10-Q 1 brreapr30form10q.htm BLUE RIDGE REAL ESTATE CO/BIG BOULDER CORP FORM 10Q FOR THE PERIOD ENDED APRIL 30, 2008 Converted by EDGARwiz

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q


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

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2008


( ) 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 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   ¨ (Do not check if smaller reporting company)

Smaller reporting company ý


     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 June 13, 2008 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.





INDEX



Page No.


PART I - FINANCIAL INFORMATION


Item 1.  Financial Statements

Combined Condensed Balance Sheets - April 30, 2008 and October 31, 2007

1


Combined Condensed Statements of Operations - Three and Six Months ended

April 30, 2008 and 2007

2


Combined Condensed Statement of Changes in Shareholders’ Equity –

Six months ended April 30, 2008

3


Combined Condensed Statements of Cash Flows - Six Months Ended

April 30, 2008 and 2007

4


Notes to Financial Statements

5


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

of Operations

10


Item 3.  Quantitative and Qualitative Disclosures About Market Risk

16


Item 4T.  Controls and Procedures

16




PART II - OTHER INFORMATION


Item 1.  Legal Proceedings

17


Item 1A.  Risk Factors

17


Item 4  Submission of Matters to a Vote of Security Holders

17


Item 6.  Exhibits

18








PART I – FINANCIAL INFORMATION


Item 1.   FINANCIAL STATEMENTS



BLUE RIDGE REAL ESTATE COMPANY and SUBSIDIARIES

BIG BOULDER CORPORATION and SUBSIDIARIES


COMBINED CONDENSED BALANCE SHEETS

 

 

 

(UNAUDITED)

 

ASSETS

04/30/08

10/31/07

  Land and land development costs (4,972 and 4,793 acres per land ledger)

$21,047,861 

$19,799,822 

  Land improvements, buildings and equipment, net

28,524,076 

28,879,722 

  Land held for investment (11,494 and 11,496, respectively, acres per
    land ledger)

8,156,279 

7,934,830 

  Land held for recreation (514 acres per land ledger)

8,693,860 

8,693,860 

  Net investment in direct financing leases

8,332,818 

8,341,379 

  Cash and cash equivalents

252,074 

189,702 

  Cash held in escrow

250,745 

12,080 

  Prepaid expenses and other assets

1,214,846 

1,645,131 

  Accounts receivable and mortgages receivable

680,774 

584,600 

 

$77,153,333 

$76,081,126 


LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

LIABILITIES:

 

 

  Debt

$28,826,825 

$26,465,930 

  Accounts payable

$844,538 

$1,415,543 

  Accrued liabilities

508,081 

554,420 

  Deferred income

1,218,233 

783,407 

  Amounts due to related parties

32,709 

48,959 

  Deferred income taxes

$7,260,600 

7,625,000 

  Accrued pension expense

498,759 

601,008 

  Total liabilities

39,189,745 

37,494,267 

 

 

 

Commitments and contingencies

 

 

 

 

 

COMBINED SHAREHOLDERS' EQUITY:

 

 

  Capital stock, without par value, stated value $.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

19,743,955 

19,659,430 

  Earnings retained in the business

19,774,892 

20,482,688 

  Accumulated other comprehensive loss

(289,583)

(289,583)

 

40,048,995 

40,672,266 

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

2,085,407 

2,085,407 

  Total shareholders' equity

37,963,588 

38,586,859

 

$77,153,333 

$76,081,126 


See accompanying notes to unaudited financial statements.





- 1 -



BLUE RIDGE REAL ESTATE COMPANY and SUBSIDIARIES

BIG BOULDER CORPORATION and SUBSIDIARIES


COMBINED CONDENSED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED
APRIL 30, 2008 and 2007

 

 

 

 

(UNAUDITED)

Three Months Ended

Six Months Ended

 

4/30/08

4/30/07

4/30/08

4/30/07

Revenues:

 

 

 

 

        Real estate management

$1,247,840 

$1,530,509 

$2,902,273 

$4,249,441 

        Summer recreation operations

33,631 

160,714 

39,835 

160,714 

        Land resource management

556,943 

804,068 

562,242 

3,293,466 

        Rental income

617,682 

633,616 

1,201,498 

1,352,508 

 

2,456,096 

3,128,907 

4,705,848 

9,056,129 

Costs and expenses:

 

 

 

 

        Real estate management

1,375,773 

1,601,145 

3,061,208 

4,127,440 

        Summer recreation operations

306,449 

158,211 

544,673 

176,745 

        Land resource management

440,491 

633,353 

533,132 

2,213,696 

        Rental income

338,297 

337,889 

657,416 

667,830 

        General and administration

303,331 

382,212 

613,801 

812,065 

 

2,764,341 

3,112,810 

5,410,230 

7,997,776 

          Operating (loss) profit

(308,245)

16,097 

(704,382)

1,058,353 

 

 

 

 

 

Other income (expense):

 

 

 

 

        Interest and other income

57,357 

80,825 

136,113 

183,359 

        Interest expense (net of capitalized interest for the three
        and six months ended April 30, 2008 and 2007of $132,499,
       $131,453, $312,615 and 288,372, respectively.)

