As filed with the Securities and Exchange Commission on October 25, 2001 CIK: 0001035270
Registration No. 333-93475
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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POST-EFFECTIVE AMENDMENT No. 2 to
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PIF/Cornerstone Ministries Investments, Inc.
(Name of small business issuer in its charter)
Georgia 6531 58-2232313
(State or jurisdiction of incorporation or (Primary Standard Industrial (I.R.S. Employer Identification No.)
organization) Classification Code Number)
6030 Bethelview Road, Suite 101
Cumming, Georgia 30040
404.323.3311
(Address and telephone number of principal executive offices and principal place of business)
Cecil A. Brooks, Chairman, President, Chief Executive Officer
PIF/Cornerstone Ministries Investments, Inc.
6030 Bethelview Road, Suite 101
Cumming, Georgia 30040
404.323.3311
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Copies to:
Drew Field
534 Pacific Avenue
San Francisco, CA 94133
415.296.9795
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Post-Effective Amendment No. 2.
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CALCULATION OF REGISTRATION FEE
===================================================================================================================
Title of each Dollar Proposed maximum Proposed maximum
class of securities Amount to be offering price aggregate offering Amount of
to be registered registered per share/certificate price registration fee
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Common Stock, without par value $ 2,112,500 $ 6.50 $ 2,112,500 $ 504.89
Series B Certificates of Indebtedness $16,000,000 $500.00 $16,000,000 $3,824.00
Total $4,328.89
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay
its effective date until the registrant shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of
1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to
said Section 8(a), may determine.
If any of the securities on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, check the following: X
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EXPLANATORY NOTE
The registration statement, and this post-effective amendment, contain two forms
of prospectus, one to be used in connection with an offering of common stock and
one to be used in a concurrent offering of certificates of indebtedness. The
common stock prospectus and the certificate of indebtedness prospectus are
identical in all respects except for the front cover page. The front cover page
for the certificate of indebtedness prospectus included in this registration
statement is labeled "Alternate Certificate of Indebtedness Page." The form of
common stock prospectus is included in this post-effective amendment no. 2 to
the registration statement. The form of the front cover page of the certificate
of indebtedness prospectus follow the common stock prospectus.
325,000 SHARES
PIF/Cornerstone
Ministries
Investments, Inc.
COMMON STOCK
--------------------------
PIF/Cornerstone Ministries Investments, Inc. is offering these 325,000
shares of common stock directly to investors and also through selected
securities broker-dealers, on a best efforts basis.
The shares have been approved for listing on the Chicago Stock Exchange
after completion of the offering.
This offering will end when all the shares have been purchased or
earlier, if we decide to close the offering.
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This offering involves a high degree of risk. See "Risk Factors"
beginning on page 4.
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Neither the Securities and Exchange Commission nor any state securities
regulator has approved or disapproved the shares or determined if this
prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
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Public Broker-dealer
Offering Discounts and Proceeds to
Price Commissions CMI
Per Share $ 6.50 $ 0.455 $ 6.045
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Total $2,112,500 $147,875 $1,964,625
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The date of this Prospectus is___________, 2001
We have not authorized anyone to give you any information or make any
representation that is not in this prospectus. The information in this
prospectus is current and correct only as of the date of this prospectus,
regardless of the time of its delivery or of any sale of the certificates. We
are offering to sell, and seeking offers to buy the certificates only in
jurisdictions where offers and sales are permitted.
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TABLE OF CONTENTS
Page Page
Prospectus summary................................... 3 Certain transactions.......................... 17
Risk factors......................................... 4 Principal shareowners......................... 17
Note about forward-looking statements ............... 6 Description of securities..................... 18
Use of proceeds...................................... 6 Future resale of securities................... 20
Management's discussion and analysis of financial Plan of distribution...................... 21
condition and results of operations.................. 6 Experts....................................... 21
Business............................................. 9 Available Information......................... 21
Management........................................... 15 Index to financial statements................. 22
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Until ______________, 2002 (90 days after the date of this prospectus) all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
2
Prospectus summary
This summary highlights some information from this prospectus. To understand
this offering fully, you should read the entire prospectus carefully, including
the risk factors and the financial statements.
Our business
PIF/Cornerstone Ministries Investments, Inc. finances land and buildings for
churches and related nonprofit faith-based schools, senior housing, affordable
housing and daycare facilities. We began operations in 1985 as Presbyterian
Investors Fund, Inc., a nonprofit corporation. Cornerstone Ministries
Investments, Inc. was organized as a for profit corporation in 1996. The two
were merged in December 2000. At June 30, 2001, we owned $30,075,873 in loans
and properties. Funding for these loans had come from $28,248,800 in
certificates of indebtedness and $3,449,267 in shares of common stock. We had
1,199 certificate holders and 226 shareowners.
Our objectives
Our goal is to help churches and other faith-based organizations buy or build
the facilities they need to carry out their missions and goals. These groups
find it difficult to finance their projects and we have little competition in
this market. We use our own funds, often together with financing from banks or
other investors. We have developed some unique approaches to providing financing
for these borrowers. Where there is no suitable existing building, we may
develop a new facility for a qualified candidate. We are not long-term lenders
in these properties. Rather, we seek to provide basically a bridge to
qualification for conventional financing.
Interest and dividends
Interest is payable on the certificates at March 15 and October 15 each year, at
the annual rate of 7% for certificates due in 2005 and 9% for certificates due
in 2007. We have paid all interest payments as due to existing certificate
holders, who must be paid before any dividends. For the past year, we have been
paying cash dividends on our common stock, at an annual rate of 10% on the share
purchase price. Dividend payments in the future will depend upon there being
sufficient net income and a decision by our board of directors.
How to buy certificates or shares
You can fill out the order form and return it with your check for the amount of
your investment. You can also purchase certificates or shares from any of the
securities broker-dealers who are our sales agents for this offering. The
minimum investment is $500 for certificates and $100 for shares.
How you can communicate with us
Our office is at 6030 Bethelview Road, Suite 101, Cumming, Georgia 30040. Our
telephone number is (678) 455-1100 and our fax number is (678) 455-1114. You are
invited to call or write Jayme Sickert. His email address is
jayme@cmiatlanta.com.
3
Risk factors
o Properties we own or finance may cause losses that could reduce or
eliminate your interest payments or dividends and cause you to lose part or
all of the amount you invested. These risks include: . o Properties we
might have to take over for nonpayment could be sold at a loss. In the
event a borrower is unable to pay its loan or lease and we must take over
the property, we may find it difficult to find a buyer for the property at
a price that will not result in our losing money. Many of the properties
which will serve as the collateral for our loans will be church buildings
or other limited use facilities. Designed specifically to meet certain
needs, they will be of limited use to other buyers.
o There may not be insurance coverage for a loss. We could lose income from a
loan, or suffer loss on resale of a property, if an uninsured event
happened. We require comprehensive liability, fire, flood and extended
insurance coverages on all buildings that secure our loans. However,
insurance is often not available for certain types of losses, such as
riots, acts of war or earthquakes.
o We may incur liability under environmental laws. Various federal, state and
local laws make property owners and lenders pay the costs of removal or
remediation of certain hazardous substances released on a property. They
often impose a penalty without regard to whether an owner, operator, or
lender knew of, or was responsible for, the release of hazardous
substances. The presence of, or failure to properly remediate, hazardous
substances may adversely affect occupancy of any facility, the ability to
operate it as intended, and the ability to sell or borrow against a
contaminated property. The presence of hazardous wastes on a property could
also result in personal injury or similar claims by private plaintiffs.
We require a transaction screen, appraisal or on-site inspection on every
property for which we make a loan. If we then decide it is necessary, we
have a Phase I environmental site assessment performed, to identify
potential contamination for which a lender may be responsible and to assess
the status of regulatory compliance.
o There may be unexpected regulatory compliance costs. The properties for
which we provide financing are subject to various other regulations from
federal, state, and local authorities. If we or a borrower fail to comply
with these regulations, it could result in a fine and the award of damages
to private plaintiffs. If a borrower had to spend a significant amount of
money to bring a property into compliance, they could be unable to make
their loan payments.
If payments to us are delayed or uncollectible, we may not be able to pay you
interest or dividends. In addition to risks that all real estate lenders face,
we have these particular issues:
o We are highly leveraged. That is, on June 30, 2001, we had about nine times
more in certificate debt than we had in shareowners' equity. Payments of
interest and principal on the debt are required, whether or not we are
current in collecting from our loans or investments.
o It is our practice for some loans to have limited personal guarantees in
which each individual guarantor pledges a maximum of $5,000. We may have
difficulty suing individuals to force their compliance with the guarantee
agreement and may have to take a loss on the loan.
o The ability of any borrower to make the loan payments is dependent on the
continuing strength of its contributions and income. To the extent that a
church or project suffers a decline in contributions or income from
ministries, it may be unable to meet its loan obligations.
o If we must foreclose on a loan, it may take longer and cost more than with
other types of real estate to achieve the foreclosure, to repair the
building, to find a buyer, or to maintain and protect the property.
o Our interest expense and most other expenses of operation are fixed and
will be incurred without regard to our revenues from interest and fees.
4
o The amount of a single loan for developing a housing ministry may become a
significant percentage of our total loans receivable, before that loan is
repaid from long-term financing. A recent development loan was over 21% of
all loans, a few days before it was refinanced. A delay in, or inability to
refinance would mean that problems with one loan could reduce our cash flow
below our ability to pay interest on our certificates.
We may not have enough cash to repay our debt when due. We receive cash from
loan repayments, fees earned and from sale of common stock and certificates of
indebtedness. We use cash in making loans and to repay our certificates. This is
a schedule of the due dates and principal amounts on our outstanding
certificates:
Due Date Amount Due Due Date Amount Due
-------- ---------- -------- ----------
October 15, 2002 $5,903,917 Various dates in 2002 $3,007,473
April 15, 2003 3,005,944 Various dates in 2003 2,156,325
Various dates in 2004 2,653,577 Various dates in 2005 8,069,612
Various dates in 2006 2,255,774
There will also be interest payments due on certificates. From June 30, 2001 to
the date of this prospectus, we have continued to sell Series B certificates due
March 15, 2004 and March 15, 2006. In addition to the certificates offered by
this prospectus, we are offering certificates that are redeemable upon request
by their owners. As a result, we must balance the amount of cash we have at any
moment with the amount that we need. This task is difficult because, if we keep
too much cash in reserve, we will not earn sufficient income to pay interest on
our debts or earn income for our shareowners. If we keep too little cash
available, we might default on our obligations. We believe that most certificate
owners will purchase new certificates to replace matured ones, so we will not
have to send them cash. This may not be what happens and we may be unable to
repay all of the maturing principal when due. If we cannot pay the certificates,
we would have to try finding other financing or selling some of our assets.
