As filed with the Securities and Exchange Commission on April 26, 2000
CIK: 0001035270
Registration No. 333-93475
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
PRE-EFFECTIVE AMENDMENT No. 2 to
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
Cornerstone Ministries Investments, Inc.
(Name of small business issuer in its charter)
Georgia 58-2232313
(State or jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6531
(Primary Standard Industrial
Classification Code Number)
6035 Atlantic Boulevard, Suite C
Norcross, Georgia 30071-1345
404.320.3311
(Address and telephone number of principal executive offices
and principal place of business)
Cecil A. Brooks, Chairman, President, Chief Executive Officer
Cornerstone Ministries Investments, Inc.
6035 Atlantic Boulevard, Suite C
Norcross, Georgia 30071-1345
404.320.3311
(Name, address and telephone of agent for service)
---------------
Copies to:
Drew Field
534 Pacific Avenue
San Francisco, CA 94133
415.296.9795
---------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
====================================================================================================================================
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
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, without par value $ 2,275,000 $ 6.50 $ 2,275,000 $ --
Series B Certificates of Indebtedness $17,000,000 $500.00 $17,000,000 $ --
Total $ --
</TABLE>
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
================================================================================
<PAGE>
EXPLANATORY NOTE
This registration statement contains 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 will be 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 registration statement and the form of the front
cover page of the certificate of indebtedness prospectus follow the common stock
prospectus.
<PAGE>
<TABLE>
CORNERSTONE MINISTRIES INVESTMENTS, INC.
Cross-reference Sheet Showing Location in Prospectus of:
PART I -- INFORMATION REQUIRED IN PROSPECTUS
<CAPTION>
Form SB-2 Item Number and Caption Caption in Prospectus
--------------------------------- ---------------------
<S> <C>
1. Front of Registration Statement and
Outside Front Cover of Prospectus......... Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus....................... Inside Front Cover Page of Prospectus
3. Summary Information and Risk Factors........ Prospectus Summary; Risk Factors
4. Use of Proceeds............................. Use of Proceeds
5. Determination of Offering Price............. Plan of Distribution -- Determination of Offering Price
6. Dilution.................................... Not applicable
7. Selling Security Holders.................... Not applicable
8. Plan of Distribution........................ Plan of Distribution
9. Legal Proceedings........................... Business -- Legal Proceedings
10. Directors, Executive Officers, Promoters
and Control Persons....................... Management
11. Security Ownership of Certain Beneficial
Owners and Management..................... Principal Shareholders
12. Description of Securities................... Description of Securities
13. Interest of Named Experts and Counsel....... Not applicable
14. Disclosure of Commission Position on Management -- Indemnification of
Indemnification for Securities Act ....... Officers and Directors
15. Organization Within Last Five Years......... Organization of the Company
16. Description of Business..................... Prospectus Summary; Risk Factors;
Business; Certain Transactions
17. Management's Discussion and Analysis
or Plan of Operation...................... Management's Plan of Operations
18. Description of Property..................... Business - Properties/Facilities
19. Certain Relationships and Related
Transactions.............................. Certain Transactions
20. Market for Common Equity and Related
Stockholder Matters Risk Factors; Shares Eligible
for Future Resale
21. Executive Compensation...................... Management: Executive Compensation
22. Financial Statements........................ Index to Financial Statements
23. Changes In and Disagreements With
Accountants on Accounting and
Financial Disclosure...................... None
</TABLE>
<PAGE>
350,000 SHARES
Cornerstone
Ministries
Investments, Inc.
COMMON STOCK
---------------
Cornerstone Ministries Investments, Inc. is offering these 350,000
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. The trading symbol will be IHN.
This offering will end when all the shares have been purchased or
earlier, if we decide to close the offering.
---------------
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 shares or determined if this
prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
================================================================================
Public Broker-dealer
Offering Discounts and Proceeds to
Price Commissions CMI
- --------------------------------------------------------------------------------
Per Share $ 6.50 $ 0.455 $ 6.045
Total $2,275,000 $159,250 $2,115,750
================================================================================
---------------
The date of this Prospectus is ___________, 2000
<PAGE>
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 shares. We are
offering to sell, and seeking offers to buy the shares only in jurisdictions
where offers and sales are permitted.
-----------------------
TABLE OF CONTENTS
Page
----
Prospectus summary ........................................................ 3
Risk factors .............................................................. 4
Note about forward-looking statements ..................................... 5
Use of proceeds ........................................................... 6
Management's discussion and analysis of financial
condition and results of operations ..................................... 6
Business .................................................................. 9
Management ................................................................ 14
Certain transactions ...................................................... 17
Principal shareowners ..................................................... 17
Description of securities ................................................. 18
Future resale of securities ............................................... 19
Plan of distribution ...................................................... 20
Experts ................................................................... 20
Available Information ..................................................... 20
Index to financial statements ............................................. 21
-----------------------
Until ______________, 2000 (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.
<PAGE>
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
CMI finances land and buildings for churches and related non-profit religious
schools and daycare facilities. We began operations in 1997 with $510,000
invested by our original sponsors and purchased six existing loans from our
principal shareowner, the Presbyterian Investors Fund, Inc. We raised
approximately $3,747,000, through a public offering of common stock and
certificates of indebtedness, from December 1998 through October 1999. We made
two loans for churches in 1998, which have since been repaid. Nine more loans
were made during 1999.
Our objectives
Our goal is to help churches buy or build their first facility. These groups
find it difficult to finance their projects and there is little competition in
this market. We have developed some unique approaches to providing financing for
these borrowers. In addition to mortgage loans, we will also purchase an
existing facility and make it available for lease and purchase by a growing
church or related organization. Where there is no suitable existing building, we
may develop a new facility for a qualified candidate. We are not long-term
investors or lenders in these properties. Rather, we seek to provide basically a
bridge to qualification for conventional lending and 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 three-year certificates and 9% for five-year
certificates. 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 quarterly 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 6035 Atlantic Boulevard, Suite C, Norcross, Georgia 30071-1345.
Our telephone number is (770) 729-1433 and our fax number is (770) 448-8452. You
are invited to call or write John T. Ottinger, our vice president and chief
financial officer. His email address is [email protected].
<PAGE>
Risk factors
You should carefully consider the following risks and the rest of this
prospectus before deciding whether and how much to invest. If these or other
risks occur, you may lose all or part of your investment.
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
CMI 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 CMI losing
money. Many of the properties in which we will invest, or which will
serve as the collateral for our loans will be church buildings.
