U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended March 31, 2001
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _________ to _________
COUNTRY MAID FINANCIAL, INC.
(Exact name of small business issuer as specified in its charter)
Commission file number: 0-30730
WASHINGTON 34-1471323
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
2500 South Main Street
Lebanon, Oregon 97355
(Address of principal executive offices)
(541) 451-1414
(Issuer's telephone number)
___________________
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of March 31, 2001, the Registrant
had 7,725,896 shares of Common Stock outstanding.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (check one): Yes [ ] No [X]
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PART I: FINANCIAL STATEMENTS AND MANAGEMENT'S
DISCUSSION AND ANALYSIS
Item 1: Financial Statements
COUNTRY MAID FINANCIAL, INC.
CONSOLIDATED BALANCE SHEETS
March 31, 2001 and December 31, 2000
ASSETS
March 31, 2001 December 31, 2000
(Unaudited) (Audited)
Current Assets
Cash $ 0 $ 39,317
Management Fee receivable 23,781 15,226
Accounts receivable 134,955 62,576
Prepaid expenses 85,644 59,682
-------- --------
Total Current Assets 244,380 176,801
Fixed Assets
Furniture & Fixtures - Net 49,280 49,280
-------- --------
Total Fixed Assets 49,280 49,280
Other Assets
Advance to Properties 63,162 0
Due from TI 37,000 37,000
Due from TIM-OR 155,607 155,607
Due from Lessors 86,305 145,380
Lease Option 650 650
-------- --------
Total Other Assets 342,724 338,637
-------- --------
TOTAL ASSETS $ 636,384 $ 564,718
======== ========
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LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, 2001 December 31, 2000
(Unaudited) (Audited)
Current Liabilities
Bank Overdraft $ 97,360 $ 109,622
Accounts Payable, Trade 223,628 263,148
Accrued Payroll & Payroll Taxes 342,399 346,125
Accrued Expenses 220,715 158,024
----------- ----------
Total Current Liabilities 884,102 876,919
Other Liabilities
Notes Payable 289,047 0
Due to stockholders 1,032,695 1,032,695
----------- ----------
Total Other Liabilities 1,321,742 1,032,695
TOTAL LIABILITIES 2,205,844 1,909,614
Stockholder's Deficit
Common Stock 2,769,252 2,769,252
Preferred Stock 100,000 100,000
Excess Liabilities at Inception (60,000) (60,000)
Retained Deficit (4,379,362) (4,154,798)
----------- ----------
Total Stockholder's Equity (1,569,460) (1,344,896)
----------- ----------
TOTAL LIABILITIES &
STOCKHOLDER'S EQUITY $ 636,384 $ 564,718
----------- ----------
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COUNTRY MAID FINANCIAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2001 and March 31, 2000
Three Months Ended Three Months Ended
March 31, 2001 March 31, 2000
(Unaudited) (Unaudited)
Revenues $ 1,129,961 $ 646,228
Operating Costs
Lease payments 355,925 163,420
Direct costs 636,352 323,650
Administrative costs 93,387 37,345
Total Operating Costs 1,085,664 524,415
Gross Profit 44,297 121,813
Expenses
Payroll and payroll taxes 105,703 70,084
Professional Fees 77,076 70,436
General & Administrative 86,082 47,875
Total expenses 268,861 188,395
Net Loss (224,564) (66,582)
Primary Loss per share (0.03) (0.01)
Diluted Loss per share (0.03) (0.01)
Weighted average number of
common shares outstanding 7,956,928 7,956,928
COUNTRY MAID FINANCIAL, INC.