If we fail to pay our Series A or Church Development Fund certificates, a
trustee may sell part of our assets. That could result in a loss on other
certificates and the shares could become worthless. A portion of our assets,
equal to the principal of the outstanding Series A and Church Development Fund
certificates, is pledged to a trustee as collateral for payment of interest and
principal on those certificates, which will all mature by April 2003. Payments
on our other certificates could not be made from those pledged assets. These
certificates are described under the heading, "Description of Securities."
Only a part of the shares and certificates offered may be sold, which could
lower our future income. Both our certificates and our shares are being sold on
a best efforts basis. That means that we, and selected broker- dealers, will use
our best efforts to locate investors. No individual or company is guaranteeing
to invest any specific amount of money. There is no way for us to predict how
much will be purchased. To the degree that we sell fewer securities than
offered, our fixed expenses will be a larger part of our income and will lower
the potential income to pay interest and dividends.
The board of directors will determine payment of dividends. We have paid
dividends since 1999, but we may not necessarily continue to do so. Our board of
directors will evaluate the timing and amount of any dividends, based on factors
including the cash available for distribution, economic conditions, applicable
laws and other facts and circumstances that they think are important to a
dividends decision.
We have been operating only since 1985 and have not had to deal with some of the
risks of our business. There are cycles in the national and local economies
which will affect our ability to collect payments and the market value of
properties securing our loans. We have no record to show how we have handled
long-term cycles.
If we lose the services of our officers, or if we cannot recruit and train
additional skilled people, our business may suffer. Both our chief executive
officer, Cecil A. Brooks, and our chief operating officer, John T. Ottinger,
have over 16 years managing faith-based, nonprofit property financing. We do not
have an employment agreement with them and we are not beneficiaries of any key
person life insurance covering them. We are seeking additional people to train,
so that we can continue to grow and to decrease our dependence upon our two
officers. Our business is specialized and it is difficult to find, train and
keep qualified people.
5
Note about forward-looking statements
Some of the statements made in this prospectus, including those relating to
expectations for the sale of securities in this offering and the performance of
our lending operations, are forward looking and are accompanied by cautionary
statements identifying important factors that could cause actual results to
differ.
Use of proceeds
The net proceeds will be $18,112,500, assuming all of the shares and
certificates offered are sold. All of the net proceeds, after payment of
offering expenses, will be used to finance churches and related nonprofit
faith-based schools, senior housing, affordable housing, student housing and
daycare facilities.
Management's discussion and analysis of
financial condition and results of operations
Comparisons of past period's results of operations. The discussion and analysis
which follows compares our results of operation for 1999 and 2000 and for the
first six months of 2000 and 2001. The merger of Presbyterian Investors Fund,
Inc. into Cornerstone Ministries Investments, Inc., to become PIF/Cornerstone
Ministries Investments, Inc., was completed on December 29, 2000. The results
for the two years, and for the six months in 2000, are only for the former CMI
and do not include any of the operations of the former PIF. The results since
the merger are included in the discussion and analysis for the first six months
of 2001, comparing them with results of CMI alone for the first six months of
2000.
Overview. We have always 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. We generate revenue from:
o interest on loans
o origination and renewal fees on loans
o gains on the sale of property securing loans
o interest on securities
o consulting fees
We also receive limited lease income, but we are no longer actively 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 us to receive income from the gains on the sale of
property for which we have provided financing. The participation percentage
varies between 25% and 33% of the gains on the sale of real estate.
Comparison of years ending December 31, 1999 and December 31, 2000
Income
General. Assets increased from $4,502,381 at the end of 1999 to $31,124,693 at
the end of 2000, as a result of the merger with PIF and the sale of CMI's stock
and certificates. The December 29, 2000 merger was too late to materially affect
income for the year. Gross income was $534,336 for 1999 and $912,396 for 2000.
Net income for these periods, before dividends but after taxes, was $116,138 and
$214,228. The increase in gross and net income is the result of increased
investable assets arising from the sale of shares and certificates.
Total loans outstanding were $3,412,979 on December 31, 1999 and $26,469,809 on
December 31, 2000. Our other assets at the end of 2000 included $273,500 in
investments in church bonds and $869,066 in interest receivable. We also had
investments in liquid securities of $2,181,280, as required by PIF's financing
terms.
Interest Income. Interest income on loans increased during the year 2000, from
$148,758 to $432,590, largely as a result of additional loans made during this
period. The total increase in loans outstanding, prior to the merger with
6
PIF, was $1,981,212, from $3,412,979 at December 1999 to $5,394,191 at December
29, 2000. The loan balance as of December 31, 2000, reflecting the effects of
the merger, was $26,469,809. Pro forma loan interest income for the full year
2000 for the combined companies would have been $2,244,862. The weighted average
interest rate on the loan balances at December 31, 2000 was 9.77%.
Investment interest income decreased from $34,453 in 1999 to $19,410 in 2000,
reflecting a more rapid deployment of available funds into loans.
Fee Income. Fee income for the twelve months ending December 31, 2000 was
$478,806 versus $263,162 for the same period in 1999. The increase is the result
of additional loans being made during the course of the year 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
loanable assets.
Income from the sale of property. By the end of 1999, we had disposed of most of
the property to which we held title and we did not realize any income from the
sale of property during the year 2000. None of our participating loans had sold
property during the course of the year. At June 30, 2001, we held title to two
properties. One, in Douglasville, GA, was sold in September 2001 and we expect
to sell the other, in Soddy Daisy, TN, during 2002.
Expenses
Interest Expenses. We experienced an increase in interest expense from $209,541
in 1999 to $314,871 in 2000. We paid $53,360 interest expense on the $750,000
drawn on our bank letter of credit. The rest of this increase in interest
expense came from the net increase in outstanding certificate principal of
$1,692,864, from $3,063,334 at the end of 1999 to $4,756,198 at the 2000 year
end. We began sales of our Series B certificates of indebtedness in May 2000 and
the increase is the net of sales less $55,000 in principal balance of
certificates that matured. We repaid the letter of credit with the money from
these sales. The combined pro-forma interest expense for 2000, reflecting the
merger, was $2,354,546. The weighted average interest cost for all of the
outstanding certificates at December 31, 2000 was 8.78%.
Marketing and Selling Expenses. We have not paid significant amounts for
marketing our lending capabilities because of the continuing backlog of projects
with which we have been approached. Total promotional expenses in 2000 were
$21,435, an increase of $14,000 over expenses in 1999.
Operating and Administrative Expenses. Operating and administrative expenses
totaled $152,092 in 1999 and $196,072 in 2000. Prior to the merger, CMI paid PIF
an administrative services fee of 1.5% of assets. This component of operating
and administrative fees increased from $47,400 to $76,125, because of the larger
asset base on which administrative services were calculated. Other areas of
expense increase including accounting, from $7,595 to $12,373, and legal
expense, from $3,265 to $10,925. We also experienced some reduction in expenses
between 1999 and 2000: from $43 257 to $3,964 in consulting fees and from
$15,256 to $9,363 in trust service fees.
We have paid selling commissions to securities broker-dealers for sales of
Series B certificates and common stock. These 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. Commissions
increased from $18,046 in 1999 to $36,716 in 2000 as certificates and common
stock have been sold in the offering which commenced in May 2000. Commission
expense, and the accompanying capitalized assets will continue as more
securities are sold through these brokers.
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 also capitalized and are amortizing
the costs associated with the transfer of registrar, paying agent, and trustee
services.
Taxes. Our taxes were $56,567 in 1999 on pre-tax income of $172,705 and $130,166
in 2000 on pre-tax income of $344,394. Total expenses, including taxes, for 1999
were $418,200 and $717,578 for 2000.
7
Dividends
We paid $111,892 in dividends on our common stock during 1999, an annual rate,
based on the initial stock offering price, of 10%. During 2000 the Board
declared dividends of $224,019, a 12% annualized return. We paid $189,000 in
dividends on our common stock during the first half of 2001.
Comparison of six-month periods ending June 30, 2000 and June 30, 2001
Income
Interest Income. Interest income on loans was $1,225,955 in the first six months
of 2001, compared to $177,354 in the prior year's period. This reflects the
merger with PIF, along with the additional amounts made available to loan,
through the sale of certificates and the sale or refinancing of loans we had
made. Investment interest income was $51,557 in the first six months of 2001,
compared to $9,660 in the prior year's period. We had more cash pending
investment, because of the merger and our financing activities.
Fee Income. Fee income for the six months ending June 30, 2001 was $785,735
versus $136,000 for the same period in 2000. Most of these fees were earned for
loans made to senior housing facilities and associated consulting services in
obtaining additional financing for them.
Expenses
Interest Expenses. Interest expense increased to $1,254.944 in the first half of
2001 from $167,861 in the 2000 period. This resulted from the net increase in
outstanding certificate principal from the PIF merger and sales of our Series B
certificates. The weighted average interest cost for the certificates at June
30, 2001 was 8.76%.
Marketing and Selling Expenses. Total promotional expenses in the first six
months of 2001 were $30,023, compared to $14,000 in the 2000 period.
Operating and Administrative Expenses. Operating and administrative expenses
totaled $216,667 in the first half of 2001, compared to $68,532 in the year
earlier period. The amount in 2000 is the administrative services fee CMI paid
PIF, equal to 1.5% of assets. The 2001 amount is all of the administrative
expenses of the now combined operation. Amortization of commissions to
securities broker-dealers for sales of Series B certificates and common stock
totaled $21,486 in the six months ended June 30, 2001, in contrast with $11,442
in the 2000 period. Amortization of legal expenses from our securities
offerings, and amortization of the costs associated with the transfer of
registrar, paying agent, and trustee services totaled $23,587 in the first half
of 2001, compared to $8,376 in the 2000 period.