(237,612)

(307,761)

(503,927)

(550,144)

 

(180,255)

(226,936)

(367,814)

(366,785)

 

 

 

 

 

(Loss) income from continuing operations before income taxes

(488,500)

(210,839)

(1,072,196)

691,568 

 

 

 

 

 

(Credit) provision for income taxes

(166,200)

(84,000)

(364,400)

277,000 

 

 

 

 

 

Net (loss) income before discontinued operations

(322,300)

(126,839)

(707,796)

414,568 

 

 

 

 

 

Discontinued operations

86,618 

 

 

 

 

 

Provision for income taxes on discontinued operations

34,000 

 

 

 

 

 

Net income from discontinued operations

52,618 

 

 

 

 

 

Net (loss) income

(322,300)

($126,839)

(707,796)

$467,186 

 

 

 

 

 

Basic (loss) earnings per weighted average combined share:

 

 

 

 

      Net (loss) income before discontinued operations

($0.13)

($0.05)

($0.29)

$0.17 

      Income from discontinued operations, net of tax

$0.00 

$0.00 

$0.00 

$0.02 

      Net (loss) income

($0.13)

($0.05)

($0.29)

$0.19 

 

 

 

 

 

Diluted (loss) earnings per weighted average combined share:

 

 

 

 

      Net (loss) income before discontinued operations

($0.13)

($0.05)

($0.29)

$0.17 

      Income from discontinued operations, net of tax

$0.00 

$0.00 

$0.00 

$0.02 

      Net (loss) income

($0.13)

($0.05)

($0.29)

$0.19 

See accompanying notes to unaudited financial statements.



- 2 -



BLUE RIDGE REAL ESTATE COMPANY and SUBSIDIARIES

BIG BOULDER CORPORATION and SUBSIDIARIES


COMBINED CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE SIX MONTHS ENDED
APRIL 30, 2008

(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, 2007

2,732,442 

$819,731 

$19,659,430 

$20,482,688 

($289,583)

($2,085,407)

$38,586,859 

 

 

 

 

 

 

 

 

Net loss

 

 

 

($707,796)

 

 

($707,796)

 

 

 

 

 

 

 

 

Compensation recognized under employee stock plan

 

 

84,525 

 

 

 

84,525 

 

 

 

 

 

 

 

 

Balances, April 30, 2008

2,732,442 

$819,731 

$19,743,955 

$19,774,892 

($289,583)

($2,085,407)

$37,963,588 


(a) Capital stock, at stated value of $.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 CONDENSED STATEMENTS OF CASH FLOWS

 

 

FOR THE SIX MONTHS ENDED

 

 

APRIL 30, 2008 and 2007

 

 

(UNAUDITED)

 

 

 

2008

2007

Cash Flows (Used In) Provided By Operating Activities:

 

 

Net (loss) income

($707,796)

$467,186 

Adjustments to reconcile net (loss) income to net

 

 

cash (used in) provided by operating activities:

 

 

Depreciation

697,562 

507,950 

Deferred income taxes

(364,400)

311,000 

Loss (gain) on sale of assets

24,848 

(2,573)

Compensation cost under employee stock plan

84,525 

136,989 

Changes in operating assets and liabilities:

 

 

Cash held in escrow

(238,665)

Accounts receivable and mortgages receivable

163,625 

(679,641)

Prepaid expenses and other assets

430,287 

135,384 

Land and land development costs

(1,820,603)

(1,353,140)

Accounts payable and accrued liabilities

(735,842)

(1,190,601)

Deferred income

434,826 

301,094 

Net cash used in operating activities

(2,031,633)

(1,366,352)

Cash Flows Used In Investing Activities:

 

 

Proceeds from disposition of assets

14,250 

2,650 

Additions to properties

(289,701)

(51,034)

Payments received under direct financing lease arrangements, net

8,561 

10,099 

Net cash used in investing activities

(266,890)

(38,285)