Consolidated Statement of Cash Flows
For Three Months Ended March 31, 2001 and March 31, 200
March 31, 2001 March 31, 2000
(Unaudited) (Unaudited)
Cash Flows from Operating Activities
Net Income from Operations $ (224,564) $ (66,582)
Changes in assets and liabilities
Prepaid expenses and other (38,224) (85,298)
Accounts payable (39,520) 123,248
Accrued payroll and payroll taxes (3,726) 19,120
Receivables (72,379) 0
Management fees (8,555) 12,384
Accrued expenses 62,691 0
Net cash flow from operating activities (324,277) 2,872
Cash flows from investing activities
Advance to Properties (63,162) 34,967
Due from Lessors 59,075 0
Total Cash Flows from Investing Activities (4,087) 34,967
Cash Flows from Financing Activities
Notes Payable 289,047 0
Issuance of Preferred Stock 0 100,000
Total Cash Flows from Financing Activities 289,047 100,000
Net Cash Flows (39,317) 137,839
Cash Balance Beginning 39,317 0
Cash Balance Ending 0 137,839
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COUNTRY MAID FINANCIAL, INC.
Notes To Unaudited Consolidated Financial Statements
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-QSB and therefore do not
include all disclosures necessary for a fair presentation of financial position,
results of operations, and cash flows in conformity with generally accepted
accounting principles. The operating results for interim periods are unaudited
and are not necessarily an indication of the results to be expected for the full
fiscal year. In the opinion of management, the results of operations as reported
for the interim period reflect all adjustments that are necessary for a fair
presentation of operating results.
Note 2. Per Share Information
Basic earnings per share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding in the
period. Diluted earnings per share takes into consideration common shares
outstanding (computed under basic earnings per share) and potentially dilutive
common shares.
Item 2. Management's Discussion And Analysis Of Financial Condition And
Results Of Operation
Statement of Forward-Looking Information
This discussion and analysis should be read together with our condensed
financial statements. This report contains both objective historical information
and subjective "forward-looking statements" that are subject to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995, and bear
certain risks and uncertainties that could cause actual results to differ
materially from those projected. Generally, forward-looking statements are
prefaced by the words: "believe," "expect," "intend," "anticipate," and similar
expressions; but their absence does not mean that a statement is not
forward-looking. Numerous factors both within and outside our control could
affect our actual results. These risk factors, among others, could cause results
to differ materially from those presently anticipated by us. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date of this report. We undertake no obligation to publicly
release the results of any revisions to these forward-looking statements that
may be made to reflect events or circumstances after the date of this report or
to reflect the occurrence of anticipated events.
General
Country Maid Financial (the "Company"), a Washington corporation,
incorporated in 1984, manages and maintains eighteen motel properties located
throughout the United States, through its subsidiary, Territorial Inns
Management ("TIM"). Currently, the Company operates in eight states: Florida,
Georgia, Illinois, Iowa, Kansas, Missouri, Texas and Washington. The Company
plans to significantly expand its operations by obtaining additional motel
operating leases throughout the United States and Canada, and has undertaken a
plan to lease a number of economy-scale motels from motel owners with option to
purchase the motel at its current value. The Company is confident that these
motel properties can be operated at a significant net profit.
Since its inception, the Company has continually sought to maximize its
revenues by increasing the number of properties under its management, delivering
fairly priced and high-quality motel services to
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its guests, and hiring experienced, talented, and personable on-site managers
and staff to manage and maintain the properties under its control. Additionally,
the Company's unique policy of combined leasehold ownership and property
management allows the Company to control the entire scope of property
management, thereby increasing the individual motels' level of operating
efficiency. The combined impact of the Company's management policies has yielded
numerous competitive advantages over industry competitors who limit their
activities to either property management or leasehold ownership.
Franchising Activities
Eleven of the twenty properties in the Company's portfolio are national
motel franchises. Two belong to the "Select Inns" chain, and nine are "Best
Inns" franchises. This arrangement has two primary advantages: First, name
recognition. Second, standardized quality. The combined impact of these
advantages is to increase the occupancy rates of the properties under the
Company's management, and to, thereby increase the Company's overall
profitability.