Designed specifically to meet the needs of a church, they will be of
limited use to other non-church buyers.
o There may not be insurance coverage for a loss. We could lose income
from a loan or lease, or suffer loss on resale of a property, if an
uninsured event happened. CMI will normally maintain comprehensive
liability, fire, flood and extended insurance coverages on all
properties in which it invests. We also require the same types of
insurance coverage on all buildings that secure our loans. However, we
cannot insure against 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 we purchase or 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 buyer or
lender may be responsible and to assess the status of regulatory
compliance.
o There may be unexpected regulatory compliance costs. The properties
which we purchase, or which others purchase and 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 or lessee 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 and
owners face, we have these particular issues:
o We are highly leveraged. That is, we have about three times more in
certificate debt than we have in shareholders' 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 to have limited personal guarantees in which each
individual guarantor pledges a maximum of $5000. We may have difficulty
suing an individual to force their compliance with the guarantee
agreement and may have to take a loss on the loan or property.
o The ability of any borrower or tenant to make the loan or lease
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
lease or loan obligations.
<PAGE>
o If we must foreclose on a loan or evict a tenant, it may take longer
and cost more than with other types of real estate to achieve the
foreclosure or eviction, to repair the building, to find a buyer or
tenant, or to maintain and protect the property.
o We can only pay dividends to the extent we have net income. Our
interest expense and most other expenses of operation are fixed and
will be incurred without regard to our revenues from interest and fees.
We may not have enough cash to repay our debt when due. We receive cash from our
financing operations and from sale of common stock and certificates of
indebtedness. We use cash in making loans and buying properties, and to repay
our certificates. Approximately $3,000,000 of certificates sold in the last year
will come due in April 2003. Up to $3,000,000 million of certificates now being
offered will also be due in 2003 and up to $14,000,000 will become due in 2005.
We do not maintain a sinking fund to build up a cash reserve to repay
certificates. 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 the certificates, a trustee may sell our assets. That could
result in a loss on the certificates and the shares could become worthless. A
portion of our assets, equal to the principal of the outstanding Series A
certificates, is pledged to a trustee as collateral for payment of interest and
principal on those certificates. Payments on the Series B certificates could not
be made from those pledged assets. Any return on shares of common stock comes
behind full payment of principal and interest on both series of certificates.
See "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 and the brokers are unsuccessful,
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. CMI has paid
dividends during 1999, but it 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.
CMI was formed in 1996 and has not had to deal with many of the risks of its
business. There are cycles in the national and local economies which will affect
our ability to collect payments and the market value of our properties. CMI has
no record to show how it has handled past 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 financial officer, John T. Ottinger,
have over 14 years managing church property financing. See "Management." 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 good people.
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 and investing operations, are forward looking and are accompanied by
cautionary statements identifying important factors that could cause actual
results to differ.
<PAGE>
Use of proceeds
The net proceeds will be $19,090,000, assuming all of the shares and
certificates offered are sold. All of the net proceeds, after payment of
commissions and other offering expenses, will be used to finance buying and
building churches and their related properties.
Management's discussion and analysis of
financial condition and results of operations
Overview
Since our inception we have been focused on serving only non-profit religious
institutions. We offer specialized financing programs for churches and related
ministries to obtain facilities that will enhance their ministry or services.
CMI generates income from:
o interest on loans
o lease payments
o origination and renewal fees on loans and leases
o gains on the sale of property and
o investments in other securities.
We charge a 10% interest rate on loans. In making these loans, we earn income
from loan fees, which are either 5% for each year the loan is renewed or a
one-time fee of 10% for a three-year loan. Our policy is to receive lease income
of no less than 15% of our investment in any property we purchase and lease. In
addition, we expect a 15% return on sale of properties. We acquired our first
lease/purchase properties in December 1999.
Comparison of years ending December 31, 1997 and December 31, 1998
General
Net income was $5,966 for the year ending December 31, 1997 and $45,913 for
1998, on total revenues of $9,465 and $85,238. This represents an increase of
770% in net income and 900% in total revenues. This large increase in net income
and total revenues is primarily a result of receiving a full years' income in
1998. CMI's founders invested $510,000 and began operations in October 1997 by
purchasing existing loans from one of the founders, Presbyterian Investors Fund,
Inc., at an average interest rate of 10.25%. Before then, funds invested in CMI
were deposited in a money market account earning the then current rate. During
the course of 1997 and 1998, CMI's officers were engaged principally in
preparations for the first public offering of certificates and common stock.
In November 1998, we began offering common stock and certificates for sale. By
December 31 of 1998, we had received additional investments of $608,500 in
certificates and $219,870 in shares.
Income
Interest income: Interest income in 1998 increased to $47,958 from $9,465 in
1997. Interest on mortgage loans was only earned in 1997 for the two months
after the October 28th purchase from Presbyterian Investors Fund, Inc. CMI
earned interest on these loans for the full period in 1998 and also made two new
loans, of $183,000 in April and $525,000 in June, 1998.
Fee income: CMI earned no fee income in 1997 as it had not begun originating new
loans. Fees earned in 1998 were $37,280 from loan closings and loan application
fees
Expenses
Interest expense: Interest expense went from zero in 1997 to $6,297 in 1998 with
the initial issuance of certificates. Interest was payable beginning with the
sale of the first certificate. The certificates were sold over a period of time
and interest expense increased as the amount of certificates outstanding
increased.
Operating and administrative expenses: We had no marketing or selling expenses
in 1997 or 1998. We had no operating expenses in 1997, because we were not
charged for any administrative services and all professionals involved in the
development of the offering worked on a deferred compensation basis. In 1998, we
paid $5,000 in audit fees and reimbursed Presbyterian Investors Fund
approximately $15,213 for administrative services.
<PAGE>
Taxes: CMI had taxable income of $5,966 in 1997 and $45,913 in 1998, for which
it incurred tax liabilities of $1,181 and $10 038
Dividends
We paid no dividends in 1997, and paid a total of $38,250 dividends to investors
in 1998.
Comparison of the years ending December 31, 1998 and December 31, 1999
General
CMI began its first offering of common stock and certificates in October 1998
and received $828,340 by the end of that year. On December 31, 1998 we had loan
balances of $625,179, cash of $677,576 and equity of $735,754. During 1999, we
received additional common stock investments of $460,169 and certificate
investments of $2,447,775. At the end of 1999, we had loan balances of
$3,142,279 cash of $706,035 and equity of $1,191,203.
We closed one loan, of $183,000, during 1998 and ten loans, totaling $5,490,069,
in 1999. We sold $750,000 in loan principal to Presbyterian Investors Fund in
January 1999 and split the loan fees on a pro-rated basis. One loan made in
1999, for $750,000, was made and refinanced prior to year's end. Approximately
$2,768,757 was disbursed on loans for the acquisition of land or existing
buildings. The balance is committed to construction loans which are in various
stages of completion or are complete.