Taxes. Our estimated taxes were $173,460 in the six months ended June 30, 2001.
They were $16,500 for the year earlier period, before the merger with PIF.
Liquidity and Capital Resources
We had $706,035 in cash on December 31,1999, $2,181,280 on December 31, 2000 and
$2,743,742 on June 30, 2001. We currently have commitments and applications
sufficient to invest the cash on hand. Net cash used by investing activities was
$2,787,576 during 1999, $23,661,295 during 2000 and $2,749,629 during the first
half of 2001 (compared to $1,135,662 in the 2000 first half).
Cash from Operations. Net cash provided from operating activities in 1999 was
$19,215 and for 2000 was $1,540,958. The amounts for the first six months of
2000 and 2001 were $617,387 and $88,061.
Cash from Financings. Since it began operations in 1986, PIF was financed
entirely by debt certificates sold to investors. It had $25,957,196 in
outstanding certificates at the December 29, 2000 merger date. 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. In May 2000, CMI began an offering of up to $2,275,000 in common
stock (shares priced at $6.50 per share) and $17,000,000 in unsecured debt
certificates. Through June 30, 2001, we had sold 347,421 shares, raising
$2,258,239, and $7,147,647 in certificates. A portion of these new investments
came from maturing investments in PIF. That offering is continuing.
8
These are the total amounts of certificates we had outstanding at December 31,
2000, by maturity date:
Amount Maturity
------ --------
$ 1,016,928 Various dates through December 15, 2001
5,903,917 October 1, 2002
3,007,473 Various dates through December 15, 2002
3,005,944 April 15, 2003
2,156,326 Various dates through December 15, 2003
2,653,577 Various dates through December 15, 2004
4,904,438 March 15, 2005
3,165,175 Various dates through December 15, 2005
2,255,774 March 15, 2006
---------
Total $28,069,552
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. We are negotiating a bank
line of credit to have in place on these certificate maturity dates.
Our experience since 1985 has been that approximately 95% of the maturing
amounts are immediately reinvested in new certificates, so that we do not
actually pay back that principal in cash. This past experience may not be
repeated for future maturing certificates and we may be required to raise cash,
from borrowings or selling assets, to pay back more of the maturing
certificates.
The amount and timing of our future capital requirements will depend, in
addition to repaying maturing certificates, on factors such as the origination
and funding of new investments, potential acquisitions of related businesses and
the overall success of our marketing efforts for certificates, notes and any
other securities.
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.
Business
Our primary objective is to maximize value and income for our shareowners, by
financing the acquisition and development of facilities for use by churches,
their related ministries and non-profit organizations. PIF was incorporated as a
Georgia nonprofit corporation in December 1985 and CMI was formed as a Georgia
for profit corporation on March 18, 1996. PIF was merged into CMI on December
29, 2000 and CMI's corporate name was changed to PIF/Cornerstone Ministries
Investments, Inc.
We offer development loans, construction, bridge and interim loans, usually due
within one to three years. The typical maximum investment amount in a church
loan is $1,000,000. Our largest loan was $6,000,000 for a senior housing project
which has since been refinanced. We do not have any limits on the percentage of
our assets that may be in any one investment or in any geographic area of the
United States. We have not established any maximum ratio of our total debt to
our total shareowners' equity. These policies would be made by our board of
directors and could be changed, without the vote of share or certificate owners.
A description of our loan programs follows.
9
Types of loans we make
Development Loans: We will provide financing to young growing churches and
ministries that we judge to possess excellent growth potential and show a strong
plan to repay the loan through their own growth or income received from related
ministries or activities. The borrowers may lack the history, size, equity or
income required by conventional lenders or bond underwriters and financial
advisors. Development loans are made on an annually renewable basis and carry
renewal fees of 5% of the outstanding balance or 10% for a three-year loan. They
carry a high interest rate, in the current market no less than 10% per year. The
maximum term of a development loan is three years, at which time the loan must
be refinanced by an outside lender. They are often made with an initial period
of interest only or deferred interest payments, followed by principal and
interest payments on an amortization schedule of up to 30 years. Development
loans are used to acquire property, portions of which may be resold to pay down
the loan, for which we will receive a participation in any profit.
Construction Loans: Construction loans are typically made to finance the
construction of new facilities, or to renovate existing facilities. They
normally have a maturity of six months to one year. Borrowers typically pay
interest only on the outstanding balance drawn for construction. We focus
primarily on loans of less than $1,000,000 for churches and daycare facilities;
larger loans are required to develop senior housing, affordable housing projects
and student housing. We require the customary documentation for construction
loans, including lien subordinations and waivers, builders risk insurance,
budgets and assignment of relevant contracts to us. We make weekly disbursements
on finished invoices and require interim lien waivers on all disbursements.
Semi-permanent Loans: These are often called mini-perms or bridge loans. They
are for as long as three years and may be linked to a construction loan. They
are often used by churches and other borrowers who expect to receive pledges,
grants, leases or other anticipated income but who are in need of immediate
funds. We make these loans on an annual renewal basis with an annual renewal fee
equal to 1% to 5% of the outstanding balance. The loans are usually repaid by
other forms of financing, such as church bonds or conventional loans. We will
assist the borrower to find long term financing through some of the lenders with
which we have established relationships, or we will sell the loan to one of
these lenders.
Our loan policies
Borrowers: We are in the business of providing facilities primarily for use by
faith-based non- profit organizations, such as churches and related ministries.
We also lend to non-profit entities that extend their ministries through
facilities for assisted living, day care, camps, group homes, etc. Primary
borrowers will be the organizations that will own and occupy the facility. A
special class of borrowers will include some for profit entities that are
developing facilities to be occupied or leased by a non-profit as the primary
occupant. For profit borrowers must submit signed development and lease
agreements with the non-profit entity or organization that will be the primary
occupant, as well as refinancing plans that will transfer ownership to the
non-profit within the term of the loan. We screen these for profit developers
for experience in developing for non-profit owners or occupants.
Loan Terms and Conditions: We make loans for acquiring and developing property,
construction of new facilities, renovation of existing facilities, financing of
anticipated income from pledges, bridge financing, refinancing existing loans,
working capital, and other purposes as our board of directors may find
acceptable. Each loan is secured by a first or second mortgage lien, a pledge of
revenue, and, where we determine necessary, limited personal guarantees made by
members or principals of the borrowers.
We may provide a fixed or variable rate loan. Our loans may include a
participation feature where there is the possibility of additional gain upon the
sale of excess property acquired by a borrower and resold during the term of our
loan. The terms and conditions offered to borrowers, including interest rates,
fees, maturities and guarantees, will be based upon current market conditions
and factors like our operating expenses and the loan's origination expenses. We
charge each borrower an application fee to offset the cost of loan origination
and approval, legal fees and out-of-pocket expenses. We charge a commitment and
closing fee and may also charge a loan renewal fee. These fees may be paid in
cash by the borrower or added to the loan principal, at our discretion.
10
We generally require the normal protections afforded commercial lenders,
including title insurance, real estate surveys, appropriate resolutions of the
borrower, appraisals of the property, and the issuance of fire and extended
insurance coverages. We use mortgage loan documents in the form currently in use
in the state where the mortgaged property is located.
We may accept a second mortgage loan position on certain short-term financings.
We may also permit these loans to be converted to tax-exempt bonds.
Loan underwriting requirements
Mortgage loan applications submitted to our underwriting staff will normally
include (i) a completed application on our form, (ii) corporate organizational
documents, (iii) financial statements including pro forma financial statements,
(iv) certified real estate appraisal, (v) a real estate survey certified to us,
(vi) preliminary title report, (vii) market and feasibility reports, if
applicable, (viii) copies of relevant insurance coverages, (ix) copies of all
material contracts and leases and (x) environmental report or affidavit.
Completed applications and supporting material are submitted to the loan
committee of our Board of Directors, which has authority to approve loans of
$500,000 or less. Loans or investments over this amount must be submitted to the
full board for approval. The loan committee consists of at least three
directors, not including any directors who are also our officers or staff. The
loan committee determines the creditworthiness of the borrower and oversees the
rates, terms and conditions of the loan. Upon approval of a loan application,
our loan staff will work with its officers and legal counsel to supervise the
loan closing, including the preparation of loan documents and forwarding of
funds. It is our policy to require borrowers to pay all expenses of the loan
including our legal expenses. These expenses are usually deducted from the loan
proceeds.
Loan investments we have made
This chart shows the number and amount of loans we have made in each of the last
five years, and the first six months of 2001:
Number of Amount of
Year loans made loans made
---- ---------- ----------
1996 15 $ 5,467,800
1997 16 7,532,000
1998 10 7,446,100
1999 17 12,953,200
2000 10 11,041,500
2001 (through June 30) 6 4,099,100
Each of our loans has a date when the full principal amount becomes due, or when
we may call the loan for repayment. Our experience has been that loans are often
refinanced before their due date. These are the number and amount of our loan
investments, at June 30, 2001, which become due or callable in the last half of
2001 and in each of the next five years:
Number of loans Amount of loans
Year due or callable due or callable
---- --------------- ---------------
2001 (last six months) 16 $ 4,014,890
2002 24 13,078,119
2003 2 3,658,333
2004 1 4,334,015
2005 0 0
2006 1 2,899,000
11
New Property Development: In 2000, we began developing new facilities, in
conjunction with church, ministry or non-profit organizations, where there are
not existing facilities or buildings that would meet their needs. Church and
daycare facilities would be from 2,000 to 10,000 square feet, with budgets from
$300,000 to $1,000,000. The churches and daycare facilities select from
standardized plans available to us and use a developer we accept.
The church will typically have been in existence for at least a year and have a
minimum income of $75,000 per year. We perform on site interviews with the
potential lessees and purchaser to determine the stability and quality of its
leadership and congregation, as well as to perform due diligence on the proposed
property for development and the demographics of the area.