The Company's Portfolio
Long-Term Leased Properties
Southfork Motel. Effective July 1, 1999, the Company entered into a Lease
Agreement with Option to Purchase the Southfork Motel located in Bloomfield,
Iowa. The lease provides for monthly lease payments calculated at twenty-percent
(20%) of the gross revenue of the motel. The lease grants the Company an option
to purchase the property at the price of $650,000 exercisable only during the
last sixty (60) days of the fourth five-year term of the lease. The Company
agreed to grant 650 shares of Class C Preferred Stock, without dividend, valued
at a Subscription Price of $130,000, convertible to the same value of common
stock twelve months from the date of issuance.
The Southfork motel currently subleases the on-site restaurant to a
third-party and the Company has assumed all rights and obligations of the
sublease. The Company receives $1,200 in monthly rental payments that are
included as part of the gross revenue of property used to calculate the monthly
lease payments payable to the motel owner.
Best Inns. On or about November 9, 1998, the Company and Best Inns, Inc., a
Kansas corporation ("Best Inns Kansas"), executed a Letter of Intent, which sets
forth the terms for the Company to lease with an option to purchase nine Best
Inns motel properties. The terms of the Letter of Intent provide that the
Company will receive the gross revenue generated by the properties and pay to
Best Inns a fixed annual lease payment of $1,980,000 payable monthly, and the
Company has an option to purchase the properties for the total amount of
$24,000,000. As consideration to Best Inns for the option to purchase, the
Company agreed to issue securities of the Company with an aggregate value of
$3,000,000.
Properties under Management Agreement
The Company operates six other motel properties and an apartment complex
under individual management agreements, which set the management fee at a fixed
percentage, generally five percent (5%) of the gross revenue received from the
property. The motel owners are obligated to pay all expenditures with limited
authority to the Company to pay recoverable expenditures on the owners' behalf
up to an amount of $5,000 per month.
We believe that our strategy of obtaining motel operating leases with
purchase options will enable us to increase the number of properties in our
portfolio, and that the combined effect of this growth strategy and our strong
management group will enable us to increase our market penetration into the
motel operating industry.
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Recent Acquisitions
On January 8, 2001, the Company announced that TIM had recently completed
leases with options to purchase two lodging properties from True Vision Co.,
LLC, an Oregon limited liability company, and its affiliates. The Company
believes each of these lodging facilities to be valued at $2,000,000. Both
facilities will be operated and managed by TIM. The first facility is a Best
Western Hallmark Inn in Lawrence, Kansas, with 60 economy-scale rooms, that the
Company believes will add an additional $700,000 per year in revenue. The second
facility, which consists of 95 rooms, is the Select Inn in Joplin, Missouri. The
Company predicts the second facility to yield annual gross revenues of
approximately $800,000.
On January 29, 2001, the Company announced that TIM had completed leases
with options to purchase two Texas lodging properties. The first property, which
was leased with an option to purchase from True Vision Plainview I, LLC and its
affiliates, is the Best Western Conestoga Inn in Plainview, Texas, which has 82
economy-scale rooms, The Company believes this property to be valued at
$3,000,000. The second facility, consisting of 82 rooms, is the Fort Stockton
Super Eight Motel in Fort Stockton, Texas. The Company values this facility at
$1,100,000. The Company intends to operate and manage both facilities through
TIM.
Results of Operation - Three months ended March 31, 2001 Compared to three
months ended March 31, 2000.
Revenues. Revenues for the three-month periods ended March 31, 2000 and
March 31, 2001 increased from $646,228 to $1,129,961, respectively. During the
three-month period ended March 31, 2001, our revenue was generated by our
property-leasing and management activities. The increase in gross revenue during
the three-month period ending March 31, 2001, compared to the same period in the
prior year is attributable primarily to a decrease in management costs and
leasing expenses.
