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 March 31, 2001
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
PIF/CORNERSTONE MINISTRIES INVESTMENTS, INC.
--------------------------------------------
(Exact name of small business issuer as specified in its charter)
Georgia 58-2232313
- --------------------------------------------------------------------------------
(State or other jurisdiction (IRS Employer Identification Number)
of incorporation or organization)
6030 Bethelview Rd, #101, Cumming, GA 30071
- --------------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
Issuer's telephone number, including area code: (678)-455-1100
--------------
- --------------------------------------------------------------------------------
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 April 30, 2001, there were issued and outstanding 468,324 shares of the
common stock of the issuer.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
PIF/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 March 31, 2000 and 2001 3
Statement of Operations for thre
Months ending March 31, 2000 and 2001 4
Statements of Cash Flow for three
Months ending March 31, 2000 and 2001 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 8
Item 2. Changes in Securities and Use of Proceeds 8
Item 3. Defaults on Senior Securities 8
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 9
2
PIF/Cornerstone Ministries Investments, Inc.
Balance Sheet
As of March 31, 2000 and 2001
-------------------------------------
Mar 31, 01 Mar 31, 00
---------- ----------
ASSETS
Current Assets
Checking/Savings 2,723,206 224,088
Accounts Receivable 51,632 6,593
Other Current Assets 19,518
Total Current Assets 2,794,356 230,681
Fixed Assets
Fixed Assets
Soddy Daisy property 326,963 261,670
PIF Office Equipment 6,689 0
PIF merger 500,955 0
Office Building 252,922 0
Accumulated Depreciation -14,479 0
---------- ----------
Total Fixed Assets 1,073,050 261,670
---------- ----------
Total Fixed Assets 1,073,050 261,670
Other Assets
Bond Holdings 248,500 0
Loan Interest Receivable 762,718 35,878
Bond interest receivable 12,312 0
Late fees receivable 401 19
Loans 26,857,247 3,534,006
Amortizable Assets 342,751 290,205
Accumulated Amortization -64,854 -25,369
Prepaid Commissions 201,560 87,871
---------- ----------
Total Other Assets 28,360,635 3,922,610
---------- ----------
TOTAL ASSETS 32,228,041 4,414,961
========== ==========
LIABILITIES & EQUITY
Liabilities
Current Liabilities 32,466
Other Current Liabilities
Payroll Liabilities
FICA, Med. & Fed. Withholding 8,595 0
State withholding 1,353 0
Federal unemployment 21 0
State unemployment 1,105 0
---------- ----------
Total Payroll Liabilities 11,074 0
Income Taxes Payable 3,570 600
due to investors 18,988 0
Due to Church Growth Found 39,563 0
Due to CDF 0 5,838
Page 1 of 2
PIF/Cornerstone Ministries Investments, Inc.
Balance Sheet
As of March 31, 2000 and 2001
-------------------------------------
Mar 31, 01 Mar 31, 00
---------- ----------
Interest payable on certificate 2,394,629 126,801
Rent deposits held 0 700
---------- ----------
Total Other Current Liabilities 2,467,824 133,939
---------- ----------
Total Current Liabilities 2,500,290 133,939
Long Term Liabilities
Debt certificates
Investor's certificates 7,314,457 3,056,276
Mortgage Fund certificates 6,941,588 0
Church Development certificates 11,904,842 0
Bond Fund certificates 474,145 0
---------- ----------
Total Debt certificates 26,635,032 3,056,276
Building Loan 207,229 0
---------- ----------
Total Long Term Liabilities 26,842,261 3,056,276
---------- ----------
Total Liabilities 29,342,551 3,190,215
Equity
Capital Stock 4,436 1,832
Paid in Capital 2,879,434 1,189,198
Retained Earnings 382,022 181,751
Dividends paid -374,395 -150,376
Net Income -6,007 2,238
---------- ----------
Total Equity 2,885,490 1,224,643
---------- ----------
TOTAL LIABILITIES & EQUITY 32,228,041 4,414,858
========== ==========
Page 2 of 2
PIF/Cornerstone Ministries Investments, Inc.