CMI's total revenues were $85,238 in 1998 and $361,633 for 1999. The increase
was primarily due to loan fees and interest arising from the increase in
available capital.
At December 31, 1999, we had no loan commitments outstanding. We had contracted
to purchase, but had not yet closed on a church property, for which we will pay
approximately $260,000. This property is located in suburban Chattanooga, TN. We
expect to realize fee income as well as capital gain income on the sale of the
property.
Income
Interest Income: Interest income was $47,958 for 1998 and $148,758 for 1999.
This increase in interest income is attributable to the increase in the loan
balances from $625,179 to $3,412,979. The interest income amount is low in 1999
relative to the loan balances, because most of the loans were closed during the
last four months of the period. We accrue interest fully on all loans, though
the borrower may have some or all of its interest payments deferred for some
period of the loan.
Fee Income: Fee income increased $263,162 in 1999 over 1998. This fee income is
from loan applications and originations.
Gain on the sale of property: In 1999 we earned $86,513 on the sale of property
located in Eastridge, TN. This property had been purchased in 1999 and we earned
fee income from providing an acquisition loan.
Other income: During 1999, CMI received interest income on its deposits of
$34,453 compared to $3,190 during 1998. This is a result of our financing
activities. We earn money market returns on cash which is not in loans, except
for that cash which is held as collateral at the trustee for the benefit of the
Series A certificate holders. We must maintain collateralized loan amounts and
cash at the trustee equal to the amount of Series A certificates outstanding.
Due to the dynamic nature of the market in which we operate, it is not possible
to be fully loaned out at all times. Hence, from time to time we will have
substantial funds on deposit with the certificate trustee that are not earning
interest, which lowers our income from these funds to less than their cost. At
times during the 1999 period, the balance held by the trustee without interest
to CMI has exceeded $1,000,000. We have instituted a more rigorous cash
management plan to avoid a recurrence of this.
<PAGE>
Expenses
Interest Expense: Interest expense rose from $6,297 for 1998 to $209,541 in
1999, due to the increase in outstanding certificates. These are the amounts of
certificates outstanding at December 31, 1999, their interest rates and
maturities:
Amount Interest rate Maturity
------ ------------- --------
$ 55,000 7.25% April 15, 2000
176,324 8.00 April 15, 2001
32,773 8.75 April 15, 2002
2,799,237 9.00 April 15, 2003
The weighted average interest cost for the certificates at December 31, 1999 was
8.9136%.
Marketing and Selling Expenses: We have not had to commit significant resources
to marketing and selling expenses as we currently have a backlog of churches
seeking loans. We have been able to develop this backlog simply by notifying
churches by limited direct mail and by contacting real estate brokers in target
areas who have solicited clients. These brokers are paid by those selling
property and CMI has no financial obligation to them.
Operating and Administrative expenses: Our administrative services are provided
by the Presbyterian Investors Fund, for which we pay an administrative services
fee of approximately 1.5% of our invested assets. There was no fee paid in 1998
and $47,400 for 1999. Outside of administrative services, our single largest
operational expense is our paying agent and registrar services for the
certificates. In 1998, we paid $500 for these services as an initial fee, while
in 1999 we paid $15,256. Their ongoing fees are based on the face value of
certificates and shares outstanding. Accounting expense increased from $2,455 to
$4,165 as a result of our increased activity.
Taxes: Taxes accrued through December 31, 1998 were $10,038. Taxes for 1999 are
estimated to be $57,595 based upon our income.
Dividends: We paid no dividends during the three quarters of 1998, having had no
significant earnings. Before the end of 1998, we paid a $0.75 per share
dividend. As of December 31, 1999 we had declared four quarterly dividends of
$0.25 per share, for an annualized return of 10. The per share amounts are
before the .5384 for one stock dividend.
Liquidity and capital resources
We had $677,576 in cash on December 31,1998 and $706,035 on December 31, 1999.
We currently have commitments and applications sufficient to invest the cash on
hand. Net cash used by investing activities was $201,882 during 1998 and
$2,787,576 during 1999. Presbyterian Investors Fund has approved a one year line
of credit to us at an interest rate of 10%. We have not yet drawn on this line
of credit. We pay a credit facility fee of 10% of the undrawn balance less any
interest earnings. We expect to invest all of these funds by the end of the
second quarter.
Cash from operations : Net cash inflow from operations was $13,463 for the year
1998 and $19,214 for 1999.
Cash from financings. CMI started with initial investments of $60,000 from
individuals and received a $450,000 investment from Presbyterian Investors Fund
in 1997. Since that time we have met our operating and cash requirements through
funds generated from operations, including loan repayments and the sale of a
loan, and from the sale of common stock and certificates of indebtedness.
From October 1998 through December of 1999, we raised $3,056,276 from the sale
of certificates of indebtedness and $691,030 from the sale of common stock.
Proceeds from the offering were used to pay legal expenses and sales commissions
and the balance has been invested in loans or is available to be invested in
loans or properties.
Current offering: CMI is seeking new capital of up to $19,275,000, consisting of
$2,275,000 in common stock and $17,000,000 in unsecured debt. We believe that
our cash on hand, together with cash generated by operations and
<PAGE>
the net proceeds of this offering will be sufficient to meet our capital
requirements through the fourth quarter of 2001, if all of the securities in
this offering are sold. The offering is being sold on a best efforts basis and
may not raise all the capital we seek. The amount and timing of our future
capital requirements will depend on factors such as the origination and funding
of new investments, the costs of additional marketing efforts, such as website
development and direct mail, potential acquisitions and the overall success of
our marketing efforts.
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 and leases. Inflation resulting in increased real estate prices could
increase the gains we could potentially realize on the sale of properties, while
at the same time decrease the ability of some potential client to purchase,
finance or lease properties.
Year 2000 issues
We have upgraded all of our internal computer and software systems as well as
communications equipment to Y2K compliant standards. Since a large part of our
accounting and recording keeping is done by outside sub-contractors, we have
sought and received assurances in writing from the major service providers of
their compliance with Y2K requirements. Our costs for preparations for Year 2000
have been minimal.
Business
CMI was formed as a Georgia corporation on March 18, 1996. 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. The financing may be either through
CMI's loan programs or through its lease/purchase programs.
CMI offers development loans, construction, bridge and interim loans, usually
due within one to three years. We will also purchase existing facilities, as
well as develop facilities we can lease and sell to one or more non-profit
organizations. Leases are for one to three years and may include a purchase
provision in which the lessee agrees to purchase the facility for a
pre-determined price. Leases are usually set at the local commercial market
lease rates. CMI expects to receive capital gains income from the sale of its
acquired properties, which it may also finance for the buyer.