In addition to churches, church ministry facilities, daycare facilities and
Christian schools, a portion of our assets is being invested to develop senior
adult housing, in particular independent living and assisted living facilities
owned or sponsored by non profit organizations. These will be based upon our
standardized plans and prototype facilities. Assisted living facilities will
range in size from 80 to 100 units and cost from $4 million to $11 million. In
addition, there are costs associated with the acquisition of property, zoning,
permitting, engineering, marketing and operating that may require us to make
additional investments. Independent living communities will vary in size but
have budgets similar to that of the assisted living facilities. Most often these
will be developed on land held by a church or other non-profit. The completed
facilities will be owned by or leased to the non-profit entity and refinanced
after three years or upon stabilization of occupancy, when financing can be
available from conventional sources, such as commercial banks or investment
banks.
We have also begun to work with non-profit faith-based organizations to assist
in their efforts to provide affordable housing. In these projects we are
currently providing loans for the acquisition and development of properties on
which single family homes will be offered for sale. There are many federal,
state, and local sources of additional and replacement financing to assist
either the non-profit sponsor or the home-buyer to develop, build, and market or
purchase these facilities. Our loans bring projects to the point at which
conventional or governmental financing becomes available. Non-profit sponsors
must employ knowledgeable developers and contractors on the projects in which we
make loans. Loans may range in size from $100,000 to $3,500,000.
These nonprofit organizations may have little or no assets with which they can
provide additional guarantees, collateral or equity for the project. We will
seek to obtain additional guarantees from the principals of the church or
organization, or from an affiliated organization that can provide the additional
security or collateral. For the return of our investment, we will rely primarily
on the value of the property to be acquired and developed, the feasibility of
the project and the expertise and knowledge of the developer and manager. There
will normally be no guarantees from the developer or manager. We will not invest
in a project developed by a for profit developer, unless a suitable nonprofit
lessee/purchaser has been qualified by the board of directors and signed a
letter of inducement or intent.
Possible acquisition of non-profit church loan funds
We believe it could further our objectives to acquire one or more non-profit
church loan and investment funds. We have no present agreements or
understandings about acquiring any particular fund.
Church loan funds make a variety of loans to member churches. They raise money
by selling debt securities to members and friends of the particular denomination
or association. These securities usually carry a fixed interest rate and a fixed
term and are renewable upon maturity. The loans they make are structured and
documented in a manner similar to typical commercial loans, and usually have the
same protections as required by our loan policies.
We believe that there are a number of church loan funds, especially smaller
ones, or those serving small constituencies of churches, that are currently
unable to make enough loans to pay for the cost of the debt securities they have
sold. These funds are seeking to make the same types of loans as the commercial
banks and other lenders, but often have a higher cost of funds than these
commercial lenders. As a result, they are unable to compete and make loans to
their member churches, which typically seek the lowest available interest rate
or fee structure.
12
It would be our intent in acquiring these funds to invest any cash available in
our own financing programs. We would also seek to maintain the investor base by
offering them similar securities. We might sell any or all of the loans acquired
to raise additional capital for investment in our financing programs.
Acquisition of the loan and investment portfolios of church loan funds can be
accomplished in a number of different ways. We have discussed with various
church loan funds a purchase of certain loans or income properties from the fund
and the assumption of a matching amount of debt certificates. We could be
required to pay to the church loan fund a premium for the purchase and
assumption or might receive a discount after a review of the loan portfolio in
terms of quality and yield, as compared to the interest rate on certificates.
A church loan fund might also be merged into our corporate entity. In a merger,
we would assume all of the assets and debts of the church loan fund. By law, any
net of assets minus liabilities of the non-profit must be distributed to another
non-profit.
Our market
We believe, based upon our monitoring of available data, that there are
approximately 325,000 Protestant churches in the United States and that 10,000
to 15,000 net new congregations begin annually. Our experience is that these new
churches will need between $350,000 to $750,000 to acquire or build their first
facility. We have found that the most strategic time for them to set a course
for their short term and intermediate term growth is the first one to three
years of existence. Their health and growth is substantially increased when they
move into a facility designed and dedicated for their use.
The longer life expectancy and age of the baby boomers will require increased
services and housing for the elderly. Our investment focus is on preserving or
enhancing the independence of residents, while providing options for services as
needed. These independent living facilities supply a minimum of personal care
while providing such amenities as security, transportation, housekeeping and
meals, items which are covered in the monthly rent paid to the facility. In 1996
only 9% of the new developments of senior housing were independent living
apartments. According to certain studies, the changes in the older population
will increase the demand for housing and services that allow seniors to live
independently and the provision of those services and housing will be a major
part of the aging process in the future.
Prior to the 1980's, federal programs were the primary vehicles for providing
affordable rental and homeownership opportunities. Over the past fifteen years,
nonprofit organizations, both community and faith based, have become the
nation's primary source of rental and homeownership opportunities for people
with low to moderate incomes. They have stepped into the void left by the
shrinking federal commitment to these areas and have addressed some of the
problems that prevent many from obtaining adequate housing. The ability of these
nonprofits to provide housing is limited, due to the diminishing availability of
acquisition and development funds needed to qualify for the various state and
local financing programs.
We intend to reach our market through a variety of strategies, including radio
and direct mail marketing. We expect to develop our investment opportunities
primarily through a network of independent representatives in key market areas
including initially Atlanta, Dallas, and Orlando/Tampa. These representatives
are not our employees, but are paid a commission to identify applicants for our
programs. They may also pursue development of the projects and present them to
us for review. These representatives may be involved in the project as real
estate agent, architect or contractor. We are actively seeking additional
representatives in areas of high growth in population and real estate values.
Our competition
We have found that most national lenders focusing on churches and related
ministries are unwilling to consider loans of less than $1,000,000 or for
churches less than five years old. Local lenders will make smaller loans, but
most of them still require at least three years of full operating history. We
believe that there is very little competition in the church and ministry markets
that we seek to serve.
13
We will face competition from other financing institutions in some areas of our
market and programs. These competitors may include banks, savings and loans,
REITs, denominational funds and broker/dealers, all or some of whom may have
greater resources or lower costs of operations. We intend to compete on the
basis of our management's experience in the church and nonprofit financing, real
estate and construction markets and our low cost of operations.
Employees
Cecil A. Brooks and John T. Ottinger, are our principal executive officers. In
addition we have four other staff members, with the addition of two new
positions in early 2001. They are all full-time employees.
Facilities
In February of 2001, we purchased two office condominiums in Cumming, Georgia to
house our growing staff. At present we occupy one and lease the second, pending
further growth.
Environmental laws
Under various federal, state and local laws, an owner or a mortgage lender may
be liable for the costs of removal or remediation of hazardous or toxic
substances from a property, even if they did not cause or even know about the
contamination. The costs and liability are not limited and could be more than
the value of the property. The presence of these substances may make it
difficult to sell the property. Environmental laws also govern the presence of
asbestos in buildings and may require removal or precautionary action. They may
also impose fines and allow recovery for injury from exposure to asbestos.
We have not incurred any material costs or effects so far from compliance with
environmental laws. We require an environmental report or affidavit before we
make a mortgage loan or purchase a property. This is a changing area of law and
we could have material extra costs or liability from being mortgage lenders or
owners of real property.
Government regulations
We do not make any loans to consumers, so we are not subject to the many
federal, state and local laws about lending. We are not required to be licensed
in the states in which we operate. Our borrowers will be subject to some of the
laws intended to protect the public from building hazards and to make buildings
accessible. We cannot monitor compliance with all these laws. Enforcement action
against the building or our borrowers could interrupt our receipt of payments
and decrease the value of the property. We do not believe that any material
changes are currently required to any of the properties securing our loans.
Legal proceedings
We are not a party to any pending legal proceeding. We are not aware that any of
the properties covered by our mortgage loans is subject to any pending legal
proceeding or that any governmental authority is contemplating any legal
proceeding involving us or any of those properties.
14
Management
Our board of directors is elected annually by our shareowners. The board is
responsible for our policies and management. However, the board retains a staff
to manage the day-to-day affairs, subject to its supervision.
Directors and officers
Name, residence address Age Responsibility
----------------------- --- --------------
Cecil A Brooks 70 Director, Chairman of the
P.O. Box 10206 Big Canoe Board, President, CEO
Jasper, GA 30143
John T. Ottinger 47 Director, Vice President, COO,
451 Battersea Dr. Secretary and Treasurer
Lawrenceville, GA 30044
Theodore R. Fox 70 Director, Member of the
575 Big Canoe Audit Committee
Big Canoe, GA
Richard E. McLaughlin 70 Director, Member of the
2627 West Grand reserve Circle #511 Loan Committee
Clearwater, FL 33759
Jayme Sickert 54 Director, Member of the
2891 Inverloch Circle Loan Committee
Duluth GA 30096
Irving B. Wicker 76 Director
132 Eswick Drive
Prattville, AL 36067
Taylor McGown 64 Director, Member of the
74 Big Canoe Loan committee
Big Canoe, GA 30143
Henry Darden 67 Director, Member of the
614 Beverly Dr. Audit Committee
Brandon, FL 33510
All directors are elected by the shareowners. Their present terms will conclude
at the annual meeting of shareowners in 2002. At that meeting, a third of the
directors elected will serve until the annual meeting in 2003, a third until the
2004 meeting and a third until the meeting in 2005. In the future, directors
will be elected for three-year terms, as the terms for one-third of the
directors expire each year.
Cecil A. Brooks has served in these capacities since CMI was founded.
He graduated from Mercer University in 1952. After a varied career in sales and
management, including real estate sales and development, he graduated from
Reformed Seminary in 1975. He served as pastor of Trinity Presbyterian Church in
Miami, Florida and on the staff of Mission to North America of the Presbyterian
Church of America from 1983 to 1994. He formed the Investors Fund for Building
and Development (the predecessor to PIF) in 1985 and has served as President
from its inception to its merger with CMI. Mr. Brooks has served on the boards
of a number of non-profit organizations concerned with foreign missions and
housing for the elderly. Mr. Brooks has over 16 years experience in all areas of
the church mortgage lending and development business. Mr. Brooks has also worked
closely with church bond underwriters and broker-dealers in the church lending
market. He has been a director since 1985.