Cash Flows Provided By Financing Activities:

 

 

Proceeds from debt

6,904,979 

12,999,914 

Payment of debt

(4,544,084)

(11,679,116)

Deferred financing costs

(120,493)

Proceeds from exercise of stock options

251,600 

Net cash provided by financing activities

2,360,895 

1,451,905 

Net increase in cash and cash equivalents

62,372 

47,268 

Cash and cash equivalents, beginning

189,702 

153,742 

Cash and cash equivalents, ending

$252,074 

$201,010 

 

 

 

Supplemental disclosures of cash flow information:

 

 

Cash paid during the period for:

 

 

Interest

$824,252 

$796,555 

Income taxes

$500 

$68,993 

 

 

 

Supplemental disclosure of non cash investing activities:

 

 

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

$348,388 

$0 

 

 

 


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 and Flower Fields Motel, 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 combined condensed financial statements as of and for the six month periods ended April 30, 2008 and 2007 are unaudited and are presented pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, these combined condensed financial statements should be read in conjunction with the combined financial statements and notes thereto contained in the Companies’ 2007 Annual Report on Form 10-K. In the opinion of management, the accompanying combined condensed 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 condensed 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 condensed 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, 2007 (“Fiscal 2007”).

     Certain amounts in the 2007 combined condensed financial statements have been reclassified to conform to the 2008 presentation.  The Companies have reclassified the operating results of the Oxbridge Square Shopping Center, to report discontinued operations, in accordance with guidance provided under SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.  Upon evaluating the characteristics outlined in SFAS No. 144, the Companies concluded that reclassification to discontinued operations is appropriate, and consistent with reporting in the Companies’ annual filing as of October 31, 2007.  The Companies have also reclassified amounts for land improvements, buildings and equipment, net to land held for investment in order to more accurately reflect the intended use of the asset.

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



- 5 -



3. 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.

4. Income Taxes

     The (benefit) provision for income taxes for the three and six months ended April 30, 2008 and 2007 represents the estimated annual effective tax rate for the year ending October 31, 2008 and 2007.  The effective income tax rate for the first six months of fiscal 2008 and fiscal 2007 was estimated at 34% and 40%, respectively.

     Effective for the quarter ended January 31, 2008, and thereafter, 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 its 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 six months ended April 30, 2008, 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 April 30, 2008, federal and state tax returns for years ending October 31, 2004 and later are subject to future examination by the respective tax authorities.

5.  Stock Based Compensation

     During the six months ended April 30, 2008, 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 period ended April 30, 2008 is as follows:

 

Shares

Weighted Average Exercise Price

Aggregate Intrinsic Value

Weighted Average Remaining Useful Life (in years)

Outstanding at October 31, 2007

64,600 

$36.93 

$2,385,600 

3.4 

Granted

-- 

-- 

-- 

 

Exercised

-- 

-- 

-- 

 

Canceled

-- 

-- 

-- 

 

Outstanding at April 30, 2008

64,600 

$36.93 

$2,385,600 

2.9 

 

 

 

 

 

Options exercisable at April 30, 2008

45,488 

$36.20 

 

 

 

 

 

 

 

Option price range

$34.00-$39.00 

 

 

 



- 6 -



       Activity related to non-vested options for the period ended April 30, 2008 is as follows:

 

 

Shares

 

Weighted Average Grant Date Fair Value Price

Non vested at October 31, 2007

 

29,862

 

$9.25

Granted

 

--

 

--

Vested

 

(10,750)

 

(10.36)

Non-vested at April 30, 2008

 

19,112

 

$8.62

     No options were exercised during the six months ended April 30, 2008.  A total of 7,400 options were exercised during the six months ended April 30, 2007.  The Companies expect to recognize compensation expense related to non-vested awards totaling approximately $85,466 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.

6.  Land and Land Development Costs

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

 

4/30/2008 

10/31/2007 

Land unimproved designated for development

$527,671 

$596,931 

Infrastructure development

13,261,689 

13,116,261 

Residential development

7,258,501 

5,755,379 

Golf Course development

331,251 

 

$21,047,861 

$19,799,822 

The decrease in Land unimproved designated for development was due to the sale of a parcel of land in Saylorsburg, Pa.  

The increase in Infrastructure development is due to the continued advancement of a number of on-going projects, most notably: the Lake Shore Development at Big Boulder ($126,000); the subdivision at Jack Frost National Golf Course ($115,000); and the F.E. Walter Dam property ($108,000).  This increase was offset by the completion of a number of site improvements at projects that will be advancing into their next phase ($237,000).