Our policy is to make loans or purchases primarily for income, although we
anticipate capital gain on property we purchase for resale. The typical maximum
investment amount in a church property or loan is $1,000,000. We do not have any
limits on the percentage of CMI's 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 and lease programs
follows.
Types of loans we make
Development Loans: CMI will provide financing to young growing churches 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 church bond 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 CMI
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
<PAGE>
interest only on the outstanding balance drawn for construction. CMI focuses
primarily on loans of less than $1,000,000. We require the customary
documentation for construction loans including lien subordinations and waivers,
builders risk insurance, budgets and assignment of relevant contracts to CMI. 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. CMI makes 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. CMI
will assist the borrower to find long term financing through some of the lenders
with which it has established relationships, or we will sell the loan to one of
these lenders.
Our loan policies
Borrowers: CMI is in the business of providing facilities primarily for use by
religious non- profit organizations, such as churches and related ministries. We
also lend to non-profit entities that extend religious 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 give the non-profit ownership
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 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.
CMI 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
CMI's loan. The terms and conditions offered to borrowers, including interest
rates, fees, maturities, guarantees, will be based upon current market
conditions and factors like CMI's operating expenses and the loan's origination
expenses.
CMI charges 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.
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.
Loan underwriting requirements
Mortgage loan applications submitted to our underwriting staff will normally
include (i) a completed application on CMI's 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 CMI,
(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.
<PAGE>
Completed applications and supporting material are submitted to the loan
committee of CMI's 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 officers or staff of CMI.
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
CMI's 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 the policy of CMI to require borrowers to pay all expenses of the
loan including CMI's legal expenses. These expenses are usually deducted from
the loan proceeds.
Loan origination services, participations and sales
CMI may be asked to close loans for other lenders, because we are active in the
non-profit loan market. We receive a fee for each loan closed on behalf of
another lender. After closing, these loans will be sold to these lenders at par
or at a small premium to CMI.
CMI may grant participations in its own loans, or enter into partnerships so
that other investors can participate directly in loans or leases we developed.
These participations extend our available funds for investment and generate
additional revenue.
We may also sell loans to other lenders and investors, to increase funds for our
lending and investing. However, the nature of the loans that CMI originates will
limit the number of potential purchasers. We may hold loans for two to three
years before they qualify for purchase by a third party lender or investor.
Loan investments we have made
Presbyterian Investors Fund, our principal shareholder, sold us six loans from
its investment portfolio in October 1997, so we could begin receiving interest
income. The price was equal to the unpaid principal balance on the loans and the
weighted average interest rate was 10.25%. Each of the loans was in a different
state and they ranged in approximate amount from $38,000 to $133,000. Two of the
loans have since been repaid in full and we sold one, for the amount of the
unpaid principal. The other three continue to make regular payments of principal
and interest.
We originated our first two loans in 1998, for $183,000 to acquire a church
building and $525,000 to build a church school. They have both been repaid in
full, including all interest and fees. We sold to Presbyterian Investors Fund a
$750,000 participation in an $800,000 building acquisition loan we made in
January 1999. We made ten loans in 1999, to acquire buildings or to acquire land
and construct buildings. They are located in Georgia, Texas and Wisconsin and
the loan amounts were from $300,000 to $650,000.
Property acquisition, lease and lease purchase financing
In December 1999, we purchased one church property in Chattanooga, Tennessee and
also completed the sale of that property. The purchase of another property in
Chattanooga is pending completion of our review. We do not plan to have mortgage
loans on properties we purchase. We plan to use the straight-line, 39-year
depreciation method of accounting for properties we own.
Existing Facilities: CMI purchases existing church properties which we then
lease and eventually sell to one or more church or non-profit religious
entities. There is a market for church facilities, as congregations grow or
wither. These facilities will range greatly in size from small starter ones for
a new church to large campuses occupied by established congregations. CMI is
particularly interested in those church properties that are in the range of
$300,000 to $750,000, as this seems to meet the needs of the best lease and
lease purchase candidates.
CMI expects to purchase these facilities at or below their market price, often
because the seller is in need of the cash from a sale to complete a move to a
new building. We look especially for those properties that have a high land
value, compared to the value of the building. CMI's goal is to earn at least a
15% return on our cash investment on any property, plus any gain from the sale
of the property or other income from services. At some point in the future we
may sell the property to one of the tenants, or to a third party. CMI expects to
receive a market or above market
<PAGE>
value for the sale of the building, because we are able to provide financing to
a borrower and may have developed lease tenants for the property.
There are special risks in the acquisition of any ministry-related property,
because it is usually designed for a single use. We may be unable to find
tenants which can pay sufficient rents, or to find a purchaser. When we acquire
a property previously owned by a non-profit entity, it will probably become
subject to real estate taxes as long as we hold title. Our leases are on a
triple net lease basis, making tenants responsible for the payment of all taxes,
as well as insurance and utilities.
In addition to church related ministry buildings, CMI may from time to time
purchase existing senior adult living or daycare facilities, childcare or
Christian school properties to be leased to non-profit religious entities. These
will be leased on terms similar to those offered to churches. We may require
that there be management and developers which are experienced in the type of
facility to be acquired.
Any acquisition will be subject to the identification of potential tenants who
have successfully completed our underwriting process. We do not currently intend
to engage in speculative acquisitions.
New Property Development: CMI may develop a new facility, in conjunction with
church, ministry or non-profit organization, where there are not existing
facilities or buildings that would meet their needs. Church properties
facilities would be from 2000 to 10,000 square feet, with budgets from $300,000
to $1,000,000. Churches would select from standardized plans available to CMI
and use a developer we accept.
The typical lease purchase agreement with a congregation would extend for three
years and require a monthly lease payment. The terms of these lease payments may
vary, including using deferred lease payments, but CMI will seek to maintain its
15% target rate of return on investments. The actual lease payment will be
determined by CMI's cost of funds and its expected rate of return as well as the
lessee's ability to make the lease payments. At the end of the lease period the
lessee will be required to purchase the project at the price in the lease
purchase agreement. During the lease period the property will be held in the
name of CMI.
The church will typically have been in existence for at least a year and have a
minimum income of $75,000 per year. CMI will 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. A deposit of one
month's rent will be required before CMI will begin development of the project.
In addition to churches, church ministry facilities, and Christian schools, CMI
anticipates that a portion of its assets will be invested to develop senior
adult housing, including independent living and assisted living facilities to be
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 60 to 80 units and cost from $4 million to $6 million. In
addition, there are costs associated with the acquisition of property, zoning,
permitting, engineering, marketing and operating that may require additional
investment by CMI. 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 leased to the non-profit entity and sold after three years or
upon stabilization of occupancy, when financing can be available from
conventional sources, such as commercial banks or investment banks.