15
John T. Ottinger, Jr. has served Vice President and Secretary/Treasurer
since CMI was founded. Mr. Ottinger was also CMI's Chief Financial Officer and
became its Chief Operating Officer in 2000. He graduated from the University of
Delaware in 1976 and spent eight years in the lodging industry. Mr. Ottinger has
served as pastor of an established church as well as organizing pastor in North
Carolina. Mr. Ottinger joined the PIF staff in 1985. Mr. Ottinger has 16 years
of extensive experience in church lending. He has been a director since 1996.
Theodore R. Fox has served as a director since 1996. He received a
Bachelor of Business Administration degree in Management from Georgia State
University. Mr. Fox has a 24-year career with Law Engineering Company, retiring
as Assistant Vice President. He joined Cole Henderson Drake, Inc. in their
finance department and has served on a part time basis since 1993. Mr. Fox is a
past Chairman of the Board of the National Association of Credit Managers.
Richard B. McLaughlin has served as a director since 1996. He has
worked in the real estate construction and land development business since 1962.
During his long career, he has developed complete subdivisions and constructed
approximately 600 homes. During the last ten years he has devoted all his
energies to the developing of church properties and the design and construction
of church properties. Mr. McLaughlin has consulted on over 300 churches during
that time. Mr. McLaughlin is the President and sole owner of Church Development
Services, Inc.
Jayme Sickert has served as a director since 1994. He graduated from
Covenant College in 1969 and Covenant Seminary in 1974. He has served a number
of churches in the Southeast as Senior Pastor, as well as working with Mission
to North America of the Presbyterian Church in America. Since 1993 he has been a
Registered Representative and lately President of Regal Investments a registered
broker dealer.
Irving B Wicker has served as a director since 1990. He graduated from
the University of Maryland in 1959 and received a Masters Degree from George
Washington University in 1963. He is a retired Lieutenant Colonel from the
United States Air Force and has been a real estate broker and financial planner
for 15 years.
Taylor McGown has served as a director since 1985. He graduated from
the University of Memphis in 1976 and received a Master of Divinity degree from
Reformed Theological Seminary in 1979. Mr. McGown served a number of pastorates
in a variety of capacities as well as serving as Director of Palmer Children's
Home. He is currently a self employed registered representative and investment
advisor.
Henry Darden has served as a director since 1992. He received a
Bachelor of Science degree from the University of Georgia in 1955 and an AA in
real estate from the City College of Chicago in 1970. Mr. Darden is a retired
Lieutenant Colonel with the United States Air Force and currently serves as a
financial and tax consultant.
Committees
Audit Committee. The board has established an audit committee of three of its
members, including two independent directors. The audit committee will make
recommendations concerning the engagement of independent public accountants,
review their independence, the services they provide and the results of the
audit engagement. The audit committee will also consider the range of audit and
non-audit fees and review the adequacy of our internal accounting controls.
Loan and Investment Committee. The board has established a loan and investment
committee consisting of five members including the chief executive officer and
having a quorum of three members. The committee will review and may approve
loans and investments of up to $500,000 on behalf of the board, in accordance
with the loan and investment policies as adopted and amended by the board form
time to time. Any individual loans or investments in excess of the committee's
authority will be subject to approval by the entire board.
Meetings and compensation of directors
The directors meet at least annually and more often as needed. The audit
committee meets at least once annually. The loan and investment committee meets
as required. Directors receive $100 for each conference call board and committee
meeting they attend and $200 for each face-to-face meeting attended. We
reimburse them for travel expenses to attend meetings.
16
Executive compensation
Cecil Brooks and John Ottinger are our only executive officers. They were
compensated by PIF through 2000 and their services to CMI were included in the
administrative services agreement CMI had with PIF. Our board of directors will
determine their compensation in 2001 and the future, through salary or through a
long-term compensation plan. We have no employment agreements with them or any
of our other employees.
Indemnification of directors and officers and limitation of their liability
Officers or directors are not liable to PIF/CMI or its shareowners, under
Georgia law, if they acted in a manner they believed in good faith to be in or
not opposed to PIF/CMI's best interests. They are not liable in any criminal
proceeding if they had no reasonable cause to believe their conduct was
unlawful. As permitted by Georgia law, we will indemnify our officers and
directors against liability and their defense costs in any proceeding in which
they have been successful or where the directors who are not involved determines
that the applicable standard of conduct has been met. We will pay reasonable
expenses, including attorneys' fees, incurred by directors or officers in
advance of the final disposition of a proceeding, if they furnish written
affirmation of good faith belief that they have met the applicable standard of
conduct, together with a written promise to repay any advances if it is
determined they are not entitled to indemnification. We have been informed that,
in the opinion of the Securities and Exchange Commission, any indemnification
for liabilities arising under the federal Securities Act of 1933 is
unenforceable, as against public policy expressed in that Act.
We do not presently carry any insurance against the liability of our officers
and directors.
Certain transactions
We have not had any material transactions or loans with any person affiliated
with us, or with either PIF or CMI, within the last two years and none is
proposed. There were transactions and loans between PIF and CMI before their
merger into one entity.
Any future material affiliated transactions and loans will be made or entered
into on terms that are no less favorable to us than those that can be obtained
from unaffiliated third parties and must be approved by a majority of our
independent directors who do not have an interest in the transactions and who
had access, at our expense, to our lawyer or independent legal counsel. We do
not make loans to our officers or directors.
Principal shareowners
The following table shows the beneficial ownership of our common stock
immediately prior to this offering, for shares owned by: (i) each of our
directors and executive officers, (ii) each shareowner we know to own
beneficially 5% or more of the outstanding shares of our common stock and (iii)
all directors and officers as a group. We believe that the beneficial owners of
the common stock listed below, based on information they furnished, have sole
investment and voting power over their shares, subject to community property
laws where applicable.
Name of Beneficial Owner Number of Shares Percentage of Total Common
Beneficially Owned Stock Beneficially Owned
Cecil A. Brooks 1,953 *
John T. Ottinger 1,540 *
Taylor McGown 1,538 *
Irving B. Wicker 1,538 *
Church Growth Fund, Inc. 69,228 13.0%
All directors and executive officers 6,569 2.5%
as a group (4 Persons)
<FN>
* Amounts to less than one percent. 17
</FN>
Description of securities
Our articles of incorporation and the Georgia Business Corporation Code
authorize us to issue up to 29,000,000 shares of common stock and 1,000,000
shares of preferred stock. We may also issue securities for borrowings. We had
530,613 shares of common stock outstanding at June 30, 2001, held by 226
shareowners. No shares of preferred stock are outstanding. At June 30, 2001,
there were $28,248,800 of certificates of indebtedness outstanding, held by
1,199 owners. This is a description of these securities:
Common stock
The owners of common stock elect all the members of our board of directors. Each
share owned is entitled to one vote on all matters to be voted on by
shareowners. A majority of the shares issued is a quorum. The shareowners are
entitled to receive dividends when, as and if declared by the board of directors
out of funds legally available. In the event of liquidation, dissolution or
winding up of the corporation, the shareowners are entitled to share ratably in
all assets remaining which are available for distribution to them after payment
of liabilities. Shareowners, as such, have no conversion, preemptive or other
subscription rights, and there are no redemption provisions applicable to the
common stock. All of the outstanding shares of common stock, and the shares
issued in this offering, will be fully paid and nonassessable. The transfer
agent and registrar for our common stock is TransferOnline, Inc.
Preferred stock
No shares of preferred stock have been issued. We may issue shares in connection
with any business acquisitions we may make. No preferred stock will be offered
to our officers, directors or principal shareowners, except on the same terms as
it is offered to all other existing shareowners or to new shareowners. Our board
of directors has the authority to issue series of preferred stock and to set
dividend rates and various rights and terms for a series, such as for
redemption, the amount payable upon any liquidation of the corporation,
conversion into other of our securities and any voting rights. Owners of common
stock could be placed below any preferred stock owners in their rights to
dividends, liquidation distributions and voting on some matters. Preferred stock
could be issued with terms that would have the effect of discouraging a change
of corporate control of or other transactions that some common stock owners
might believe to be in their best interests.
Certificates of indebtedness previously issued and still outstanding
Both PIF and CMI have issued certificates of indebtedness to fund their
financings. These are descriptions of the certificates previously sold and still
outstanding:
PIF issued three series of certificates before its December 2000 merger into
CMI. The amounts of PIF certificates outstanding are included in this
prospectus' financial statements and management's discussion and analysis of
financial condition and results of operations.
PIF has offered its mortgage loan fund certificates since 1985, at a $500
minimum investment, for these terms and interest rates:
Term Annual Rate
---- -----------
1-year 6.75%
2-year 7.25
3-year 8.00
4-year 8.25
5-year 9.00
These mortgage loan fund certificates were also offered for five-year terms, at
annual interest rates selected by the investor, between 3% and 7%. All of the
mortgage loan fund certificates are unsecured general obligations.
18
In 1996, PIF began offering certificates of its church bond fund. All of the
amounts received from sale of those certificates were invested in bonds issued
by churches to fund the construction and renovation of church and ministry
facilities. All of the bonds were held by a trustee to secure payment of
principal and interest of the certificates. All of these certificates have now
been repaid and the bonds released from the trustee.
PIF began offering church development fund certificates in 1997. These
certificates were at $2,500 minimum investments, at 9% annual interest and begin
to become due on September 30,2002 and continue to mature through September
2004. All of the loans made from the proceeds of church development fund
certificates, and all other assets resulting from those proceeds, are being held
by a trustee as security for payment of principal and interest on the
certificates.
CMI issued $3,056,276 of Series A certificates of indebtedness during a public
offering from October 1998 through October 1999. The Series A certificates were
secured in their payment of principal and interest by the deposit in trust of an
amount of our mortgage loans and cash which was equal to the unpaid amount of
Series A certificates. All of the Series A certificates will have matured by
April 15, 2003.
CMI commenced an offering in May 2000 of up to $17,000,000 of Series B
certificates of Indebtedness, of which $5,680,754 had been sold by June 30,
2001. These securities remained available until the date of this prospectus.
There is no trust deposit or other collateral to secure payment of Series B or
any other of our certificates.
