In that event, the Companies calculate the expected future net cash flows to be generated by the asset.  If those net future cash flows are less than the carrying value of the asset, an impairment loss is recognized in operating income. The impairment loss is the difference between the carrying value and the fair value of the asset.  The impairment loss is recognized in the period incurred.

Deferred income consists of dues, rents and deposits on land or home sales. Rents that are not yet earned are related to the Companies’ commercial properties that have been paid in advance, and dues are related to memberships in their hunting and fishing clubs and golf course memberships paid in advance. The Companies recognize revenue related to the hunting and fishing clubs and golf course memberships over the one-year period that the dues cover.  The Companies recognize revenue related to the fishing club over a five month period from May through September, and the golf course over a seven month period, April through October.  Deposits are required on land and home sales.

The Companies sponsor a defined benefit pension plan as detailed in footnote 8.  The accounting for pension benefits is determined by specialized accounting and actuarial methods using numerous estimates, including discount
rates, expected long-term investment returns on plan assets, employee turnover, mortality and retirement ages, and future salary increases.  Changes in these key assumptions can have a significant effect on the pension plan’s impact on the Companies’ financial statements.  The Companies engage the services of an independent actuary and investment consultant to assist them in determining these assumptions and in calculating pension income.  The plan is currently underfunded and, accordingly, the Companies have made contributions to the fund of $467,392 and $444,494 in the fiscal years ending October 31, 2008, or Fiscal 2008, and October 31, 2007, or Fiscal 2007, respectively.  The Companies expect to contribute $362,058 to the pension plan in Fiscal 2009.  The Companies also have in place a 401(k) pension plan available to all full time employees, which is funded entirely by employee contributions.

The Companies account for their employee stock options in accordance with SFAS No. 123R, “Share-Based Payment”.  SFAS No. 123R requires the Companies to recognize as compensation expense an amount equal to the grant date fair value of the stock options issued over the required service period.  Compensation cost was measured using the modified prospective approach provided under SFAS No. 123R.

The fair value of each option award is estimated at the date of grant using a Black-Scholes option pricing model.  Expected volatilities are based upon historical volatilities of the Companies’ stock.  The Companies use historical data to estimate option exercises and employee terminations with the valuation model.  The expected term of options granted is derived from the output of the valuation model and represents the period of time that options granted are expected to be outstanding.  The risk-free rate for periods within the contractual term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

The Companies have no off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

Results of Operations for the Three and Nine Months Ended July 31, 2009 and 2008

Operations for the three and nine months ended July 31, 2009 resulted in, respectively, a net loss of ($511,192) and ($1,068,303), or ($0.21) and ($0.44) per combined share, compared to a net loss of ($293,740) and ($1,001,536), or ($0.12) and ($0.41) per combined share, for the three and nine month periods ended July 31, 2008.

Revenues

Combined revenue of $3,407,058 and $7,678,411 for the three and nine months ended July 31, 2009 represents an increase of $740,226 and $305,731, respectively, compared to the three and nine months ended July 31, 2008. Real Estate Management Operations / Rental Operations revenue decreased $586,618 and $2,579,648, or 38% and 46%, respectively, for the three and nine months ended July 31, 2009, compared to the three and nine months ended July 31, 2008. Summer operations revenue increased $72,335 and $83,213, or 26% and 26% respectively, for the three and nine months ended July 31, 2009, compared to the three and nine months ended July 31, 2008. Land resource management revenue increased $1,254,509, or 148% and $2,802,166, or 198%, respectively, for the three and nine months ended July 31, 2009 compared to the three and nine months ended July 31, 2008.