The increase in Residential development was primarily due to construction costs associated with the Woodsbluff Court duplex units ($249,000) located in the Laurelwoods II residential community and with the Boulder Lake Village condominium project ($1,529,000) located on Big Boulder Lake.  This increase was offset by the sale of a single-family unit on Longview Drive in the Laurelwoods II residential community ($275,000).

The decrease in Golf Course development was the result of the reclassification of costs to land improvements and equipment upon completion of the installation of landscaping and an irrigation system at the Jack Frost National Golf Course Clubhouse.

7.  Land

 

4/30/08 

10/31/07

Land held for investment

 

 

  Land – Principally unimproved

$1,980,139 

$2,071,405 

  Land – Commercial rental properties

6,176,140 

5,863,425 

 

$8,156,279 

$7,934,830

 

 

 

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 

     For the six months ended April 30, 2008, the increase in land-commercial rental properties was the result of a reclassification to land, costs associated with the demolition of the Flower Fields Motel.



- 7 -



8.  Pension Benefits

   Components of Net Periodic Benefit Cost:

 

Three Months Ended

Six Months Ended

 

4/30/08

 

4/30/07

4/30/08

 

4/30/07

 

 

 

 

 

 

 

Service Cost

$45,000 

 

$45,750 

$90,000 

 

$91,500 

Interest Cost

79,250 

 

73,750 

158,500 

 

147,500 

Expected return on plan assets

(95,000)

 

(86,250)

(190,000)

 

(172,500)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net amortization and deferral:

 

 

 

 

 

 

   Amortization of transition obligation

$717 

 

717 

1,434 

 

1,434 

   Amortization of prior service cost

69 

 

52 

138 

 

104 

   Amortization of accumulated gain

 

15,000 

 

30,000 

   Net amortization and deferral

786 

 

15,769 

1,572 

 

31,538 

 

 

 

 

 

 

 

   Total net periodic pension cost

$30,036 

 

$49,019 

$60,072 

 

$98,038 

     The Companies expect to contribute $469,078 to its pension plan in fiscal 2008.  As of April 30, 2008, contributions have been made totaling $200,893.  The Companies anticipate contributing an additional $268,185 to fund its pension in fiscal 2008.

9.  Discontinued Operations

     On June 16, 2006, the Oxbridge Square Shopping Center was sold as a Section 1031 tax deferred exchange and as a result of the Companies no longer being involved with that business, the operating activity for the six months ending April 30, 2007 is reported as a discontinued operation.  The operating results of the Oxbridge Square Shopping Center were previously reported in the Rental Income segment.

     Operating results for the discontinued operation of the Oxbridge Square Shopping Center for the six months ended April 30, 2007 were as follows:

 

Six months ended

 

April 30, 2007

Revenues

$86,720 

 

 

Expenses

102 

Interest Expense

Total Expenses

102 

 

 

Income from discontinued

   operations before income taxes

$86,618 

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 payments plus scheduled increases based upon the consumer price index, not to exceed 4% in any given year.  Minimum future lease payments due under those leases at April 30, 2008 is as follows:

Year ending October 31:

 

2009

$249,839 

2010

256,085 

2011

262,487 

2012

269,049 

2013

275,775 

Thereafter

15,700,524 

TOTAL

$17,013,759 



- 8 -





     The Companies net investment in direct financing leases consists of the following as of April 30, 2008:

Minimum future lease payments

$8,582,880 

Unguaranteed residual value of lease properties

8,430,879 

Gross investment in lease

17,013,759 

Unearned income

(8,680,941)

Net investment in direct financing leases

$8,332,818 

     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, and is evaluated for collectibility 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 six months ended April 30, 2007, 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 six months ended April 30, 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

 

Six months ended

 

 

4/30/08

4/30/07

 

4/30/08

4/30/07

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

 

2,450,424 

2,447,957 

 

2,450,424 

2,445,491 

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

 

371 

 

2,356 

Combined shares used to compute dilutive
   effect  of stock option

 

2,450,424 

2,448,328 

 

2,450,424 

2,447,847 

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

 

 

Three months ended

 

Six months ended

 

 

4/30/08

4/30/07

 

4/30/08

4/30/07

Net (loss) income before discontinued operations

 

($322,300)

($126,839)

 

($707,796)

$414,568 

Weighted average combined shares of common stock outstanding

 

2,450,424 

2,447,957 

 

2,450,424 

2,445,491 

Basic (loss) earnings per weighted average combined share

 

($0.13)

($0.05)

 

($0.29)

$0.17 

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

 

 

Three months ended

 