Statement of Operations
For three months ending March 31, 2000 and 2001
--------------------------
Jan - Mar 01 Jan - Mar 00
------------ ------------
Income
Interest Income
Interest earned - loans 660,561 82,589
Interest earned - bonds 5,044 0
Mortgage late fees 1,546 1,097
Early Redemption Penalty 3,375 0
Interest - bank accounts 23,194 7,399
------- -------
Total Interest Income 693,720 91,085
Fees and services 194,000 33,500
Rental Income 2,779 0
Miscellaneous 2,911 1,000
------- -------
Total Income 893,410 125,585
Expense
Interest Expenses
Interest on Line of Credit 0 11,300
Interest on certificates 609,870 68,859
Interest on Building Loan 1,537 0
------- -------
Total Interest Expenses 611,407 80,159
Marketing Expenses
Amortization expense 11,729 4,188
Commissions 7,913 5,810
Compliance and registration 450 0
Printing expense 1,430 0
Promotion expense 25,656 0
Travel expense 8,984 0
------- -------
Total Marketing Expenses 56,162 9,998
Operating Expenses
Audit & Tax Services 16,328 0
Accounting expense 21,285 9,849
Bank service charges 502 189
Consulting fee 1,450 400
Equipment rental 1,895 0
Appraisal expense 1,850 0
Loan closing costs 9,760 0
Insurance expense 2,754 0
Depreciation 14,479 0
Legal expense 18,612 1,271
Meals and entertainment 950 0
Management fees 0 15,927
Building Repairs & Maintenance 1,436 0
Office expense 4,379 0
Postage and courier expense 2,711 233
Printing expense 759 0
Taxes and licenses 0 765
Rent expense 3,177 0
Page 1 of 2
PIF/Cornerstone Ministries Investments, Inc.
Statement of Operations
For three months ending March 31, 2000 and 2001
--------------------------
Jan - Mar 01 Jan - Mar 00
------------ ------------
Trust service fees 15,263 3,955
Telephone expense 8,958 0
Ttrustees expense 4,422 0
Utilities 345 0
------- -------
Total Operating Expenses 131,315 32,589
Personnel Expenses
Salary 85,673 0
FICA & Medicare 6,554 0
Unemployment taxes 1,384 0
Medical Benefits 3,349 0
------- -------
Total Personnel Expenses 96,960 0
Estimated income taxes 3,570 600
------- -------
Total Expense 899,414 123,346
------- -------
Net Income -6,004 2,239
======= =======
Page 2 of 2
PIF/Cornerstone Ministries Investments, Inc.
Statement of Cash Flows
For three months ending March 31, 2000 and 2001
--------------------------------
Jan - Mar 01 Jan - Mar 00
------------ ------------
OPERATING ACTIVITIES
Net Income -6,007 2,238
Adjustments to reconcile Net Income
to net cash provided by operations:
Accounts Receivable 42,453 -6,593
Due from Church Growth Found 1,000 0
CMI stock for CGF 450,000 0
Notes rec. - for CGF 250,000 0
Sage advances -1,318 0
CHI advances -15,670 0
Prepaid Expense 623 0
Prepaid Insurance 2,754 0
Deposit on Real Estate 0 5,000
Security deposits 631 0
Accounts payable 6,217 -46,816
PIF Visa 476 0
Payroll Liabilities:FICA, Med. & Fed. Withholding 8,595 0
Payroll Liabilities:State withholding 1,353 0
Payroll Liabilities:Federal unemployment 21 0
Payroll Liabilities:State unemployment 1,105 0
Income Taxes Payable -133,430 -20,670
Income Taxes Payable:Georgia tax payments 2,625 0
Income Taxes Payable:Fed. Income taxes paid 6,575 0
Due to investors 18,425 0
Payroll Liabilities -34,871 0
Due to Church Growth Found -711,000 0
Due to CDF 0 5,838
Interest payable on certificate 180,938 42,618
Dividends payable -151,974 -29,776
Loan draws to distribute 0 -40,619
Rent deposits held -700 0
--------- ---------
Net cash provided by Operating Activities -81,179 -88,780
INVESTING ACTIVITIES
Fixed Assets:Soddy Daisy property -31,464 -261,670
Fixed Assets:PIF merger -955 0
Fixed Assets:Office Building -252,922 0
Fixed Assets:Accumulated Depreciation 14,479 0
Bond Holdings 25,000 0
Loan Interest Receivable 90,670 8,227
Bond interest receivable 3,367 0
Late fees receivable -78 2,042
Loans:Church Loans-CDF -1,909,929 0
Loans:Church loans - PIF 1,717,702 0
Loans:Church Loans -195,210 -121,027
Amortizable Assets 0 -30,505
Accumulated Amortization 11,729 4,188
Prepaid Commissions -35,960 5,810
--------- ---------
Page 1 of 2
PIF/Cornerstone Ministries Investments, Inc.