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Real Estate Management/Rental Operations

Real Estate Management Operations / Rental Operations had revenue of $3,060,226 for the nine months ended July 31, 2009, compared to $5,639,874 for the nine months ended July 31, 2008, which resulted in a decrease of $2,579,648, or 46%, which was primarily attributed to a decrease in Moseywood Construction Company’s new home construction sales.  Revenue for the new home construction for the nine months ended July 31, 2009 was $487,653 compared to $3,054,216 for the nine months ended July 31, 2008 for a decrease of $2,566,563, or 84 %. This is the result of having fewer homes under construction in Fiscal 2009 as compared to the nine months ended July 31, 2008. As of July 31, 2009, there were two homes under various stages of construction compared to 13 homes for the period ended July 31, 2008. On July 3, 2008, Management decided to complete all new homes under contract and not to accept any new home construction contracts due to the ongoing slowdown in the overall economy. This was offset by an increase in Trust service fees, which are fees charged to our resort communities for water, sewer and road maintenance. For the nine months ended July 31, 2009, the “Trust” service fees were $473,305 as compared to $397,612 for the nine months ended July 31, 2008 which resulted in an increase of $75,693 or 19%.

Summer Recreation Operations

Summer operations revenue for the nine months ended July 31, 2009 was $403,891 as compared to $320,678 for the nine months ended July 31, 2008 resulting in an increase of $83,213 or 26%. This was primarily the result of an increase in green fees at the Jack Frost National Golf Course.

Land Resource Management

For the nine months ended July 31, 2009, Land Resource Management had revenue of $4,214,294 compared to $1,412,128 for the nine months ended July 31, 2008, which resulted in an increase of $2,802,166. The increase in real estate development revenue is attributable to the sale of three duplex units in the Laurelwoods II community and one condominium in the Boulder Lake Village community for the nine months ended July 31, 2009 resulting in revenue of $1,834,956, as compared to one home sale in Laurelwoods II community for the nine months ended July 31, 2008 resulting in revenue of $354,300, for an increase of $1,480,656.  For the nine months ended July 31, 2009, land sale revenue was $2,117,855 as compared to $807,829 for the nine months ended July 31, 2008, for an increase of $1,310,026. Land sales occur sporadically and do not follow any set schedule.  Timbering revenue on one contract for the nine months ended July 31, 2009 was $261,483 as compared to $250,000 on one contract for the nine months ended July 31, 2008.

Operating Costs

Real Estate Management/Rental Operations

Operating costs associated with Real Estate Management Operations / Rental Operations for the nine months ended July 31, 2009 were $2,510,054 compared to $5,156,203 for the nine months ended July 31, 2008, which represents a decrease of $2,646,149, or 51%.  The decrease was mainly attributable to fewer new homes under construction in 2009 as the result of a slowdown of current economic conditions and Management’s decision not to accept any new home construction contracts.  For the nine months ended July 31, 2009, construction costs were $564,879 compared to $2,630,394 for the nine months ended July 31, 2008 for a decrease of $2,065,515, or 79%. New home construction operating expenses for the nine months ended July 31, 2009 was $241,720 as compared to $748,742 for the nine months ended July 31, 2008 resulting in a decrease of $507,022, or 68%. For the nine months ended July 31, 2009, commission expense on new home sales decreased by $133,800, advertising expense decreased $105,291, salaries and wage expense decreased $57,869, corporate service fee decreased $68,445and insurance expense decreased $38,412 due to the decrease in the number of new homes under construction, as compared to the nine months ended July 31, 2008.

Summer Recreation Operations

Operating expenses associated with Summer Operations for the nine months ended July 31, 2009 were $931,454 as compared to $1,117,861 for the nine months ended July 31, 2008, which represents a decrease of $186,407, or 17 %.  This decrease was attributable to decreases in operating costs for the Jack Frost National Golf Course primarily related to salaries and wages ($168,268).