Certificates of indebtedness offered by this prospectus
This prospectus offers $1,000,000 of Series B Certificates with a March 15, 2005
maturity date and a 7.00% interest rate. It also offers $15,000,000 of Series B
Certificates with a March 15, 2007 maturity date and a 9.00% interest rate. Both
certificates may be purchased in any amount, with a minimum purchase of $500.
Interest will be paid on all certificates each March 15 and September 15. Owners
of $10,000 or more of certificates may elect to receive monthly interest
payments.
Other certificates we are currently offering
Two other types of certificates are available only by direct purchase from our
offices. They are:
Access certificates. These certificates have no stated maturity. They can be
purchased in any amount of at least $100 and owners can add to their certificate
at any time, in amounts of $100 or more. The amount they have invested will
remain in their certificate account until they redeem it. They may redeem any
amount of the balance by giving at least seven days written notice. Our board of
directors will set the rate on the first business day of each January, June,
September and December. The directors may also change the rate between those
dates if they believe that market conditions warrant a change. Certificate
holders choose to have interest paid semiannually or when they redeem an amount.
Graduated certificates. These are for five year terms. Certificates will be
issued in any dollar amount, with a minimum investment of $500. The amount and
maturity date is set upon purchase and there can be no additions to the amount
during their term. The owners may redeem any amount of the principal or interest
on any anniversary date of their purchase, by giving at least ten days written
notice. Unless we receive notification of the intent to redeem within 10
business days of maturity, certificates will automatically be renewed, on the
terms under which they were originally purchased, at the then prevailing
interest rate for similar certificates. These certificates currently pay a
graduated increased interest rate based on each year the certificate remains
invested. Currently the rates are 7% for the first year, 7.5% for the second
year, 8% for the third year, 8.5% for the fourth year, and 9% for the fifth
year, giving an overall average, if left invested for 5 years, of 8%.
Certificate holders choose, at the time of purchase, to have their interest on
the Certificate paid semi-annually or upon maturity. Monthly interest payments
are available on investments of $10,000 or more. Unpaid interest is compounded
every six months from the issue date of the certificate.
19
General terms
All certificates will begin to bear interest at the stated rate one business day
after we receive funds from an investor. However, we will not issue the
certificate or a receipt for an investment until the check or other payment has
cleared our bank. All certificate interest and maturities will be calculated on
a 365-day year. Any payment due on a weekend or on a nationally recognized bank
holiday will be paid the next business day. We will set interest rates for
future certificates as market conditions warrant. Certificates issued in the
future may bear higher or lower interest rates than the currently offered
certificates, and may have different terms and conditions than these
certificates. Certificates will normally be registered in book entry form and
the investor will receive only a written confirmation of their investment, and
not an actual certificate.
Unsecured obligations. No assets have been set aside as collateral for the
payment of the certificates. They are general obligations, with no preference
over any other debt that we may have. We are not required to deposit into any
sinking fund for the purpose of paying the certificates on maturity. The
certificates or trust indenture do not restrict us from issuing additional debt
or making any additional debt senior in payment priority to the certificates. We
are not required to maintain any particular ratios of debt to assets or
stockholders' equity.
Default. Regions Bank, Montgomery, Alabama, is the trustee for the certificates.
A default would occur if we were more than 60 days late in making an interest or
principal payment or if we went into bankruptcy or failed to comply with the
trust indenture created for these certificates. If a default happened, the
trustee could pursue any available remedy to collect on behalf of the
certificate owners. Persons owning at least 25% in amount of the certificates
could declare all the certificates due and payable. Persons owning a majority in
amount of the certificates could direct the trustee in taking any action it
considered lawful and fair. An individual certificate owner is restricted in the
ability to start independent proceedings, without the consent of the trustee or
joining with others holding a majority in amount of the certificates.
Redemption. Certificate owners may not redeem them for cash before their
maturity date. Our current policy is to redeem certificates which have been held
at least a year, upon a request showing exceptional need or hardship. There
would be an early payment fee equal to six months' interest. We have the right
to redeem some or all of the certificates upon notice, sent at least 30 and not
more than 60 days before the redemption date. Investors would then exchange
their certificates for the principal amount and any unpaid interest. No interest
would be earned after the redemption date. If less than all the certificates
were redeemed, the paying agent for the certificates would select the ones to
redeem, on a basis it considered fair. There is no right to convert the
certificates into any of our other securities. We do expect, however, to be
offering new series of certificates. Investors could ask that all or part of the
amounts due them be reinvested in new certificates, after they had received a
current prospectus for the new certificates.
Future resales of securities
The certificates may legally be sold. The form and instructions for transfer are
on the back of the certificate. There is not expected to be any trading market
for the certificates, so any sale would have to be arranged between the
certificate owner and a buyer. Registration would not be required for any resale
of certificates under federal law, except for certificates held by certain of
our affiliates. The shares of our common stock have been approved for listing on
the Chicago Stock Exchange and that results in an exemption from registration of
the certificates for resale under the laws of most states. Residents of certain
states may need to rely upon another exemption from state registration for any
resale of their certificates.
The shares sold in this offering and shares sold in earlier public offerings are
freely tradable, without restriction or registration under federal securities
laws. Sales of shares to residents of certain states or jurisdictions may
require registration or an applicable exemption from registration provisions of
the shares in those states or jurisdictions. The 73,842 shares of common stock
issued to the founders are "restricted securities" and may not be sold in a
public distribution except in compliance with the federal Securities Act of 1933
or an applicable exemption under the
20
Securities Act, including its Rule 144. Rule 144 provides that a person who is
not one of our officers, directors or principal shareowners and who has owned
shares for at least a year could offer and sell those shares through any trading
market, if reporting and other requirements were met.
The shares have been approved for listing on the Chicago Stock Exchange after
completion of this offering. In the event the shares are not being traded on the
Exchange, Huntleigh Securities Corp. , Medallion Equities, Inc. and MMR
Investment Bankers, Inc. have said they will provide an order-matching service
for persons wishing to sell or buy shares after this offering is over.
Plan of distribution
We are offering shares and certificates directly to the public through Jayme
Sickert, our Vice President of Church and Investor Relations, who will not
receive any commissions or other compensation based on transactions in
securities. His activities are intended to be within Rule 3a4-1 of the federal
Securities Exchange Act of 1934 and he will comply with securities regulations
of the states in which the offering is to be registered. We will communicate
announcements of the offering and offer copies of this prospectus, as permitted
by federal and state securities regulations. We are also offering through
registered securities broker-dealers, principally Huntleigh Securities Corp.,
Medallion Equities, Inc. and MMR Investment Bankers, Inc. They will be paid
commissions for sales they make of three percent on certificates due 2005, five
percent on certificates due 2007 and seven percent on shares of common stock. We
have agreed to indemnify the broker-dealers and their controlling persons
against any liability arising out of any alleged untrue or omitted statement in
this prospectus. We and the broker-dealers will be selling on a "best efforts"
basis, without any commitment to sell the entire offering or any minimum amount.
We expect to offer these certificates and shares to residents of Alaska,
Arkansas, Arizona, Colorado, Delaware, Florida, Georgia, Hawaii, Idaho,
Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts,
Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Jersey, New
York, North Carolina, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina,
Texas, Utah, Vermont, Virginia and West Virginia. We expect to offer the shares
in the additional states of Alabama and Tennessee.
The public offering price for the shares is the same price paid by CMI's
founders and by investors in the first public offering. The price, interest rate
and other terms of the certificates were set to be competitive with other
interest-bearing securities.
There is no escrow of the offering proceeds, so all amounts paid for the
certificates will be immediately available to use in our business. We plan to
continue the offering until all the certificates have been sold. We reserve the
right to close the offering before then and to reject any purchase in full or in
part.
Experts
The financial statements of CMI as of and for the periods ended December 31,
1999 and December 31, 2000 have been included in this prospectus in reliance on
the report of T. Jackson McDaniel III, certified public accountant.
Available Information
This prospectus is part of a registration statement on Form SB-2 filed under the
Securities Act of 1933. This prospectus does not contain all of the information
in the registration statement and its exhibits. Statements in this prospectus
about any contract or other document are just summaries. You may be able to read
the complete document as an exhibit to the registration statement.
We file reports under the Securities Exchange Act of 1934. You may read and copy
the registration statement and our reports at the Securities and Exchange
Commission's public reference rooms at 450 Fifth Street, N.W., Washington, D.C.
20549, Seven World Trade Center, 13th Floor, New York, New York 10048, and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. You may telephone
the Commission's Public Reference Branch at 800-SEC-0330. Our registration
statement and reports are also available on the Commission's Internet site at
http://www.sec.gov.
21
Index to financial statements
Independent Auditors' Report F-1
Balance Sheets F-2
Statements of Income and Retained Earnings F-3
Statements of Changes in Stockholders' equity F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6
22
T. JACKSON McDANIEL III
Certified Public Accountant
1439 McLendon Drive
Suite C
Decatur, GA 30033
(770) 491-0609
To the Board of Directors
PIF/Cornerstone Ministries Investments, Inc.
Cumming, Ga
I have audited the accompanying balance sheet of PIF/Cornerstone Ministries
Investments, Inc. as of December 31, 2000 and 1999 and the related statements of
income, retained earnings, cash flows and changes in stockholders' equity for
the years then ended. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of PIF/Cornerstone Ministries
Investments, Inc. as of December 31, 2000 and 1999 and the results of its
operations, its cash flows and changes in stockholders' equity for the years
then ended in conformity with generally accepted accounting principles.
S/T. Jackson McDaniel III
March 12, 2001
F-1
PIF/CORNERSTONE MINISTRIES INVESTMENTS, INC.
