U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ending September 30, 2000
Or
/_/ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to ____________
Commission File No. 333-93475
CORNERSTONE MINISTRIES INVESTMENTS, INC.
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(Exact name of small business issuer as specified in its charter)
Georgia 58-2232313
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(State or other jurisdiction (IRS Employer Identification Number)
of incorporation or organization)
6035 Atlantic Blvd, Suite C, Norcross, GA 30071
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(Address of principal executive office) (Zip Code)
Issuer's telephone number, including area code: (404)-320-3311
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Former name, address and former fiscal year, if changed since last report.
Check whether the issuer (1) filed all reports required to be filed by the
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for past 90 days.
Yes _X_ No___
As of October 30, 2000, there were issued and outstanding 303,852 shares of the
common stock of the issuer.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ ]
Cornerstone Ministries Investments, Inc.
Index
Page
Form 10-QSB Title Page 1
Index 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet at September 30, 2000 3
Statement of Operations for three and nine
Months ending September 30, 1999 and 2000 4
Statements of Cash Flow for nine months ended
September 30, 1999 and 2000 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults on Senior Securities 9
Item 4. Submission of Matters to a Vote of Security-Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
2
Cornerstone Ministries Investments, Inc.
Balance Sheet
(unaudited)
$ 36,799
Assets
Current Assets
Checking/Money Markets $ 326,060
Accounts Receivable $ 6,229
-----------
Total Current Assets $ 332,289
Fixed Assets
Land and Property $ 280,509
Amortizable Assets $ 339,016
Accumulated Amortization $ (38,477)
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Total Fixed Assets $ 581,048
Other Assets
Loan Interest Receivable $ 100,710
Late Fees Receivable $ 437
Loans $ 5,182,115
Prepaid Commissions $ 118,563
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Total Other Assets $ 5,401,825
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Total Assets $ 6,315,163
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Liabilities
Current Liabilities
Accounts Payable $ 18,266
Taxes Payable $ 7,300
Note Payable $ 450,000
Due PIF $ 10,856
Interest Payable of Certificates $ 172,950
Rent Deposits Held $ 700
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Total Current Liabilities $ 641,806
Long Term Liabilities
Investor Certificates $ 3,813,729
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Total Long Term Liabilities $ 3,813,729
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Total Liabilities $ 4,473,801
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Equity
Capital Stock $ 2,238
Paid in Capital $ 1,869,284
Retained Earnings $ 172,953
Net Income $ 19,309
Dividends Paid $ (222,421)
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Total Equity $ 1,841,363
Total Liabilities and Equity $ 6,315,163
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3
Cornerstone Ministries Investments, Inc.
Statement of Operations
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
1999 2000 1999 2000
Income
Interest Income-Loans $ 35,048 $ 121,872 $ 79,731 $ 267,241
Fees and Services $ 44,200 $ -- $ 147,200 $ 136,000
Mortgage Late Fees $ 1,237 $ 714 $ 1,541 $ 3,151
Interest Income_Bank $ 11,760 $ 2,284 $ 27,144 $ 11,944
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Total Income $ 92,244 $ 124,870 $ 255,256 $ 450,321
Expense
Interest Expense $ 64,010 $ 99,831 $ 141,665 $ 267,241
Operating Expenses $ 26,638 $ 55,220 $ 78,219 $ 143,574
Marketing Expenses $ -- $ 7,435 $ 385 $ 7,435
Income Taxes $ 1,838 $ -- $ 13,581 $ 16,500
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Total Expense $ 92,486 $ 162,035 $ 233,850 $ 434,750
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Net Income $ (242) $ (37,165) $ 21,407 $ 15,571
==================================================================================================================
4
Cornerstone Ministries Investments, Inc.