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Land Resource Management

Operating costs associated with Land Resource Management for the nine months ended July 31, 2009 were $4,257,530 compared with $1,166,144 for the nine months ended July 31, 2008, which represents an increase of $3,091,386.  This is primarily attributable to asset impairments of $2,254,500 for the nine months ended July 31, 2009.  The impairment expense is the result of various asset carrying values in excess of fair market value that may not be recoverable.  The fair market value is determined using numerous estimates, including discount rates, sales prices and sale dates.  Changes in these key assumptions can have a significant effect on the fair market value of these assets and the impact on the Companies’ financial statements.  We engaged the services of an independent specialist to assist us in determining these assumptions and the calculation of fair values.  Additionally, there was an increase in construction and operating costs related to real estate development, which was $1,793,880 for the nine months ended July 31, 2009 as compared to $571,758 for the nine months ended July 31, 2008, an increase of $1,222,122.  This is primarily the result of three duplex sales in the Laurelwoods II community and one condominium sale in the Boulder Lake Village community for the nine months ended July 31, 2009 as compared to one single family home in the Laurelwoods II community for the nine months ended July 31, 2008.  Operating expenses associated with land sales decreased $14,826 for the nine months ended July 31, 2009 as compared to the nine months ended July 31, 2008 and was primarily related to decreased salaries and wages ($17,037) offset by increased research and development costs ($10,573) associated with natural gas exploration.  Timbering operating expenses increased $18,507 for the nine months ended July 31, 2009 as compared to the nine months ended July 31, 2008.  This was primarily the result of cruise report services performed by the Companies’ forester, who is engaged on a consulting basis, to determine the current volume of merchantable timber in conjunction with the Companies’ forestry management plan.

General and Administration

General and Administration costs for the nine months ended July 31, 2009 were $1,051,858 compared to $900,313 for the nine months ended July 31, 2008, which represents an increase of $151,545, or 17%.  This is primarily the result of increased salaries and related benefits ($79,264, or 17%) and the discontinuance of corporate service fees ($121,491, or 100%) which in the previous fiscal year reduced general and administrative expense. These increases were the result of a reallocation to better reflect actual job related duties. These increases were offset by a reduction in consulting fees of $25,549, or 39%.

Other Income (Expense)

Interest and other income was $249,141 for the nine months ended July 31, 2009 compared to $238,248 for the nine months ended July 31, 2008, which represents an increase of $10,893, or 5%. Interest expense for the nine months ended July 31, 2009 was $785,316 compared to $749,170 for the nine months ended July 31, 2008, which represents an increase of $36,146, or 5% which is primarily attributable to interest expense related to the Jack Frost sewage plant expansion. Prior to April 2008, the interest expense on this project was capitalized as the construction phase was completed. Therefore the interest expense for the nine months ended July 31, 2008 reflects only four months of interest expense as compared to the nine months ended July 31, 2009, which reflects nine months. This was offset by a reduction of debt related to the companies’ investment properties.

Tax Rate

The effective tax rate for the three months ended July 31, 2009 and 2008 was 34%.  The rate for 2009 is specific to federal taxes.  There is no benefit for state income tax in 2009 because the Companies fully reserved the future benefit.

Liquidity and Capital Resources

As reflected in the Combined Statements of Cash Flows, net cash provided by operating activities was $8,754 for the nine months ended July 31, 2009 versus net cash used in operating activities of $3,551,864 for the nine months ended July 31, 2008.  The increase in net cash provided by operating activities for the nine months ended July 31, 2009 is primarily attributable to a land sale consisting of 1,175 acres and significantly reduced land development costs.  

For the nine months ended July 31, 2009, the construction of Building J in the Boulder Lake Village condominium community at Big Boulder was our major expenditure.



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On May 22, 2009, the Companies entered into a Deed of Trust and Security Agreement and Real Estate Lien Note with Barbers Hill Bank, a branch of Anahuac National Bank, in the amount of $1,050,000, which encumbers certain real property owned by Blue Ridge Real Estate Company located in Chambers County, Texas.  This property is currently leased to Jack in the Box Eastern Division, L.P. The loan has a term of five years and requires monthly payments in the amount of $7,254 beginning June 22, 2009 and ending May 22, 2014, at which time the remaining principal balance and all interest accrued shall become due and payable.  The proceeds of the loan will be used to fund the completion of Building J of the Boulder Lake Village condominium project and general operations.  The interest rate is fixed at 6.75%.