BALANCE SHEET
June 30, 2001 (Unaudited) and December 31, 2000 (Audited) and December 31, 1999 (Audited)
ASSETS 12/31/99 12/31/00 6/30/01
(AUDITED) (AUDITED) (UNAUDITED)
---------------- ----------------- --------------
CURRENT ASSETS
CASH $ 706,035 $ 2,181,280 $ 2,743,742
ACCOUNTS RECEIVABLE - 67,085 287,772
ACCRUED INTEREST RECEIVABLE 46,167 869,066 802,987
---------------- ----------------- --------------
TOTAL CURRENT ASSETS 752,202 3,117,431 3,834,501
REAL ESTATE LOANS RECEIVABLE 3,412,979 26,469,809 28,590,067
FIXED ASSETS-NET OF ACCUMULATED
DEPRECIATION - 6,689 234,220
INTANGIBLE ASSETS-NET OF ACCUMULATED
AMORTIZATION 332,200 955,226 1,032,286
INVESTMENTS
REAL ESTATE HELD - 295,499 746,891
OTHER ASSETS
BOND HOLDINGS - 273,500 223,000
PREPAID INSURANCE - 5,507 1,500
DEPOSIT 5,000 1,031 400
---------------- ----------------- --------------
TOTAL ASSETS $ 4,502,381 $ 31,124,693 $ 34,662,865
================ ================= ==============
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 87,537 $ 26,337 $ 13,468
INTEREST PAYABLE 83,750 2,213,690 2,412,731
INCOME TAXES PAYABLE 30,810 112,264 165,695
PAYROLL TAX LIABILITIES - 34,871 10,503
DUE TO INVESTORS - - 89,915
DIVIDENDS PAYABLE 29,776 151,974 -
DUE TO CHURCH GROWTH FOUNDATION - 22,240 -
RENT DEPOSITS HELD 700 700 -
---------------- ------------------ ---------------
TOTAL CURRENT LIABILITIES 232,573 2,562,076 2,692,312
LONG TERM LIABILITIES-INVESTOR CERTIFICIATES
LOAN FOR BUILDING - - 200,933
INVESTOR CERTIFICATES 3,056,276 25,483,051 28,047,867
BOND FUND CERTIFICATES - 474,145 -
---------------- ------------------ ---------------
TOTAL LONG TERM LIABILITIES 3,056,276 25,957,196 28,248,800
DEFERRED INCOME TAXES 12,372 22,823 31,669
---------------- ------------------ ---------------
TOTAL LIABILITIES 3,301,221 28,542,096 30,972,781
COMMON STOCK, .01 PAR VALUE,
10,000,000 SHARES AUTHORIZED,
397,227 ISSUED AND OUTSTANDING 1,191 3,972 5,306
PAID IN CAPITAL 1,189,839 2,578,286 3,443,961
RETAINED EARNINGS (DEFICIT) 10,130 339 240,817
---------------- ------------------ ---------------
TOTAL SHAREHOLDER'S EQUITY 1,201,160 2,582,597 3,690,084
---------------- ------------------ ---------------
TOTAL LIABILITIES AND MEMBER'S EQUITY $ 4,502,381 $ 31,124,693 $ 34,662,865
================ ================== ===============
F-2
<FN>
See accompanying accountant's report and notes to financial statements
</FN>
PIF/CORNERSTONE MINISTRIES INVESTMENTS, INC
STATEMENT OF INCOME
AND RETAINED EARNINGS
For the 6 months ended June 30, 2001 (Unaudited) and June 30, 2000 (Unaudited)
and the years ended December 31, 2000 (Audited) and December 31, 1999 (Audited)
12/31/99 12/31/00 6/30/00 6/30/01
(AUDITED) (AUDITED) (UNAUDITED) (UNAUDITED)
---------------- ---------------- --------------- --------------
REVENUES
Interest Income-Loans $ 148,758 $ 432,590 $ 178,791 $ 1,348,948
Fees Earned 263,162 478,806 136,000 795,925
Rental Income 1,452 - - 7,346
Other income - 1,000 1,000 2,965
Gain on Sale of Real Estate 86,513 - - -
---------------- ---------------- --------------- --------------
TOTAL REVENUES 499,885 912,396 315,791 2,155,184
OPERATING EXPENSES
Interest Expense-Investor Certificates 209,541 314,871 136,494 1,249,017
Interest on Line of Credit - 53,360 31,367 5,927
Management Fees 47,400 76,125 31,973 -
Marketing Expenses 33,876 92,239 19,822 105,203
Operating Expenses 70,816 50,817 31,559 431,575
---------------- ---------------- --------------- --------------
TOTAL OPERATING EXPENSES 361,633 587,412 251,215 1,791,722
NET INCOME FROM OPERATIONS 138,252 324,984 64,576 363,462
OTHER INCOME (EXPENSE)
Interest Income-Banks 34,453 19,410 9,660 51,557
Income Tax Expense (56,567) (130,166) (12,253) (174,541)
---------------- ---------------- --------------- --------------
TOTAL OTHER INCOME (EXPENSE) (22,114) (110,756) (2,593) (122,984)
NET INCOME $ 116,138 $ 214,228 $ 61,983 $ 240,478
RETAINED EARNINGS (DEFICIT)-BEGINNING OF PERIOD (9,688) 103 10,130 339
DIVIDENDS (111,892) (224,019) (72,010) -
---------------- ---------------- --------------- --------------
RETAINED EARNINGS (DEFICIT)-END OF PERIOD $ (5,442) $ (9,688) $ 103 $ 240,817
================ ================ =============== ==============
F-3
<FN>
See accompanying accountant's report and notes to financial statements
</FN>
PIF/CORNERSTONE MINISTRIES INVESTMENTS, INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
For the years ended December 31, 2000 and December 31, 1999
Retained Total
Common Paid-In Earnings Owner's
Stock Capital (Deficit) Equity
---------- -------------- ----------- --------------
Balance at December 31, 1998 $ 730 $ 729,140 $ 5,884 $ 735,754
Net Income (Loss) for the year
ended December 31, 1999 - - 116,138 $ 116,138
Dividends declared - - (111,892) (111,892)
Capital contribution 461 460,699 - 461,160
---------- -------------- ----------- --------------
Balance at December 31, 1999 $ 1,191 $ 1,189,839 $ 10,130 $1,201,160
Net Income (Loss) for the year
ended December 31, 2000 - - 116,138 116,138
Dividends declared - - (111,892) (111,892)
Capital contribution 2,781 1,388,447 - 1,391,228
---------- -------------- ----------- --------------
Balance at December 31, 2000 $ 3,972 $ 2,578,286 $ 14,376 $2,596,634
========== ============== =========== ==============
F-4
<FN>
See accompanying accountant's report and notes to financial statements
</FN>
PIF/CORNERSTONE MINISTRIES INVESTMENTS, INC.
STATEMENT OF CASH FLOWS
For the 6 months ended June 30, 2001 (Unaudited) and June 30, 2000 (Unaudited)
and the years ended December 31, 2000 (Audited) and December 31, 1999 (Audited)
12/31/99 12/31/00 6/30/00 6/30/01
(AUDITED) (AUDITED) (UNAUDITED) (UNAUDITED)
--------------- --------------- ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash from Operations:
Net income (loss) $ 116,138 $ 214,228 $ 61,983 $ 240,478
Items that do not use
Cash:
Amortization 14,332 31,945 8,375 59,809
(Increase) Decrease in
Accounts Receivable - (67,085) (46,229) (220,687)
(Increase) Decrease in
Accrued Interest Receivable (44,219) (822,899) (12,146) 66,079
(Increase) Decrease in
Intangible Assets (147,022) (154,971) (70,463) (106,939)
(Increase) Decrease in
Other Assets (5,000) (1,538) 5,000 55,138
Increase (Decrease) in
Accounts Payable (59,997) (61,200) (74,891) (12,869)
Increase (Decrease) in
Interest Payable 81,053 2,129,940 37,352 199,041
Increase (Decrease) in
Dividends Payable 29,776 122,198 42,269 (151,974)
Increase (Decrease) in
Rent Deposit Payable (5,080) - - (700)
Increase (Decrease) in
Income taxes payable 30,810 81,454 (18,557) 53,431
Increase (Decrease) in
Payroll Tax Liabilities - 34,871 - (24,368)
Increase (Decrease) in
Other Liabilities - 23,564 - 67,675
Increase (Decrease) in
Deferred tax liability 8,424 10,451 3,584 8,846
--------------- --------------- ------------ ------------
Net Cash Provided (Used) by
Operating Activities 19,215 1,540,958 (63,723) 232,960
Cash Flows From Investing Activities:
Real Estate Purchased - (295,499) (263,042) (451,392)
Effect of PIF Asset Acquisition - (308,966) - -
Plant, Property & Equipment Purchased - - - (257,460)
Loans purchased - (21,720,888) - -
Loans made (3,552,450) (3,387,451) (1,608,234) (7,960,335)
Loan principal repayments received 764,874 2,051,509 809,847 5,840,077
--------------- --------------- ------------ ------------
Net Cash Provided (Used) by
Investing Activities (2,787,576) (23,661,295) (1,061,429) (2,829,110)
Cash Flows From Financing Activties:
Stock subscriptions sold 461,160 1,391,228 41,987 867,009
Certificates of Indebtedness Issued - 1,699,922 207,141 2,090,671
Certificates of Indebtedness Acquired 2,417,776 20,726,853 -
Loan-PIF - - 606,607
Loan for Building - - - 200,933
Dividends Paid (82,116) (222,421) (72,010) -
--------------- --------------- ------------ ------------
Net Cash Provided by Financing Activities 2,796,820 23,595,582 783,725 3,158,613
Net Increase (Decrease)
in Cash: 28,459 1,475,245 (341,427) 562,463
Cash-Beginning of Period 677,576 706,035 706,035 2,181,280
--------------- --------------- ------------ ------------
Cash-End of Period $ 706,035 $ 2,181,280 $ 364,608 $ 2,743,743
=============== =============== ============ ============
During the year ended December 31, 2000 the Company
paid cash interest of $317,360
F-5
<FN>
See accompanying accountant's report and notes to financial statements
</FN>
CORNERSTONE MINISTRIES INVESTMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 and JUNE 30, 2001
NOTE 1 - Summary of Significant Accounting Policies
(A) Conformity with Generally Accepted Accounting Principles and Accounting
Method
The accounting policies of the Company conform to generally accepted accounting
principles consistent to its industry. The Company uses the accrual method of
accounting.