Statement of Cash Flows
(unaudited)
Nine Months Ended
September 30, 1999 September 30, 2000
Operating Activities
Net Income $ 21,407
Adjustments to Reconcile
Net Income to Net Cash
Accounts Rec
Deposit on Real Estate $ (5,000) $ 5,000
Accounts Payable $ (24,915)
Taxes Payable $ 5,771 $ (13,790)
Note Payable $ 450,000
Due PIF $ 35,704 $ 10,856
Interest Payable on Certificates $ 83,834 $ 88,767
Legal Fees Payable $ (144,255)
Dividends Payable $ (29,776)
Loan Draws Payable $ 351,592 $ (40,619)
Net Cash Provided by ----------- -----------
Operating Activities $ 348,603 $ 454,686
Investing Activities
Fixed Assets $ (280,509)
Amorizable Assets $ (35,868) $ (79,317)
Accumulated Amortization $ 10,091 $ 17,296
Loan Interest Rec $ (14,918) $ (56,605)
Late Fees Rec $ (629) $ 1,625
Loans $(1,752,006) $(1,769,136)
Prepaid Commissions $ (59,496) $ (24,882)
Net Cash Provided by ----------- -----------
Investing Activities $(1,852,826) $(2,191,528)
Financing Activities
Investors Certificaes $ 2,459,839 $ 757,453
Capital Stock $ 461 $ 1,047
Paid In Capital $ 460,699 $ 679,445
Retained Earnings $ (8,798)
Dividends Declared $ 29,776
Dividends Paid $ (52,340) $ (102,056)
Net Cash from Financing ----------- -----------
Activities $ 2,868,659 $ 1,356,867
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Net Cash increase for period $ 1,364,436 $ (379,975)
Cash at beginning of period $ 677,576 $ 706,035
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Cash at end of period $ 2,042,012 $ 326,060
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Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
Since our inception we have been focused on serving only non-profit religious
institutions. We offer specialized financing programs for churches and
non-profit sponsors of senior adult housing and affordable housing programs. To
date almost all of the business conducted by CMI has been with churches engaged
in the construction of new facilities, however, it is anticipated that in the
last quarter of the year 2000 CMI will realize significant fee income from
investment in loans for affordable housing.
CMI generates income from origination and renewal fees on loans, interest on
loans, lease payments, gains on the sale of property and investments in money
market investments. We charge a 10% fee on new loans and renewal fees of as much
as 5%. Our interest rates currently are set at 10%. Fees and interest represent
the bulk of CMI income for the first nine months of the year 2000.
Comparison of periods ending September 30, 1999 and September 30, 2000
General
Gross income for the first nine months ending September 30, 1999 was
$255,256 and $450,321 for 2000. Net income for these periods was $21,407 and
$15,571 respectively. For the three-month periods July to September, 1999 and
July to September 2000 gross income was $92,244 and $124,870. Net income for
these periods was $(242) and $(37,165). The large increase in gross income is
due to the overall increase in assets available for investment. Assets for
investment on September 30, 1999 and September 30, 2000 were $4,721,131 and
$6,315,163. Total loans outstanding were $2,377,185 and $5,182,115 at the end of
the respective periods.
Income
Interest Income. Interest income on loans increased in the first nine
months of 2000 to $299,226 from $79,371 during the same period in 1999. The
increase in loan interest income was the result of an increase of loans
outstanding of $2,804,930, from $2,377,185 to $5,182,115, as well as loans from
1999 being outstanding for the full period in 2000.Investment interest income
for the first nine months of 1999 and 2000 respectively was $27,144 and $11,944.
The decline in investment interest income was the outcome of having a smaller
investment in money market funds and interest bearing accounts and a larger
investment in loans.
For the three months ending September 30, 1999 and September 30, 2000
loan interest income was $35,048 and $121,872. Again the increase is the result
of significantly larger balance in outstanding loans.
Fee Income. Fee income for the first nine months of 2000 declined
vis-a-vis the same period in 1999, from $147,200 to $136,000. The decline is the
result of two factors; first, CMI was able to close more loans in the first
three quarters of 1999 because it had more un-invested cash, and second, a delay
in a significant closing until the fourth quarter of 2000, delaying earning of
the loan closing fees. During the fourth quarter CMI expects to recognize as
much as $300,000 in loan fee income.
Expenses
Interest Expenses. CMI experienced an increase in interest expense for
the comparable nine-month periods ending September 30, 1999 and September 30,
2000 of $125,576, from $141,665 to $267,241. This change represents the
interest on an increased in the amount of certificates outstanding of $745,390
and Series A Certificates remaining outstanding for the period in 2000. In May
of 2000 CMI began sales of its Series B certificates. From May until September
2000 an additional $757,453 in certificates were outstanding. In the first
quarter of 2000 CMI obtained a line of credit from Presbyterian Investors Fund,
Inc. to fund commitments while CMI raised additional capital. The outstanding
balance as of September 30, 2000 was $450,000. To September 30, 2000 CMI had
paid interest on the line of credit of $49,360.
6
For the three-month periods ending September 30, 1999 and 2000 the increase in
interest expense was $17,378 from $64, 010 to $81, 381 as a result of increased
certificates outstanding. During this three-month period CMI paid $17,993 in
interest on its line of credit with Presbyterian Investors Fund. During this
period CMI reduced the outstanding balance of the line of credit from $604,456
June 30, 2000 to $450,000 on September 30, 2000.