On August 28, 2009 Blue Ridge Real Estate Company, through its wholly owned subsidiary, Blue Ridge WNJ, LLC, entered into a mortgage and security agreement and a $4,038,000 Senior Secured Note with Wells Fargo Bank Northwest, N.A.  The Note is secured by the mortgage, which encumbers certain real property known as the Walgreens Store located in Dover Township, Ocean County, New Jersey.  A portion of the proceeds of the loan were used to payoff the Note outstanding with State Farm Bank which previously encumbered the New Jersey Walgreens property.  Interest and principal payments, beginning on September 15, 2009 are due and payable monthly until August 15, 2031.  The interest rate is fixed at 6.90%.

On August 28, 2009 Blue Ridge Real Estate Company, through its wholly owned subsidiary, Blue Ridge WMN, LLC, entered into a mortgage and security agreement and a $4,340,000 Senior Secured Note with Wells Fargo Bank Northwest, N.A.  The Note is secured by the mortgage, which encumbers certain real property known as the Walgreens Store located in White Bear Lake, Washington County, Minnesota.  A portion of the proceeds of the loan were used to payoff the Note outstanding with State Farm Bank which previously encumbered the Minnesota Walgreens property.  Interest and principal payments, beginning on September 15, 2009 are due and payable monthly until August 15, 2031.  The interest rate is fixed at 6.90%.

The Companies have a line of credit with Manufacturers and Traders Trust Company to fund real estate development.  The aggregate amount of this line of credit was $25,000,000 prior to February 27, 2009. On February 27, 2009 the Companies entered into a loan modification agreement which decreased the aggregate amount of the line of credit from $25,000,000 to 20,000,000.  The loan modification agreement also amended the interest rate from LIBOR plus 2.5% to LIBOR plus 3.5% with an interest rate floor of 5.5% and provides that the Companies must establish an interest reserve account of $690,000 as security for the payment of interest.  The Companies established the interest reserve escrow with the proceeds from a sale of land during the third quarter of Fiscal 2009.  At July 31, 2009, the balance of the interest reserve escrow account was $628,103.  Interest is due and payable on a monthly basis and at July 31, 2009, the interest rate equaled 5.5%.  The remaining principal and any accrued interest is due and payable on April 19, 2010.  The Companies are using $7,900,000 of the $20,000,000 line of credit to fund the construction of residential development projects.  The Companies have utilized a portion of the proceeds from the sale of three Woodsbluff Court duplex units and one Boulder Lake Village condominium unit to pay $909,323 on this sublimit during the first quarter of Fiscal 2009.  At July 31, 2009, $5,691,457 was outstanding on this sub-limit.  The Companies utilized $6,000,000 of the $20,000,000 to fund site-development.  The loan modification amended the site-development sublimit from $11,000,000 to $6,000,000.  The Companies have utilized a portion of the proceeds from the sale of three Woodsbluff Court duplex units and one Boulder Lake Village condominium unit to pay $280,000 on this sublimit during the first quarter of Fiscal 2009.  At July 31, 2009, $4,392,933 was outstanding on this sub-limit.  The remaining $6,100,000 of the $20,000,000 line of credit is used to fund the expansion of the water and sewer systems at both Big Boulder and Jack Frost Mountain Ski Areas. This expansion is necessary to accommodate the new construction.  The Companies have utilized all remaining proceeds of a land sale to pay $1,410,878 on this sublimit during the third quarter of Fiscal 2009.  At July 31, 2009, $2,050,632 was outstanding on the $6,100,000 sub-limit.  The balance of this sublimit was paid with the proceeds from the second phase of a land sale in the fourth quarter of Fiscal 2009, which is detailed in Note 11 (“Subsequent Events”) the Financial Statements included in this report. The total principal amount outstanding under the aggregate line of credit will not exceed the lesser of (a) $20,000,000, or (b) 80% of the cost or appraised value of the units.  

The Companies also have a $3,100,000 line of credit with Manufacturers and Traders Trust Company for general operations.  During the nine months ended July 31, 2009, we borrowed against the $3,100,000 line of credit in varying amounts with a maximum amount of $3,096,730.  At July 31, 2009, $2,995,535 was outstanding on the $3,100,000 line and the rate of interest is 5.5%.  Previously, the Companies had a $5,000,000 open end mortgage with Manufacturers and Traders Trust intended for real estate transactions; however, effective February 27, 2009, the $5,000,000 line has been cancelled due to non-usage.