These nonprofit organizations may have little or no assets with which they can
provide additional guarantees, collateral or equity for the project. CMI 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 its investment CMI 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 be normally no guarantees from the developer or manager. CMI will not
invest in a project unless a suitable lessee/purchaser has been qualified by the
board of directors and signed a letter of inducement or intent.
<PAGE>
Possible acquisition of non-profit church loan funds
We believe it could further CMI's 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 CMI's 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.
It would be our intent in acquiring these funds to invest any cash available in
CMI's 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 CMI's financing programs.
Acquisition of the loan and investment portfolios of church loan funds can be
accomplished in a number of different ways. CMI has 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 CMI. In a merger, CMI might assume
all of the assets and debts of the church loan fund, but not the fund's net
worth, if any. 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.
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 employees of CMI, but are paid a commission to identify applicants for
CMI's programs. They may also pursue development of the projects and present
them to CMI for its 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 CMI seeks to serve.
<PAGE>
We do not know of any commercial or nonprofit entities that provide facility
lease financing for churches and other non-profit entities as an integral part
of their business, except in the case of senior adult living facilities. Many of
these lenders represent a referral source for properties that CMI may acquire
for its lease purchase programs.
CMI will face competition from other financing institutions in some areas of its
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 financing, real estate, and
construction market and our low cost of operations.
Employees
Our only employees are Cecil A. Brooks and John T. Ottinger, the two officers of
CMI. They currently work part-time. Their compensation is included in the
administrative services agreement with Presbyterian Investors Fund.
Facilities
Our office facilities are provided as part of the administrative services
agreement with Presbyterian Investors Fund.
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 or leases to consumers, so we are not subject to the
many federal, state and local laws about lending and renting. We are not
required to be licensed in the states in which we operate. Our borrowers and
tenants 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 or
tenants 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
CMI is 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 CMI or any of those properties.
Management
CMI's board of directors is elected annually by the shareowners. The board is
responsible for CMI's policies and management. However, the board retains a
staff to manage the day-to-day affairs, subject to its supervision.
<PAGE>
Directors and officers
Name, residence address Age Responsibility
- ----------------------- --- --------------
Cecil A Brooks 67 Director, Chairman of the
9123 Shetland Trail #10206 Board, President, CEO
Jasper, GA 30143
John T. Ottinger 45 Director, Vice President, CFO,
451 Battersea Dr. Secretary and Treasurer
Lawrenceville, GA 30044
Theodore R. Fox 67 Director, Member of the
575 Big Canoe Audit Committee
Big Canoe, GA
Richard E. McLaughlin 68 Director, Member of the
2627 West Grand reserve Circle #511 Loan Committee
Clearwater, FL 33759
Jayme Sickert 52 Director, Member of the
2891 Inverloch Circle Loan Committee
Duluth GA 30096
Irving B. Wicker 74 Director
132 Eswick Drive
Prattville, AL 36067
Taylor McGown 62 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
William Lamberth 48 Director
203 Clematis Court
McKinney, Texas 75070
All directors are elected by the shareowners. Their present terms will conclude
at the annual meeting of shareowners in 2000. At that meeting, a third of the
directors elected will serve until the annual meeting in 2001, a third until the
2002 meeting and a third until the meeting in 2003. 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 the Presbyterian Investors Fund) in 1985 and
has served as President since its inception. Mr. Brooks has served on the boards
of a number of non-profit organizations concerned with foreign missions and
housing for the elderly. As President of Presbyterian Investors Fund and
Cornerstone Ministries Investments, Mr. Brooks has over 14 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 1996.
<PAGE>
John T. Ottinger, Jr. has served in these capacities since CMI was
founded. 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 staff of Presbyterian Investors Fund in 1985 and currently serves as
Vice President and Secretary/Treasurer. He serves in the same capacities for
CMI. Mr. Ottinger has 14 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 1996. 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. He has previously served on the Board of Presbyterian Investors
Fund.
Irving B Wicker has served as a director since 1996. He graduated from
the University of Maryland in 1959 and received a Masters Degree from George
Washington University in 1963. Mr. Wicker is a retired Lieutenant Colonel from
the United States Air Force and has been a real estate broker and financial
planner for 15 years. Mr. Wicker has served on the Board of Presbyterian
Investors Fund since 1990
Taylor McGown has served as a director since 1996. 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. He has served on the Board of Presbyterian Investors Fund since 1985.
Henry Darden has served as a director since 1906. 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. Mr. Darden has served as a board member of
Presbyterian Investors Fund.
William Lamberth has served as a director since 1998. He graduated from
Southern Methodist University in 1974 with a degree in Business Administration.
Mr. Lamberth spent the next 13 years in the real estate development business
before entering Gordon Conwell Seminary in 1987. He finished seminary in 1992
and was appointed assistant pastor of Park Cities Presbyterian Church in Dallas,
Texas. He started Redeemer Presbyterian Church in the northern Dallas suburb of
McKinney in 1996 and serves as senior pastor.
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 CMI's internal accounting controls.
<PAGE>
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 board and committee meeting they
attend. We reimburse them for travel expenses to attend meetings.
Executive compensation
Cecil Brooks and John Ottinger are our only executive officers. They are
compensated by Presbyterian Investors Fund and their services to CMI are
included in the administrative services agreement we have with Presbyterian
Investors Fund. The board of directors may decide to provide compensation to
them in the future, through salary or through a long-term compensation plan. CMI
has no employment agreements.
Indemnification of directors and officers and limitation of their liability
Officers or directors are not liable to 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 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, CMI will indemnify its 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. CMI 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 CMI's officers
and directors.
Certain transactions
Presbyterian Investors Fund, Inc. is a founding investor and owned 37.8% of
CMI's common stock, before this offering began. It could elect a controlling
number of our directors. CMI purchased six existing church loans from the Fund
in October 1997. All of the loans were current in their payments and they had a
10.25% average interest rate. The $447,954 price was equivalent to the unpaid
principal balance on the loans at the date of purchase.
We sold a $700,000 participation in a $750,000 loan to the Fund in 1999, shortly
after we had originated it. The purchase price was equal to the loan principal
amount. CMI retained the loan origination fees.
Our administrative services, including officer compensation and a pro-rated
portion of office space, are supplied by the Fund, under a services agreement.