Six months ended

 

 

4/30/08

4/30/07

 

4/30/08

4/30/07

Net (loss) income before discontinued operations

 

($322,300)

($126,839)

 

($707,796)

$414,568 

Combined shares used to compute dilutive effect of stock option

 

2,450,424 

2,448,328 

 

2,450,424 

2,447,847 

Basic (loss) earnings per weighted average combined share

 

($0.13)

($0.05)

 

($0.29)

$0.17 




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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 17A 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 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:

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

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

Borrowing costs, and the Companies’ ability to generate cash flow to pay interest and scheduled amortization payments as well as the Companies’ ability to refinance such indebtedness or to sell assets when it comes due;

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

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

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

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

The Companies’ ability to achieve gross profit margins at which the Companies can be profitable, including margins on services the Companies perform on a fixed price basis;

Changes in market demand, weather and/or economic conditions within the Companies’ local region and nationally;

Fluctuations in the price of building materials;

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; and

Actions by the Companies’ competitors.


In addition, you should refer to the “Risk Factors” in the Companies’ Annual Report on Form 10-K for the fiscal year ended October 31, 2007 for a discussion of other factors that may cause the Companies’ actual results to differ materially from those implied by the Companies’ forward-looking statements.  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.  



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

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

Overview

The Companies’ principal business is the management and development of their real estate and rental properties.  Also significant to the Companies’ operations is the development of “drive-to” and “destination” resort communities in and around the two ski areas, Jack Frost Mountain and Big Boulder.

Since the completion of the Companies’ last large-scale real estate development project in the 1980s, which established the Companies’ four resort communities, management was primarily focused on the promotion and maintenance of the two ski areas, the Companies’ summer operations and the resort communities.  Beginning in the fiscal year ended October 31, 2001, the Companies began to refocus their attention on the further development of their real estate holdings.  Management is continuing to evaluate the feasibility of the Companies’ current real estate projects based on market demand and economic conditions.

The Companies own 16,970 acres of land in Northeastern Pennsylvania.  Of these land holdings, the Companies’ have designated 4,972 acres as held for development and are moving forward with governmental approvals in connection with such development.  Management believes that the Companies’ primary focus should be on the construction of single and multi-family dwellings in proximity to the Jack Frost Mountain and Big Boulder Ski Areas.  It is expected that all of the Companies’ planned developments will result in approximately 3,700 lots or units, some of which will be subdivided and sold as parcels of land, while others will be developed into single and multi-family housing.  

The Companies are constructing Phase I and II of the Laurelwoods II community of single and multi-family homes and a condominium project known as Boulder Lake Village.  The Companies are also moving forward with plans to develop other residential communities near Jack Frost Mountain and Big Boulder Ski Resorts.  This is part of the Companies’ comprehensive plan for their “core land” development in and around their two ski areas.

For the fiscal year ended October 31, 2008, or Fiscal 2008, management intends to continue selective sales and purchases 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 to the purchasers of the Laurelwoods II single family and duplex townhomes $8,000 toward the payment of such purchaser’s closing costs, dues for a one year membership with the Lake Mountain Club and complimentary passes to the Jack Frost National Golf Course.  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 a Laurelwoods II single family home.  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 the Companies’ land.  The selection of parcels is based upon the Companies’ current real estate development activities.

The Jack Frost National Golf Course opened in the spring of 2007.  Construction of the temporary clubhouse was completed and opened to guests on August 11, 2007.

The Companies are in various stages of approval for the community surrounding the Jack Frost National Golf Course.  This community is expected to include approximately 1,100 homes and will be comprised of approximately 40% single family homes and 60% multi-family units, as well as golf club amenities and the necessary infrastructure.

The Companies also expect that certain subdivisions may be sold outright in phases to nationally-recognized land developers in order to facilitate the market for housing and to reduce the inherent risk associated with land development.



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The Companies currently operate two real estate sales offices.  Jack Frost-Big Boulder Real Estate is located in Lake Harmony, Pennsylvania and markets new and previously owned homes in and around the Companies’ resort communities primarily to buyers seeking a second home.  The Stoney Run Realty office located in Stroudsburg, Pennsylvania offers custom-built, single family homes in the Pocono region.  These homes primarily attract customers from nearby metropolitan areas in Pennsylvania, New York and New Jersey.  All of these custom-built homes are built by the Companies’ construction division, Moseywood Construction Company.

Recent Developments

On March 3, 2008, the Companies sold a Laurelwoods II single family unit for $350,000.