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Purchase obligations total $3,004,548 and consist of material contracts with multiple contractors all relating to real estate development.  Payments and adjustments made through July 31, 2009 total $2,643,822.

We currently anticipate that the funds needed for future operations and to implement our land development strategy will be satisfied through operating cash, borrowed funds, public offerings or private placements of debt or equity and reinvested profits from completed and sold units or lots. We expect that with respect to land development, future construction will be conducted in phases, with the profits from each phase used to fund additional future construction. Construction is being implemented in phases as to reduce market risk associated with changing economic conditions.

Item 4T.  CONTROLS AND PROCEDURES

(a)  Evaluation of Disclosure Controls and Procedures.

Management, with the participation of the Companies’ chief executive officer and chief financial officer, evaluated the effectiveness of the Companies’ disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Companies’ chief executive officer and chief financial officer concluded that the Companies’ disclosure controls and procedures as of the end of the period covered by this report have been designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and is accumulated and communicated to the Companies’ management, including the Companies’ principal executive and principal financial officers, or person performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Companies believe that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

(b)  Change in Internal Control over Financial Reporting.

No change in the Companies' internal control over financial reporting occurred during the Companies’ most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


PART II - OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS

The Companies are presently party to certain lawsuits arising in the ordinary course of their business.  The Companies believe that none of their current legal proceedings will be material to their business, financial condition or results of operations.

Item 1A.  RISK FACTORS

There have been no material changes in the risk factors from those disclosed in the Companies’ Annual Report on Form 10-K for the fiscal year ended October 31, 2009.




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Item 6.   EXHIBITS

Exhibit Number

Description

10.1

Deed of Trust and Security Agreement, dated May 22, 2009, between Blue Ridge Real Estate Company and Kenneth D. Moore, Trustee. (filed on September 14, 2009 as exhibit 10.1 to the Quarterly Report on Form 10-Q and incorporated herein by reference.)

10.2

$1,050,000 Real Estate Lien Note, dated May 22, 2009, between Blue Ridge Real Estate Company and Barbers Hill Banking Center, a branch of Anahuac National Bank. (filed on September 14, 2009 as exhibit 10.2 to the Quarterly Report on Form 10-Q and incorporated herein by reference.)

10.3

First Amendment to Agreement of Sale, Phase 2, dated July 17, 2009 between Blue Ridge Real Estate Company and The Conservation Fund for the purchase of 2,797 acres located in Lackawanna, Luzerne and Monroe Counties, Pennsylvania. (filed on July 20, 2009 as exhibit 10.2 to Form 8-K and incorporated herein by reference.)

10.4

Mortgage and Security Agreement, Assignment of Leases and Rents and Fixture Filing Statement, dated August 28, 2009, between Blue Ridge WMN, LLC and Wells Fargo Bank Northwest, N.A. as Trustee (filed on September 3, 2009 as exhibit 10.1 to Form 8-K and incorporated by reference herein.)

10.5

$4,340,000 6.90% Senior Secured Note, dated August 28, 2009, between Blue Ridge WMN, LLC and Wells Fargo Bank Northwest, N.A. as Trustee (filed on September 3, 2009 as exhibit 10.2 to Form 8-K and incorporated by reference herein.)

10.6

Note Purchase Agreement, dated August 28, 2009, between Blue Ridge WMN, LLC and Wells Fargo Bank Northwest, N.A. as Trustee (filed on September 3, 2009 as exhibit 10.3 to Form 8-K and incorporated by reference herein.)

10.7

Mortgage and Security Agreement, Assignment of Leases and Rents and Fixture Filing Statement, dated August 28, 2009, between Blue Ridge WNJ, LLC and Wells Fargo Bank Northwest, N.A. as Trustee (filed on September 3, 2009 as exhibit 10.1 to Form 8-K and incorporated by reference herein.)

10.8

$4,340,000 6.90% Senior Secured Note, dated August 28, 2009, between Blue Ridge WNJ, LLC and Wells Fargo Bank Northwest, N.A. as Trustee (filed on September 3, 2009 as exhibit 10.2 to Form 8-K and incorporated by reference herein.)