The payment is equal to 1.5 percent of our assets and amounted to $47,400 in
1999. No fee was paid in 1998.
Any future material affiliated transactions and loans will be made or entered
into on terms that are no less favorable to CMI than those that can be obtained
from unaffiliated third parties and must be approved by a majority of CMI's
independent directors who do not have an interest in the transactions and who
had access, at CMI's expense, to CMI's or independent legal counsel. CMI does
not make loans to its officers or directors.
<PAGE>
Principal shareowners
The following table shows the beneficial ownership of CMI's common
stock immediately prior to this offering, giving effect to the 1.5384 for 1
stock split to be effective January 14, 2000 and as adjusted to reflect the sale
of the shares being offered, for shares owned by:
(i) each of CMI's 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.
<TABLE>
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.
<CAPTION>
Number of
Shares Percentage of Total Common Stock Beneficially Owned
Beneficially ---------------------------------------------------
Name of Beneficial Owner Owned Before Offering After Offering
- ------------------------ ----- --------------- --------------
<S> <C> <C> <C>
Cecil A. Brooks 1,538 * *
Taylor McGown 1,538 * *
Irving B. Wicker 1,538 * *
Presbyterian Investors Fund, Inc. 69,228 37.8% 12.8%
All directors and executive officers
as a group (3 Persons) 4,614 2.5% *
<FN>
* Amounts to less than one percent.
</FN>
</TABLE>
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. Before
sales in this offering, CMI had 183,228 shares of common stock outstanding, held
by 76 shareowners. This includes shares to be issued in the January 14, 2000
stock split of 1.5384 shares of common stock for each share owned on that date.
No shares of preferred stock have ever been issued. There are $3,056,276 of
Series A Certificates of Indebtedness outstanding. This is a description of
these securities:
Common stock
The owners of common stock elect all the members of CMI's 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 American Securities Transfer &
Trust, Inc.
Preferred stock
No shares of preferred stock have been issued and our board of directors does
not presently intend to issue any. No preferred stock will be offered to CMI's
officers, directors or principal shareowners, except on the same terms as it is
<PAGE>
offered to all other existing shareowners or to new shareowners. The board 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 CMI, conversion into other CMI 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 control of CMI or other transactions that
some common stock owners might believe to be in their best interests.
Certificates of indebtedness
We issued $3,056,276 of Series A Certificates of Indebtedness during a
public offering from October 1998 through October 1999. We are now offering up
to $17,000,000 of Series B Certificates of Indebtedness. The Series A
Certificates were secured in their payment of principal and interest by the
deposit in trust of an amount of CMI's mortgage loans and cash which was equal
to the unpaid amount of Series A certificates. There is no trust deposit or
other collateral to secure payment of the Series B certificates.
Payment dates and interest rates. We are offering up to $3,000,000 of Series B
Certificates with a March 15, 2003 maturity date and a 7.00% interest rate. We
are also offering up to $14,000,000 of Series B Certificates with a March 15,
2005 maturity date and a 9.00% interest rate. Both certificates may be purchased
in any amount, with a minimum purchase of $2,500. 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.
Unsecured obligations. No assets have been set aside as collateral for the
payment of the certificates. They are general obligations of CMI, with no
preference over any other debt that CMI may have. CMI is 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 CMI from issuing additional
debt or making any additional debt senior in payment priority to the
certificates. CMI is not required to maintain any particular ratios of its debt
to its assets or its stockholders' equity.
Default. Fidelity National Bank, in Atlanta, is the trustee for the
certificates. A default would occur if CMI were more than 60 days late in making
an interest or principal payment or if it 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. CMI does 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. Holders 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 other CMI securities. We do expect, however, to be
offering a new series of certificates at the time the Series A and Series B
certificates mature. Owners could ask that all or part of the amounts due them
be reinvested in new certificates, after they had received a current prospectus
describing CMI and 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.
<PAGE>
The shares sold in this offering and the 109,386 shares sold in the first public
offering will be 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 Securities
Act, including its Rule 144. Rule 144(k) provides that a person who is not an
officer, director or principal shareowner of CMI 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 listed, Huntleigh
Securities Corp. and Medallion Equities, 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
CMI is offering shares and certificates directly to the public through John T.
Ottinger, its Chief Financial Officer, 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. CMI 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. and Medallion Equities,
Inc. They will be paid commissions for sales they make of three percent on
certificates due 2003, five percent on certificates due 2005 and seven percent
on shares of common stock. CMI has 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. Both CMI 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 have applied to register this offering
in Alabama, Florida, Georgia, Illinois, Indiana, Maryland, Mississippi, North
Carolina, South Carolina, Pennsylvania, Tennessee, Virginia and West Virginia.
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 and shares will be immediately available to CMI to use in its
business. We plan to continue the offering until all the shares and 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,
1997 and December 31, 1998 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.
CMI will have to 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
<PAGE>
Branch at 800-SEC-0330. Our registration statement and reports are also
available on the Commission's Internet site at http://www.sec.gov.
We intend to furnish our shareowners with annual reports containing audited
financial statements after the end of each fiscal year.
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
<PAGE>
T. JACKSON McDANIEL III
Certified Public Accountant
1439 McLendon Drive
Suite C
Decatur, GA 30033
(770) 491-0609
To the Board of Directors
Cornerstone Ministries Investments, Inc.
I have audited the accompanying balance sheet of Cornerstone Ministries
Investments, Inc. as of December 31, 1999, 1998 and 1997 and the related
statements of income, retained earnings, and cash flows for the 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 Cornerstone Ministries Investments,
Inc. as of December 31, 1999, 1998 and 1997 and results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ T. Jackson McDaniel CPA
- ---------------------------
March 15, 2000
F-1
<PAGE>
<TABLE>
CORNERSTONE MINISTRIES INVESTMENTS, INC.