On April 30, 2008, the Companies sold an easement for a communications tower in Buck Township, Luzerne County, Pennsylvania to Crown Castle USA, Inc. for $148,000.

Construction of “Building J” at Boulder Lake Village is currently underway.  Management is carefully monitoring its construction progress.  Currently the Companies have one agreement of sale for a third floor penthouse condominium unit.  Reservations are being accepted for the other 17 planned units in “Building J”.  Completion of the entire project is anticipated in August 2008.

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 and are moving ahead cautiously with real estate operations.

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, timbering and leasing activities.  Revenues are recognized as services are performed.

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.  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



- 12 -



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 charged against income in the period incurred.

Long-lived assets, namely properties, are based on historical cost. Depreciation and amortization is provided principally using the straight-line half-year method over the estimated useful life of the class of property. Upon sale or retirement of depreciable property, 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.

Impairment losses are recognized in operating income, as they are determined. 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.

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.  Deposits are required on land and home sales.

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 Six Months Ended April 30, 2008 and 2007

Operations for the three and six months ended April 30, 2008 resulted in, respectively, net loss of ($322,300) and ($707,796), or ($0.13) and ($0.29) per combined share, compared to net loss of ($126,839) and net income of $467,186, or ($0.05) and $0.19 per combined share, for the three and six months ended April 30, 2007. The fluctuation in profit has mainly been driven by the decline in the real estate market and  the resulting decline in real estate and development sales transactions.



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Revenues

Combined revenue of $2,456,096 and $4,705,848 for the three and six months ended April 30, 2008 represents a decrease of $672,811 and $4,350,281, respectively, compared to the three and six months ended April 30, 2007.  Real Estate Management Operations / Rental Operations revenue decreased $298,603 and $1,498,178, or 22% and 27%, respectively, for the three and six months ended April 30, 2008, compared to the three and six months ended April 30, 2007. Summer operations revenue decreased $127,083 and $120,879, or 79% and 75%, respectively, for the three and six months ended April 30, 2008, compared to the three and six months ended April 30, 2007. Land resource management revenue decreased $247,125 and $2,731,224, or 31% and 83%, respectively, for the three and six months ended April 30, 2008 compared to the three and six months ended April 30, 2007.

Real Estate Management/Rental Operations

Real Estate Management Operations / Rental Operations had revenue of $4,103,771 for the six months ended April 30, 2008, compared to $5,601,949 for the six months ended April 30, 2007, which resulted in a decrease of $1,498,178, or 27%, which was primarily attributed to a decrease in Moseywood Construction Company’s new home construction sales.  Revenue for the new home construction for the six months ended April 30, 2008 was $2,420,432 compared to $3,667,704 for the six months ended April 30, 2007 for a decrease of $1,247,272, or 34%. This is the result of having fewer homes under construction in Fiscal 2008 (22 homes) as compared to the fiscal year ended October 31, 2007, or Fiscal 2007 (39 homes). The remaining decrease in revenue was primarily due to a reduction in sales commissions on residential home sales at our resort communities.

Summer Recreation Operations

Summer operations revenue for the six months ended April 30, 2008 was $39,835 as compared to $160,714 for the six months ended April 30, 2007. This was the result of the Jack Frost National Golf Course recognizing Charter membership initiation fees as revenue in Fiscal 2007.

Land Resource Management

For the six months ended April 30, 2008, Land Resource Management had revenue of $562,242 compared to $3,293,466 for the six months ended April 30, 2007, which resulted in a decrease of $2,731,224, or 83%.  This decrease is primarily attributable to one home sale in the Laurelwoods II community for the six months ended April 30, 2008, as compared to five home sales in Laurelwoods II for the six months ended April 30, 2007, which resulted in decreased revenue of $1,638,602, or 82%.  For the six months ended April 30, 2008, land sale revenue was $207,942 as compared to $1,163,566 for the six months ended April 30, 2007, for a decrease of $955,624, or 82%.  Land sales occur sporadically and do not follow any set schedule.  Timbering revenues for the six months ended April 30, 2008 was $0 as compared to $136,998 for two timbering contracts generated for the six months ended April 30, 2007.

Operating Costs

Real Estate Management/Rental Operations

Operating costs associated with Real Estate Management Operations / Rental Operations for the six months ended April 30, 2008 were $3,718,624 compared to $4,795,270 for the six months ended April 30, 2007, which represents a decrease of $1,076,646, or 22%.  The decrease was mainly attributable to fewer homes sold in 2008.  For the six months ended April 30, 2008, construction costs were $2,061,810 compared to $2,935,788 for the six months ended April 30, 2007 for a decrease of $873,978, or 30%.  This decrease was primarily due to reduced operating expenses associated with new home construction.  For the six months ended April 30, 2008, commission expense on new home sales decreased by $57,014, or 44%, advertising expense decreased $50,448, or 39%, insurance expense decreased $36,316, or 51% as compared to the six months ended April 30, 2007, all of which occurred primarily as a result of the decrease in the number of new homes sold.