(B) Description of Company's Operations
The Company is in the business of originating and purchasing Mortgage loans on
Church and Church related properties. Costs associated with loan applications
received directly from borrowers are expensed as period costs.
The Company is also in the business of investing in Church and Church related
real estate for the purpose of 1)selling at a profit, 2)leasing to Churches and
Church related activities.
(C) Organizational Information
The Company is a corporation organized under the laws of the State of Georgia.
(D) Provision for Loan Losses
Management is of the opinion that losses arising from the default of Church or
Church related loans are not probable or reasonably estimated. Management has an
aggressive policy of working out any potential problem loans before they reach
the default stage. As of the balance sheet date no loan is in arrears in a
material amount. Therefore, no allowance for loan losses is reflected in the
accompanying statements.
(F) Comparative Data
The Balance Sheet information for the year ended December 31, 1999 is presented
for comparative purposes and are not intended to be complete financial statement
presentations.
(G) Accrued Interest Income
Interest income is accrued monthly on the outstanding balance of loans
receivable.
(H) Accrued Interest Expense
Interest on Certificates of Indebtedness is accrued semiannually from the date
of issuance, and may be paid semiannually. Investors holding five year
certificates in multiples of $10,000 may receive interest monthly.
(I) Cash and Cash Equivalents
Cash and cash equivalents include checking accounts and short term certificates
with original maturities of 90 days of less.
NOTE 2 - LEASE COMMITMENTS
The Company currently has no material lease commitments. For the year ended
December 31, 2000 the Company shared office space at no cost with its largest
shareholder. (See NOTE 13)
F-6
CORNERSTONE MINISTRIES INVESTMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 and JUNE 30, 2001
NOTE 3 - REAL ESTATE LOANS RECEIVABLE
At December 31, 2000 and December 31, 1999, and June 30, 2001 the Company had
Real Estate Loans Receivable from Churches totaling $26,469,809, $3,412,979, and
$28,590,063 respectively. These loans mature over a period beginning in 2001 and
ending in 2012. Of the total loans receivable at December 31, 2000 $21,720,888
were acquired as a result of the PIF Acquisition (See NOTE 12)
NOTE 4 - INTANGIBLE ASSETS
Intangible assets consist of costs incurred to 1)organize the Company, 2) costs
of registering the Company's equity and debt securities, 3) developing the
Prospectus for registering of the Company's securities, and 4) commissions paid
and/or accrued on the sale of debt securities and equity securities. These
intangibles are amortized on a straight line basis for periods of 5 to 40 years.
NOTE 5 - INCOME TAXES
Income taxes payable and the corresponding expense on The Company's net income
for the years ended December 31, 2000,and December 31, 1999 and the six months
ended June 30, 2001 and June 30, 2000.
12/31/2000 12/31/1999 06/30/2001 06/30/2000
--------------- --------------- -------------- --------------
Current: Federal $ 101,519 $ 36,044 $ 142,193 $ 8,744
State 18,195 8,151 23,502 3,505
Deferred Federal 9,058 10,747 7,447 2,855
State 1,394 1,625 1,399 729
--------------- --------------- -------------- --------------
$ 130,166 $ 56,567 $ 174,541 $ 15,837
=============== =============== ============== ==============
Deferred income taxes arise because of timing differences between financial
accounting and tax accounting rules for the deductibility of intangible
amortization expense.
NOTE 6 - CASH CONCENTRATION
A cash concentration risk arises when the Company has more cash in one financial
institution then is covered by insurance. At December 31, 2000, and June 30,
2001 the Company had cash in one institution that was over the amount insured by
the FDIC of $2,081,280 and $1,468,777 respectively.
F-7
CORNERSTONE MINISTRIES INVESTMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 and JUNE 30, 2001
NOTE 7 - SIGNIFICANT BUSINESS CONCENTRATION
At December 31, 2000 the Company has loans receivable derived from lending
activities of $26,469,809. Of this amount $5,155,426 or approximately 19.5% of
the total loan portfolio of the Company is from one entity. At June 30, 2001 the
total loans outstanding were $28,590,067 with the loan outstanding to this
entity equal to $6,129,597 or approximately 21.44% of the Company's total loan
portfolio. This entity borrowed the funds to finance Phase I of an Assisted
Living Facility in Ft. Pierce, Fl. At December 31, 2000, this facility had not
yet opened. However, subsequent to year end, the financed facility opened Phase
I. Subsequent to the quarter ended June 30, 2001, the Company's loan was
refinanced and the Company received approximately $3,800,000 in cash and
acquired $2,300,000 in tax free bonds in exchange for the balance.
NOTE 8-NAME CHANGE
Prior to the year ended December 31, 1998, the Company was named "Cornerstone
Ministries Fund, Inc.". During the year ended December 31, 1998, the Company
changed its name to "Cornerstone Ministries Investments, Inc." to allow it to
register its securities in all 50 states and to more correctly identify it with
its mission. Prior to December 31, 2000 the Company again changed its name to
"PIF/Cornerstone Ministries Investments, Inc." to reflect the acquisition of the
Presbyterian Investors Fund by the Company. (SEE NOTE 12)
NOTE 10-SECURITIES OFFERING
In December 1999 The Company filed a FORM SB-2 Registration Statement under The
Securities Act of 1933. Under this Registration Statement it is The Company's
intent to raise approximately $19,275,000 in additional capital. This is to be
accomplished through the issuance of $2,275,000 in additional Common Stock and
$17,000,000 in new Certificates of Indebtedness.
As of the date of the accompanying accountant's report the Company has an
additional 278,100 shares of stock as a result of this offering.
NOTE 11-STOCK SPLIT
In December of 1999 the board of directors authorized a split its stock in a
ratio of approximately 1.53 to 1. This split was effected for shareholders of
record on January 2, 2000, and effected as of January 15, 2000. The split has no
effect on the earnings or cash position of the company at December 31, 2000
NOTE 12-ACQUISITION OF ASSETS OF PRESBYTERIAN INVESTORS FUND, INC.
On October 11, 2000 the Board of Directors agreed to acquire certain assets of
the Presbyterian Investors Fund, Inc. (PIF). PIF was in the business of
originating and purchasing loans made to churches that are members of The
Presbyterian Church in America (PCA). The acquisition price was determined by an
evaluation of the loan portfolio of the PIF and was to be paid by the assumption
of certain liabilities of PIF plus a premium to be paid for the assets that was
not to be less than $500,000. This acquisition was closed on December 29, 2000
effective as of that date. The financial statements to which these footnotes are
a part include the results of that acquisition.
NOTE 13-SUBSEQUENT EVENT-REAL ESTATE ACQUISITION
On February 1, 2001 the company acquired two office condos to be used as office
space. The purchase price was $250,000. The company occupied this new office
space on February 28, 2001. Until the new space was occupied the company
operated under a month to month lease at $1,031 a month.
F-8
[Alternate Certificate of Indebtedness Prospectus Cover Page]
$16,000,000
PIF/Cornerstone
Ministries
Investments, Inc.
SERIES B CERTIFICATES OF INDEBTEDNESS
---------------------------
Cornerstone Ministries Investments, Inc. is offering these Series B Certificates of Indebtedness directly
to investors and also through selected securities broker-dealers, on a best efforts basis.
The amount you pay for certificates will be repaid upon their maturity date, unless you choose to replace
them with any certificates we may be offering at that time. We do not expect that there will be any trading market
for the certificates.
This offering will end when all the certificates have been purchased or earlier, if we decide to close the
offering. There is no requirement that a minimum number of certificates must be sold.
This offering involves a high degree of risk. See "Risk Factors" beginning on page 4.
Neither the Securities and Exchange Commission nor any state securities regulator has approved or disapproved the
certificates or determined if this prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
===================================================================================================================
Certificate Annual Principal Public Offering Broker-dealer
Maturity Interest Amount Price per Discounts and Proceeds to
Date Rate Offered Certificate Commissions CMI
-------------------------------------------------------------------------------------------------------------------
March 15, 2005 7.00% $ 1,000,000 $500 $ 75 $2,425
March 15, 2007 9.00% 15,000,000 $500 $125 $2,375
-------------------------------------------------------------------------------------------------------------------
Total $16,000,000 $780,000 $15,220,000
===================================================================================================================
---------------------------
The date of this Prospectus is___________, 2001
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
Item 27. Exhibits
Exhibits listed below are filed as part of this Registration Statement
pursuant to Item 601 of Regulation S-B.
Exhibit
Number Description
------- -----------
23.1 Consent of T. Jackson McDaniel III, Certified Public Accountant
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorizes this Post-effective
Amendment No. 2 to Registration Statement to be signed on its behalf by the
undersigned, in Cumming, Georgia, on October 23, 2001.
PIF/CORNERSTONE MINISTRIES INVESTMENTS, INC. (Issuer)
By S/CECIL A. BROOKS
------------------------------------------
Cecil A. Brooks, Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
post-effective amendment No. 2 to registration statement was signed by the
following persons in the capacities and on the dates stated.
Signature Title Date
--------- ----- ----
S/CECIL A. BROOKS Chief Executive Officer, President and October 23, 2001
-------------------------------------------- Chairman of the Board of Directors
Cecil A. Brooks
S/JOHN T. OTTINGER Vice President, Chief Financial Officer October 23, 2001
-------------------------------------------- Secretary, Treasurer and Director
John T. Ottinger (Principal financial and accounting officer)
S/THEODORE R. FOX Director October 23, 2001
--------------------------------------------
Theodore R. Fox
S/RICHARD E. MCLAUGHLIN Director October 23, 2001
--------------------------------------------
Richard E. McLaughlin
S/JAYME SICKERT Director October 23, 2001
--------------------------------------------
Jayme Sickert
S/IRVING B. WICKER Director October 23, 2001
--------------------------------------------
Irving B. Wicker
S/TAYLOR MCGOWN Director October 23, 2001
--------------------------------------------
Taylor McGown
S/HENRY R. DARDEN Director October 23, 2001
--------------------------------------------
Henry Darden
* S/CECIL A. BROOKS October 23, 2001
-----------------
Cecil A. Brooks
Attorney-in-fact