BALANCE SHEET
December 31, 1999, December 31, 1998 and December 31, 1997
<CAPTION>
ASSETS
12/31/99 12/31/98 12/31/97
---------- ---------- ----------
<S> <C> <C> <C>
CURRENT ASSETS
CASH $ 706,035 $ 677,576 $ 75,875
ACCOUNTS RECEIVABLE -- -- --
ACCRUED INTEREST RECEIVABLE 46,167 1,948 2,325
---------- ---------- ----------
TOTAL CURRENT ASSETS 752,202 679,524 78,200
REAL ESTATE LOANS RECEIVABLE 3,412,979 625,179 423,297
INTANGIBLE ASSETS-NET OF ACCUMULATED
AMORTIZATION 332,200 199,510 14,753
OTHER ASSETS 5,000 --
---------- ---------- ----------
TOTAL ASSETS $4,502,381 $1,504,213 $ 516,250
========== ========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 87,537 $ 147,534 $ --
INTEREST PAYABLE 83,750 2,697 --
INCOME TAXES PAYABLE 30,810 -- --
DIVIDENDS PAYABLE 29,776 -- --
RENT DEPOSITS HELD 700 5,780 1,181
---------- ---------- ----------
TOTAL CURRENT LIABILITIES 232,573 156,011 1,181
LONG TERM LIABILITIES-INVESTOR CERTIFICIATES
INVESTOR CERTIFICATES 3,056,276 608,500 --
DEFERRED INCOME TAXES 12,372 3,948 --
---------- ---------- ----------
TOTAL LONG TERM LIABILITIES 3,068,648 612,448 --
---------- ---------- ----------
TOTAL LIABILITIES 3,301,221 768,459 1,181
COMMON STOCK, .01 PAR VALUE,
10,000,000 SHARES AUTHORIZED,
119,103 ISSUED AND OUTSTANDING 1,191 730 510
PAID IN CAPITAL 1,189,839 729,140 509,490
RETAINED EARNINGS (DEFICIT) 10,130 5,884 5,069
---------- ---------- ----------
TOTAL SHAREHOLDER'S EQUITY 1,201,160 735,754 515,069
---------- ---------- ----------
TOTAL LIABILITIES AND MEMBER'S EQUITY $4,502,381 $1,504,213 $ 516,250
========== ========== ==========
<FN>
See accompanying accountant's report and notes to financial statements
</FN>
</TABLE>
F-2
<PAGE>
<TABLE>
CORNERSTONE MINISTRIES INVESTMENTS, INC
STATEMENT OF INCOME
AND RETAINED EARNINGS
For the years ended December 31, 1999, December 31, 1998
and December 31, 1997
<CAPTION>
12/31/99 12/31/98 12/31/97
--------- --------- ---------
<S> <C> <C> <C>
REVENUES
Interest Income-Loans $ 148,758 $ 47,958 $ 9,465
Fees Earned 263,162 -- --
Rental Income 1,452 -- --
Gain on Sale of Real Estate 86,513 37,280 --
--------- --------- ---------
TOTAL REVENUES 499,885 85,238 9,465
OPERATING EXPENSES
Interest Expense-Investor Certificates 209,541 6,297 --
Management Fees 47,400 -- --
Marketing Expenses 33,876 12,716 --
Operating Expenses 70,816 20,313 3,499
--------- --------- ---------
TOTAL OPERATING EXPENSES 361,633 39,325 3,499
NET INCOME FROM OPERATIONS 138,252 45,913 5,966
OTHER INCOME (EXPENSE)
Interest Income-Banks 34,453 3,190 --
Income Tax Expense (56,567) (10,038) (1,181)
--------- --------- ---------
TOTAL OTHER INCOME (EXPENSE) (22,114) (6,848) (1,181)
NET INCOME $ 116,138 $ 39,065 $ 4,785
RETAINED EARNINGS (DEFICIT)-BEGINNING OF YEAR 5,884 5,069 284
DIVIDENDS PAID (111,892) (38,250) --
--------- --------- ---------
RETAINED EARNINGS (DEFICIT)-END OF YEAR $ 10,130 $ 5,884 $ 5,069
========= ========= =========
<FN>
See accompanying accountant's report and notes to financial statements
</FN>
</TABLE>
F-3
<PAGE>
<TABLE>
CORNERSTONE MINISTRIES INVESTMENTS, INC.
STATEMENT OF CASH FLOWS
For the years ended December 31, 1999, December 31, 1998
and December 31, 1997
<CAPTION>
12/31/99 12/31/98 12/31/97
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash from Operations:
<S> <C> <C> <C>
Net income (loss) $ 116,138 $ 39,065 $ 4,785
Items that do not use
Cash:
Amortization 14,332 3,879 509
(Increase) Decrease in
Accounts Receivable -- -- --
(Increase) Decrease in
Accrued Interest Receivable (44,219) 377 (2,325)
(Increase) Decrease in
Intangible Assets (147,022) (188,636) (15,262)
(Increase) Decrease in
Other Assets (5,000) -- --
Increase (Decrease) in
Accounts Payable (59,997) 147,534 --
Increase (Decrease) in
Interest Payable 81,053 2,697 --
Increase (Decrease) in
Dividends Payable 29,776 -- --
Increase (Decrease) in
Rent Deposit Payable (5,080) 4,599 1,181
Increase (Decrease) in
Income taxes payable 30,810 -- --
Increase (Decrease) in
Deferred tax liability 8,424 3,948 --
----------- ----------- -----------
Net Cash Provided (Used) by
Operating Activities 19,214 13,463 (11,112)
Cash Flows From Investing Activities:
Loans purchased -- -- (446,736)
Loans made (3,552,450) (364,585) --
Loan principal repayments received 764,874 162,703 23,439
----------- ----------- -----------
Net Cash Provided (Used) by
Investing Activities (2,787,576) (201,882) (423,297)
Cash Flows From Financing Activties:
Stock subscriptions sold 461,160 219,870 450,000
Certificates of Indebtedness Issue 2,417,776 608,500 --
Dividends Paid (82,116) (38,250) --
----------- ----------- -----------
Net Cash Provided by Financing Activities 2,796,820 790,120 450,000
Net Increase (Decrease)
in Cash: 28,458 601,701 15,591
Cash-Beginning of Year 677,576 75,875 60,284
----------- ----------- -----------
Cash-End of Year $ 706,035 $ 677,576 $ 75,875
=========== =========== ===========
During the year ended December 31, 1999 the Company paid cash interest of $114,268.
<FN>
See accompanying accountant's report and notes to financial statements
</FN>
</TABLE>
F-4
<PAGE>
<TABLE>
CORNERSTONE MINISTRIES INVESTMENTS, INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
For the year ended December 31, 1999
<CAPTION>
Retained Total
Common Paid-In Earnings Owner's
Stock Capital (Deficit) Equity
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1998 $ 730 $ 729,140 $ 5,884 $ 735,754
Net Income (Loss) for the year
ended December 31, 1999 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
=========== =========== =========== ===========
</TABLE>
F-5
<PAGE>
CORNERSTONE MINISTRIES INVESTMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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.
It was originally the intent of Management of The Company to cause The Company
to qualify as a Real Estate Investment Trust (REIT) under the tax laws of the
United States at sometime in the future. However, The Company's Board of
Directors has decided to no longer seek REIT status at this time due to market
conditions and the limitations imposed upon REIT's with respect to the raising
of capital.
(C) Organizational Information
The Company is a corporation organized under the laws of the State of Georgia.
(D) Organizational Expenses
The expenses associated with organizing the corporation and beginning business
have been capitalized and are being amortized over 60 months.
(E) 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 years ended December 31, 1998 and December
31, 1997 are 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.