Marketing and Selling expenses. CMI to date has not had to commit
resources to marketing its lending capabilities because of the significant
backlog of projects with which it has been approached. Total promotional expense
for the first nine months of 1999 was $385 and for the same period in 2000 CMI
had spent $7,435, all in the three-month period ending September 30, 2000.
Operating and administrative expenses. Operating and administrative
expenses, including brokerage expenses totaled $78,219 in the first nine months
of 1999 and $143,574. This increase of 84% can be attributed primarily to the
increase in the assets of CMI, and additional sales of securities by the
company, thereby increasing its amortization expense. CMI pays a management fee
of 1.5% of assets to Presbyterian Investors Fund. As the assets of CMI increase,
the management fee increases, during this nine-month period, from $35,550 to
$50,980, an increase of 43%. Commission expense (selling commissions are paid in
cash but capitalized and amortized over three, five, and seven years depending
on whether a three-year, five-year, or common stock is sold) increased from
$12,063 to $17,296 as securities were sold from the new offering commenced May
17, 2000. The commission expense will continue to increase as additional
securities are sold to increase lending capability. In addition, amortized legal
expenses increased as a result of the new offering. Legal expenses connected
with the new offering and the transfer of trust services from Colonial Trust
Company to Computershares, Inc. are capitalized and amortized. The increase in
amortized cost was $7,205 or 71%. Accounting fees increased to $12,373 as a
result of costs of the 1999 Audit by T. Jackson McDaniel.
During the three months ended September 30, 1999 and September 30, 2000 total
operating and administrative expenses increased from $26, 639 to $55,220. This
increase is primarily due to the increase in management fees from $11,850 to
$19,006; commissions from $5,329 to $15,320; amortization expense from $4,160 to
$8,921; and one time legal expenses connected with loans of $7,309.
Taxes. For the nine month periods total estimated taxes for 1999 were
$13,851 and for 2000 $16,500. If the anticipated loan income is realized in the
fourth quarter of 2000, an additional $130,000 (approximately) in taxes will be
due from this income after expenses and payment of expected dividends. For the
three months ended September 30, 2000 CMI had not set any funds aside for taxes.
Dividends
During the first nine months of 1999 CMI paid quarterly dividends totaling $0.60
per share for an annualized rate of 12%. In January 2000 the Board voted to
split the existing shares, reducing their price from $10.00 per share to $6.50
per share and increasing the total shares outstanding. During the period ending
September 30, 2000 the Board of Directors elected to declare dividends on a
semi-annual basis. For investors of record on June 30, 2000 the Board of
Directors declared a semi-annual dividend of $0.39 per share or an annualized
return of 12%.
Liquidity and Capital Resources
Cash from operations. Net cash flow from operations in the nine-months
ending September 30, 1999 and September 30, 2000 was $348,603 and $454,686
respectively. Net cash flow from investing activities was $(1,852,826) and
$(2,191,528.) Net cash flow from financing activities was $2,868,659 and
$1,356,867.
Cash from financings. CMI's first offering of stock and certificates
raised a total of $3,747,306. CMI began operations with an initial investments
of $510,000 from individuals and Presbyterian Investors Fund, Inc.
7
Current Offering. CMI is seeking new capital of $19,275,000, consisting
of 2,275,000 in common stock and $17,000,000 in unsecured debt. The offering was
declared effective May 17, 2000. Through September 30, 2000 CMI had received
$655,184 in common stock investments and $834,453 in unsecured debt investments.
We believe that the expected amount of additional sales from the offering, as
well as cash on hand will be sufficient to meet our capital requirements for the
next quarter. The offering is a best efforts direct public offering. The amount
and timing of our future capital requirements will depend on factors such as the
origination and funding of new investments, the costs of additional underwriting
and marketing efforts and general expenses of operations.
Effects of Inflation
Inflation, which has been limited during the course of our operating history,
has had little effect on our operations. We do not believe that it will have a
significant impact on our cost of capital or on the rates that we can charge on
our loans. Inflation resulting in increased real estate prices could potentially
increase the gains realized on the sale of properties, while at the same time
decrease the ability of some potential client to purchase, finance or lease
property.
Year 2000 issues
We have upgraded all of our internal computer and software systems as well as
communications equipment to be Year 2000 standards. Since a large part of our
accounting and record keeping is done by outside sub-contractors, we have sought
and received assurances in writing from the major service providers of their
compliance with Y2K requirements. This compliance includes the transition from
the year 2000 to the year 2001.
8
Part II. Other Information
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Securities Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
Not Applicable
9
Signatures
In accordance with the requirements of the Securities and Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Cornerstone Ministries Investments, Inc.
(Registrant)
Dated: November 15, 2000
By: /S/John T. Ottinger
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John T. Ottinger
Vice President and Chief Financial Officer
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