Statement of Cash Flows
For three months ending March 31, 2000 and 2001
Net cash provided by Investing Activities -563,571 -392,935
FINANCING ACTIVITIES
Debt certificates: Investor's certificates 2,558,259 0
Debt certificates: Mortgage Fund certificates -1,567,702 0
Debt certificates: Church Development certificates -312,721 0
Building Loan 207,229 0
Capital Stock 464 641
Paid in Capital 301,148 -641
Dividends declared 151,974 29,776
Dividends paid -151,974 -30,010
--------- ---------
Net cash provided by Financing Activities 1,186,677 -234
--------- ---------
Net cash increase for period 541,927 -481,949
Cash at beginning of period 2,181,280 706,035
--------- ---------
Cash at end of period 2,723,207 224,086
========= =========
Page 2 of 2
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 faith-based
organizations, principally churches. We also offer specialized programs for
churches and non-profit sponsors of senior housing and affordable housing
programs. While our earnings have historically come from financing churches,
that began to change during the last quarter of 2000 as we began to realize
revenues from investment in senior and affordable housing projects.
As previously reported, Cornerstone Ministries Investments, Inc. acquired, by
merger effective December 29, 2000, all of the assets and liabilities of
Presbyterian Investors Fund, Inc., a not for profit corporation. No additional
shares were issued in the merger.
PIF/CMI generates revenue from origination and renewal fees on loans, interest
on these loans, gains on the sale of property and interest on money market
accounts. We also receive limited lease income, but we are no longer pursuing a
lease/purchase strategy. We currently charge a 10% fee on new loans and renewal
fees of as much as 5% of the outstanding balance of the renewing loan. Our
interest rate on all new loans is currently from 10% to 12%. Some loans are
participating loans, enabling PIF/CMI to receive income from the gains on the
sale of property for which it has provided financing. The participation
percentage varies between 25% and 33% of the gains on the sale of real estate.
Comparison of Periods Ending March 31, 2000 and March 31, 2001
Income
General. Assets increased from $4,414,961 at the end of March 2000 to
$32,228,042 at the end of March 2001, as a result of the merger with PIF and the
sale of CMI's stock and certificates. The December 29, 2000 merger has had a
material effect on quarterly income. Gross income was $125,584 for the first
quarter of 2000 and $893,410 for 2001. Net income for these periods, before
dividends but after taxes, was $2,238 and $(6,007).
Total loans outstanding on March 31, 2000 were $3,534,006 and $26,857,247 on
March 31, 2001. Our other assets at the end of March 2001 included $273,500 in
investments in church bonds and $786,218 in interest receivable. We also had
investments in liquid securities of $2,723,206.
Interest Income. Interest income on loans increased from $82,589 to $660,561,
largely as a result of the merger and additional loans made during this period.
Investment interest income increased from $7,399 to $23,194 for the three month
period, reflecting an increase in cash balances held.
Fee Income. Fee income for the three months ending March 31, 2001 was $194,000
versus $33,500 for the same period in 2000. The increase is the result of
additional loans being made during the period out of increased funds arising
from the sale of stock and certificates, as well as some limited refinancing of
existing loans by third parties, providing some additional lendable assets and
the merger.
Income from the sale of property. CMI did not realize any income from the sale
of property during the quarters ending March 31, 2000 or March 31, 2001. By the
end of 2000, CMI had disposed of most of the property to which it held title.
None of its participating loans had sold property during the course of the year.
PIF/CMI currently holds title to one property, in Soddy Daisy, TN, which it
expects to sell during the year 2001.
Expenses
Interest Expense. As a result of its growth in assets through sales and the
merger, PIF/CMI experienced an increase in interest expense from $80,159 to
$611,407, including interest expense in the quarter for a loan on its facilities
purchased in February of 2001. This increase in interest expense is a result of
a net increase in outstanding certificate principal, from $3,056,276 to
$29,842,551.
6
Marketing and Selling Expenses. To date, CMI has not committed substantial
resources for marketing its lending capabilities because of the continuing
backlog of projects with which it has been approached. Total promotional
expenses in the first quarter of 2001 were $25,656 versus $0 in 2000.
Operating and Administrative Expenses. Operating and administrative expenses
totaled $131,317 in 2001 and $32,589 in 2000. This increase can be attributed to
having a larger asset base on which administrative services are calculated.