Labor and Benefits Expenses. This category comprises all internal labor
costs including: salaries, taxes, employee benefits, and all other direct costs
related to Company performance, including labor costs, supplies and other
miscellaneous related expenses. Our labor and benefits expenses for the
three-month period ended March 31, 2000 and March 31, 2001 increased from
$70,084 to $105,703, respectively. The fluctuation in labor and benefits
expenses from the first quarter of 2000 compared to the same period in 2001was
directly attributable to an increase in costs associated with leasing and
managing the Company's various properties. At March 31, 2001, we had thirteen
full time employees and seventeen part-time employees engaged in administration,
on-site operations, and property management. In addition, from time to time, the
Company may hire additional independent consultants or contractors to support
its property management and administrative organizations. Moreover, we may hire
additional staff, as needed, to meet the demands of our management and leasing
operations.
General and Administrative Expenses. General and administrative expenses
for the three-month periods ended March 31, 2000 and March 31, 2001 increased
from $47,875 to $86,082 respectively. In each period, these expenses consisted
primarily of the costs associated with purchasing supplies, property management,
facility renovation, human resources, employee training, advertising and
marketing costs, and general management and administrative costs. This increase
was due to an increase in these costs.
We believe that our general and administrative expenses may increase in
dollar amount for the remainder of fiscal 2001 as a result of an anticipated
expansion of our operations.
Net Loss. The Company recognized a net loss for the three-month period
ended March 31, 2001 of $(224,564) compared to a net loss of $(66,582) for the
same period in 2000. The change in net loss
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reflected in the three-month period ending March 31, 2001 and March 31, 2000
reflected shifting property management and administrative costs.
Liquidity and Capital Resources. At March 31, 2001, the Company had cash
and cash equivalents of $(97,360). In the first three months of 2001, total cash
used in operating activities was $(324,277), which was primarily due to property
management and operating expenses. The Company did expend capital for
investing activities during the first three months of 2001.
Miscellaneous Accounting Information
Statement of Financial Standards No. 133 ("SFAS 133"), "Accounting for
Derivative Instruments and Hedging Activities," established accounting and
reporting standards for derivative instruments and for hedging activities. SFAS
133 has no impact on our financial statements because we do not currently engage
in any derivatives or hedging activities.
Statement of Financial Standards No. 134, "Accounting for Mortgage-Backed
Securities Retained after the Securitization of Mortgage Loans Held for Sale by
a Mortgage Banking Enterprise," does not apply to us.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company may become from time to time, subject to claims and suits
arising in the ordinary course of our business. In certain actions, plaintiffs
request punitive or other damages that may not be covered by insurance. On March
23, 2001, Tubeart Display, Inc. ("Tubeart") filed suit against TIM for payment
of $11,046.60 plus attorney fees stemming from an alleged default by TIM on a
Rental Agreement allegedly entered into between Tubeart and TIM on November 26,
1996. No disposition has been reached in this case. However, the Company does
not believe that the outcome of this litigation will materially affect its
investors.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits.
All of the Exhibits listed below are incorporated by reference from the
Company's Form 10 Registration Statement that became effective on November 8,
2000. No reports on Form 8-K were filed during the three-month period ended
March 31, 2001.
EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
3.1 Restated Articles of Incorporation
3.2 Bylaws
4.1 Specimen Common Stock Certificate
4.2 Certificate of Designation of Preferred Stock dated May 10, 1999
10.1 Form of Management Agreement of Territorial Inns Management, Inc.
(Schedule of Properties)
10.2 Form of Property Management Agreement of Territorial Inns
Management, Inc. (Schedule of Terms of Agreements)
10.3 Stock Purchase Agreement dated September 30, 1998 between
Country Maid Financial, Inc. and Shareholders of Territorial Inns
Management, Inc.
10.4 Office Lease Agreement dated October 1, 1998, between Country
Maid Financial, Inc. and C. Richard Kearns and Dixie Kearns.
(b) Reports on Form 8-K.
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
COUNTRY MAID FINANCIAL, INC.
Dated: May 18, 2001 By: /s/
-----------------------------
C. RICHARD KEARNS
Chief Executive Officer
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