Summer Recreation Operations

Operating expenses associated with Summer Operations for the six months ended April 30, 2008 were $544,673 as compared to $176,745 for the six months ended April 30, 2007, which represents an increase of $367,928, or 208%.  These costs are directly attributable to the operation of the Jack Frost National Golf Course,



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which opened in April 2007.  Prior to the course opening in April 2007, most related costs were captured as startup costs and are being amortized.  For the six months ended April 30, 2008, increases in operating costs were primarily attributable to salaries and wages ($83,119), equipment rental ($24,948), real estate taxes ($22,052) and depreciation ($152,740).

Land Resource Management

Operating costs associated with Land Resource Management for the six months ended April 30, 2008 were $533,132 compared with $2,213,696 for the six months ended April 30, 2007, which represents a decrease of $1,680,564.  This is primarily attributable to decreased construction costs related to real estate development, which was $280,006 for the six months ended April 30, 2008 as compared to $1,351,187 for the six months ended April 30, 2007, for a decrease of $1,071,181, or 79%.  Land Resource Management operating expenses for the six months ended April 30, 2008 were $235,196 as compared to $471,846 for the six months ended April 30, 2007 for a decrease of $236,650, or 50%.  Operating expense decreases were primarily the result of decreased salaries and wages ($53,672, or 83%), sales commissions ($81,138, or 82%), professional fees ($16,989, or 76%) and closing related costs ($13,265, or 53%). These decreases are the result of one new home sale in the Laurelwoods II community for the six months ended April 30, 2008 as compared to five new home sales in Laurelwoods II for the six months ended April 30, 2007.  No land was sold in 2008, therefore, there were no costs.  In 2007, costs were $315,815.  Timbering operating costs for consultants decreased $11,645 as those fees are commission based and there was no revenue for the six months ended April 30, 2008.

General and Administration

General and Administration costs for the six months ended April 30, 2008 were $613,801 compared to $812,065 for the six months ended April 30, 2007, which represents a decrease of $198,264.  This is primarily the result of reduced pension expense ($87,840, or 63%) and reduced salaries and benefits ($62,515, or 39%).  Pension expense decreased due to a reduced expense estimate developed by the Companies’ actuary that was driven by a change in the discount rate and no amortization of the recognized loss for Fiscal 2008.  Salaries and wages have decreased by $15,140, or 10%, as compared to the six months ended April 30, 2007, due to a reallocation of costs to better reflect the time expenditure of several employees on various development projects.

Other Income (Expense)

Interest and other income was $136,113 for the six months ended April 30, 2008 compared to $183,359 for the six months ended April 30, 2007, which represents a decrease of $47,246.  This decrease is primarily attributable to a loss recognized on the demolition of a cottage located along Route 940 in White Haven, Pennsylvania ($23,033) and a real estate tax revenue reimbursement in Fiscal 2007 ($21,579).

Interest expense for the six months ended April 30, 2008 was $503,927 compared to $550,144 for the six months ended April 30, 2007, which represents a decrease of $46,217.  This was primarily the result of the pay down of certain mortgage debt and declining interest rates.

Discontinued Operations

There were no discontinued operations for the six months ended April 30, 2008.  The discontinued operations for the six months ended April 30, 2007 resulted from residual rental revenue of $86,618 received from the Oxbridge Square Shopping Center that was sold in June 2006.

Tax Rate

The effective Tax Rate for the three months ended April 30, 2008 was 34% and for the three months ended April 30, 2007 was 40%.  The rate for 2008 is specific to federal taxes.  There is no provision for state income tax because the Companies have state net operating loss carryforwards that have been fully reserved.  That benefit is being realized resulting in no state income tax expense for 2008.

Liquidity and Capital Resources

As reflected in the Combined Condensed Statement of Cash Flows cash used in operating activities increased to $2,031,633 in the three months ended April 30, 2008 compared to $1,366,352 in the three months ended April 30, 2007.  The increase in cash used in operating activities was primarily a result of a $1.2 million fluctuation from profit to loss.  The loss is due to reduced custom home construction, reduced land sales and reduced new home sales in our resort communities all of which are being driven by the downturn in the real



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estate market.  The changes in the components of our operating capital are subject to wide fluctuations based on the timing of transactions related to various real estate transactions.