Prior to the merger, CMI paid PIF an administrative services fee of 1.5% of
assets. After the merger, all operating and administrative costs, including
selling commissions and legal expenses, are paid directly by PIF/CMI.
Selling commissions are paid in cash but capitalized over three, five, and seven
years depending on whether a three-year certificate, five-year certificate or
common stock is sold. Amortized commissions increased from $5,810 in 2000 to
$7,913 in 2001 as certificates and common stock have been sold in the current
offering, which commenced in May 2000. Commission expense and the accompanying
capitalized assets will increase as securities continue to be sold.
Amortized legal expenses increased as a result of the new offering in the year
2000. Legal expenses associated with both the 1998 offering and the 2000
offering are capitalized and amortized. We capitalized and are amortizing the
costs associated with the transfer of registrar, paying agent, and trustee
services as well.
Taxes. CMI accrued taxes of $3,600 in 2000 on pre-tax income of $2,838,
anticipating significant additional income. We estimate taxes for the year 2001
will be approximately $172,000 based on projected income estimates for the year.
Liquidity and Capital Resources
Cash from Operations. Net cash provided from operating activities in 2000 was
$(88,780) and for 2001 was $(81,179).
Cash from Financings. CMI began operations in 1996 with an initial investment of
$510,000 from individuals and PIF. CMI's first offering of stock and
certificates in 1998 raised a total of $3,747,306.
Current Offering. CMI is currently seeking new capital of up to $19,275,000,
consisting of $2,275,000 in common stock (shares priced at $6.50 per share) and
$17,000,000 in unsecured debt. This offering began in May 2000. Through March
31, 256,730 in new shares had been sold, raising $1,668,745 in new equity, and
an additional $4,267,919 in certificates had been sold, including rollovers from
maturing certificates. The total realized from this ongoing offering is
$5,936,664. A portion of these new investments came from maturing investments in
PIF.
We believe that additional sales of new investments from the current and planned
offerings, as well as cash on hand, expected refinancings and sales of existing
loans, will be sufficient to meet our capital needs for the next quarter. 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 operations and we do not believe it will have a
significant effect on our cost of capital or on the rates that we charge on our
loans. Inflation resulting in increased prices for real estate could potentially
decrease the ability of some potential clients to purchase, finance, or lease a
property.
7
Part II. Other Information
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
(d) The following information is furnished as required by Rule 463 and Item
701(f) of Regulation S-B, for the offering of securities under
PIF/CMI's first registration statement filed under the Securities Act
of 1933:
(1) Effective date of the registration statement was May 1, 2000.
Effective date of Post-Effective Amendment No. 1 was April 16,
2001. The Commission file number is 333-93475.
(2) The offering commenced May 1, 2000.
(3) Not applicable.
(4) (i) The offering has not terminated.
(ii) There is no underwriter.
(iii) Securities registered are common stock and Series B
Certificates of Indebtedness.
(iv) For the common stock, 350,000 shares are registered at an
aggregate price of $2,275,000; 256,730 shares, at an aggregate
offering price of $1,668,745 had been sold through March 31,
2001. For the Certificates of Indebtedness, $17,000,000 face
amount are registered at an aggregate price of $17,000,000;
$4,267,919 had been sold through March 31, 2001. All sales
were for the account of the issuer. There is no selling
security holder.
(v) The total amount of cash expenses incurred from the
effective date of the registration statement to March 31, 2001
was $ 207 ,044, including $162,299 of commissions to
registered broker-dealers and $44,745 of other expenses.
(vi) The net offering proceeds to the issuer, after deducting
total expenses were $5,729,620. .
(vii) From the effective date of the registration statement to
March 31, 2001, all of the net offering proceeds were used to
finance buying and building churches and their related
properties. All of these payments of the net proceeds were to
persons other than directors, officers or other persons
described in Regulation S-B Item 701(f)(4)(vii)(A).
(viii) This use of proceeds is as described in the prospectus
for the offering.
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
(a) No exhibits are filed.
(b) A report on Form 8-K was filed January 16, 2001, to report, under Item
2, the merger of Cornerstone Ministries Investments, Inc. and
Presbyterian Investors Fund, Inc. An amended Form 8-KA was filed March
16, 2001 to furnish audited financial statements for the combined
entity.
8
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
-----------------------------------------
John T. Ottinger
Vice President and Chief Financial
Officer
9