10.9

Note Purchase Agreement, dated August 28, 2009, between Blue Ridge WNJ, LLC and Wells Fargo Bank Northwest, N.A. as Trustee (filed on September 3, 2009 as exhibit 10.3 to Form 8-K and incorporated by reference herein.)

31.1*

Principal Executive Officer’s Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

31.2*

Principal Financial Officer’s Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.



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32.1*

Principal Executive Officer’s Certification pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934.

32.2*

Principal Financial Officer’s Certification pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934.

* Filed herewith



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SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized:



BLUE RIDGE REAL ESTATE COMPANY

BIG BOULDER CORPORATION

(Registrants)





Dated:    December 2, 2010

/s/ Eldon D. Dietterick

Eldon D. Dietterick

Executive Vice President/Treasurer




Dated:   December 2, 2010

/s/ Cynthia A. Van Horn

Cynthia A. Van Horn

Chief Accounting Officer


























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EXHIBIT INDEX

Exhibit Number

Description

10.1

Deed of Trust and Security Agreement, dated May 22, 2009, between Blue Ridge Real Estate Company and Kenneth D. Moore, Trustee. (filed on September 14, 2009 as exhibit 10.1 to the Quarterly Report on Form 10-Q and incorporated herein by reference.)

10.2

$1,050,000 Real Estate Lien Note, dated May 22, 2009, between Blue Ridge Real Estate Company and Barbers Hill Banking Center, a branch of Anahuac National Bank. (filed on September 14, 2009 as exhibit 10.2 to the Quarterly Report on Form 10-Q and incorporated herein by reference.)

10.3

First Amendment to Agreement of Sale, Phase 2, dated July 17, 2009 between Blue Ridge Real Estate Company and The Conservation Fund for the purchase of 2,797 acres located in Lackawanna, Luzerne and Monroe Counties, Pennsylvania. (filed on July 20, 2009 as exhibit 10.2 to Form 8-K and incorporated herein by reference.)

10.4

Mortgage and Security Agreement, Assignment of Leases and Rents and Fixture Filing Statement, dated August 28, 2009, between Blue Ridge WMN, LLC and Wells Fargo Bank Northwest, N.A. as Trustee (filed on September 3, 2009 as exhibit 10.1 to Form 8-K and incorporated by reference herein.)

10.5

$4,340,000 6.90% Senior Secured Note, dated August 28, 2009, between Blue Ridge WMN, LLC and Wells Fargo Bank Northwest, N.A. as Trustee (filed on September 3, 2009 as exhibit 10.2 to Form 8-K and incorporated by reference herein.)

10.6

Note Purchase Agreement, dated August 28, 2009, between Blue Ridge WMN, LLC and Wells Fargo Bank Northwest, N.A. as Trustee (filed on September 3, 2009 as exhibit 10.3 to Form 8-K and incorporated by reference herein.)

10.7

Mortgage and Security Agreement, Assignment of Leases and Rents and Fixture Filing Statement, dated August 28, 2009, between Blue Ridge WNJ, LLC and Wells Fargo Bank Northwest, N.A. as Trustee (filed on September 3, 2009 as exhibit 10.1 to Form 8-K and incorporated by reference herein.)

10.8

$4,340,000 6.90% Senior Secured Note, dated August 28, 2009, between Blue Ridge WNJ, LLC and Wells Fargo Bank Northwest, N.A. as Trustee (filed on September 3, 2009 as exhibit 10.2 to Form 8-K and incorporated by reference herein.)

10.9

Note Purchase Agreement, dated August 28, 2009, between Blue Ridge WNJ, LLC and Wells Fargo Bank Northwest, N.A. as Trustee (filed on September 3, 2009 as exhibit 10.3 to Form 8-K and incorporated by reference herein.)

31.1*

Principal Executive Officer’s Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

31.2*

Principal Financial Officer’s Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.



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32.1*

Principal Executive Officer’s Certification pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934.

32.2*

Principal Financial Officer’s Certification pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934.

* Filed herewith




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