For the six months ended April 30, 2008, our major capital expenditures were for the construction of Building J in the Boulder Lake Village condominium community on Big Boulder Lake and the construction of four duplex units in the Laurelwoods II residential community at Big Boulder Ski Area.  

The Companies have a line of credit with Manufacturers and Traders Trust Company in the aggregate amount of $25,000,000 to fund real estate development.  Interest is due and payable on a monthly basis at a rate equal to LIBOR (as announced by the Wall Street Journal as of the first day of the calendar month) plus 250 basis points, which equaled 5.21% at April 30, 2008.  A portion of the proceeds from home sales are required to pay down the principal balance.  The remaining principal and any accrued interest is due and payable on April 19, 2010.  The Companies are using $6,000,000 of this line of credit to fund construction of residential development projects.  At April 30, 2008, $3,583,645 was outstanding on this sub-limit.  A total of $12,900,000 of this line of credit is used to fund site development improvements for residential developments.  At April 30, 2008, $4,476,733 was outstanding on this sub-limit. The remaining $6,100,000 of this 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 in order to accommodate the new construction.  At April 30, 2008, $2,461,510 was outstanding on the $6,100,000 sub-limit.  The term on this sub-limit is two years with interest only payments due until the maturity date after which time the Companies plan to seek a term mortgage note. The total principal amount outstanding under the line of credit will not exceed the lesser of (a) $25,000,000 or (b) 80% of the cost or appraised value of the units.

The Companies have two other lines of credit with Manufacturers and Traders Trust Company totaling $8.1 million: a $3.1 million line for general operations and a $5 million line for real estate transactions.  During the six months ended April 30, 2008, we borrowed against the $3.1 million line of credit in varying amounts with a maximum amount of $3,021,682.  At April 30, 2008, $2,631,444 is outstanding on the $3.1 million line and there are no borrowings outstanding on the $5 million line.  The rates of interest are one percentage point less than the prime rate on the $3.1 million line (which equaled 4.00% at April 30, 2008) and one half of one percentage point (0.50%) less than the prime rate on the $5 million line (which equaled 4.50% at April 30, 2008).

We anticipate that the funds needed for future operations and to implement our land development strategy will be satisfied through cash from operations, borrowed funds, public offerings or private placements of debt or equity. 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 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Companies are not required to provide information required by this Item.

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.



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(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

No update.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Annual Meeting of Shareholders was held on April 8, 2008.  The following proposal was adopted by the margins indicated:

(1) Election of Directors.  The results of the vote tabulated at the meeting for the following five director nominees were as follows:

 

Blue Ridge Real Estate Company

Big Boulder Corporation

 

Number of Shares

Number of Shares

 

Votes For

Votes Withheld

Votes For

Votes Withheld

 

 

 

 

 

Bruce F. Beaty

2,094,618 

1,123 

2,094,618 

1,123 

Milton Cooper

2,001,162 

94,579 

2,001,218 

94,523 

Michael J. Flynn

2,001,114 

94,627 

2,001,170 

94,571 

Patrick M. Flynn

2,001,188 

94,553 

2,001,188 

94,553 

Wolfgang Traber

2,094,600 

1,141 

2,094,600 

1,141 

No other persons were nominated, or received votes, for election as directors at the 2007 Annual Meeting of Shareholders. There were no abstentious or broker non-votes with respect to this proposal, except as noted above.



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Item 6.   EXHIBITS

Exhibit Number

Description

31.1*

Principal Executive Officer’s Rule 13a-14(a)/15d-14(a) Certification

31.2*

Principal Financial Officer’s Rule 13a-14(a)/15d-14(a) Certification

32.1*

Principal Executive Officer’s Section 1350 Certification

32.2*

Principal Financial Officer’s Section 1350 Certification

* 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:   June 16, 2008

/s/ Eldon D. Dietterick

Eldon D. Dietterick

Executive Vice President/Treasurer




Dated:   June 16, 2008

/s/ Cynthia A. Van Horn

Cynthia A. Van Horn

Chief Accounting Officer


























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EXHIBIT INDEX

Exhibit Number

Description

31.1*

Principal Executive Officer’s Rule 13a-14(a)/15d-14(a) Certification

31.2*

Principal Financial Officer’s Rule 13a-14(a)/15d-14(a) Certification

32.1*

Principal Executive Officer’s Section 1350 Certification

32.2*

Principal Financial Officer’s Section 1350 Certification

* Filed herewith




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