F-6
<PAGE>
CORNERSTONE MINISTRIES INVESTMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(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 - RELATED PARTY TRANSACTIONS
The Company is being managed by individuals employed by its majority
shareholder. The Company is charged a management fee for these management
services. During the year ended December 31, 1997 The Company purchased loans
with a remaining balance of approximately $423,000 from its majority
shareholder.
During the year ended December 31, 1999 the management fee charged was $47,400.
No management fee was charged in prior periods.
NOTE 3 - LEASE COMMITMENTS
The Company currently has no lease commitments. It is sharing resources with its
largest shareholder.
NOTE 4 - REAL ESTATE LOANS RECEIVABLE
At December 31, 1999, December 31, 1998, and December 31, 1997 the Company had
Real Estate Loans Receivable from Churches totaling $3,412,979, $625,179 and
$423,297 respectively. These loans mature over a period beginning in 2000 and
ending in 2012.
NOTE 5 - 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 periods of 5 to 40 years.
NOTE 6 - INCOME TAXES
Income taxes payable and the corresponding expense on The Company's net income
for the years ended December 31, 1999, December 31, and 1998, December 31, 1997
has been computed as follows:
12/31/1999 12/31/1998 12/31/1997
---------- ---------- ----------
Current: Federal $36,044 $ 4,128 $ 851
State 8,151 1,962 330
Deferred Federal 10,747 2,820 --
State 1,625 1,128 --
------- ------- -------
$56,567 $10,038 $ 1,181
======= ======= =======
Deferred income taxes arise because of timing differences between financial
accounting and tax accounting rules for the deductibility of intangible
amortization expense.
F-7
<PAGE>
CORNERSTONE MINISTRIES INVESTMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 7 - 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, 1999, December 31,
1998 and December 31, 1997 the Company had cash in one institution that was over
the amount insured by the FDIC of $606,035, $577,576 and $0 respectively.
NOTE 8-OTHER ASSETS
Other Assets at December 31, 1999 includes approximately $40,600 held in escrow
to be distributed in the near term to churches as additional loan amounts. The
amount to be distributed is also included in Accounts Payable due to their short
term nature. As of the date of the accountant's report all of these funds had
been distributed.
NOTE 9-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.
NOTE 10-SECURITIES OFFERING
Prior to December 31, 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 not
completed the SB-2 registration requirements and as such has not issued any
additional stock or certificates of indebtedness.
NOTE 11-STOCK SPLIT
Prior to December 31, 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, 1999.
F-8
<PAGE>
[Alternate Certificate of Indebtedness Page]
$17,000,000
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.
--------------
<TABLE>
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.
<CAPTION>
===================================================================================================
Certificate Annual Principal Public Offering Broker-dealer
Maturity Interest Amount Price per Discounts and Proceeds to
Date Rate Offered Certificate Commissions CMI
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
March 15, 2003 7.00% $ 3,000,000 $ 2,500 $ 75 $ 2,425
March 15, 2005 9.00% 14,000,000 $ 2,500 $ 125 $ 2,375
- ---------------------------------------------------------------------------------------------------
Total $17,000,000 $ 790,000 $16,210,000
===================================================================================================
</TABLE>
--------------
The date of this Prospectus is___________, 2000
<PAGE>
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
The Registrant's Articles of Incorporation, Article VII, provide that
none of its directors shall be personally liable to the Registrant or its
shareholders for monetary damages for breach of duty of care or other duty as a
director, except as liability is required by the Georgia Business Corporation
Code or other applicable law. The Registrant's Bylaws, Article VI, require the
Registrant to indemnify officers or directors who were wholly successful in the
defense of any proceeding to which they were parties because they were officers
or directors. This mandatory indemnification is against reasonable expenses they
incurred in the proceeding. The Registrant is permitted to indemnify officers
and directors, and to pay their reasonable defense expenses, except in such
cases as those involving conduct that was unlawful or in bad faith. Permission
must come from a majority of disinterested directors or shareholders.
These provisions in the Registrant's articles and bylaws may permit
indemnification to directors, officers or persons controlling the Registrant for
liabilities arising under the Securities Act of 1933. The Registrant has been
informed that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
Item 25. Other Expenses of Issuance and Distribution.
Expenses of the Registrant in connection with the issuance and
distribution of the securities being registered are estimated as follows,
assuming the Maximum offering amount is sold:
Securities and Exchange Commission filing fee ................. $ 4,802
Blue sky fees and expenses .................................... 6,400
Accountant's fees and expenses ................................ 13,500
Special Counsel's fees and expenses ........................... 75,000
General Counsel's fees and expenses ........................... 35,000
Printing and Edgar filer ...................................... 10,000
Postage and other delivery media .............................. 5,000
Marketing expenses, including travel .......................... 25,000
Miscellaneous ................................................. 10,298
--------
Total .................................................... $185,000
========
(The Registrant will bear all these expenses.)
Item 26. Recent Sales of Unregistered Securities.
<TABLE>
(a) The following information is given for all securities that the Registrant
sold within the past three years without registering the securities under the
Securities Act. The numbers give effect to the 1.5384 for one stock split, to be
effective January 14, 2000.
<CAPTION>
Date Title Amount
---- ----- ------
<S> <C> <C>
(1) October 1997 common stock 69,228 shares
(2) November 1998 through October 1999 common stock 106,308 shares
(2) November 1998 through October 1999 Series A Certificates of Indebtedness $3,056,276
</TABLE>
(b) (1) No underwriters were used. There was one purchaser, Presbyterian
Investors Fund, Inc., which has total assets in excess of $5,000,000, is an
organization described in section 501(c)(3) of the Internal Revenue Code
and was not formed for the specific purpose of acquiring these securities.
Sophisticated persons as described in Rule 506(b)(2)(ii) directed its
purchase.
<PAGE>
(2) No underwriters were used. The following registered securities
broker-dealers participated as agents in the best efforts public offering
of these securities: Great Nation Investment Corp., Huntleigh Securities
Corp. and Medallion Equities, Inc.
(c) (1) All securities were sold for cash. The total offering price of the
securities sold was $450,000. No underwriting discounts or commissions were
paid.
(2) The total offering price of the securities sold was $691,030 from the
sale of shares and $3,056,276 from the sale of certificates. The total
compensation paid to securities broker-dealers was $111,980.
(d) The section of the Securities Act under which the Registrant claims
exemption from registration and the facts relied upon to make the exemption
available are:
(1) Section 4(2). The one purchaser became the majority shareowner. It
provides management and administrative services to the Registrant. It is an
accredited investor as defined by Rule 501 and is in the business of making
investments.
(2) Section 3(b). The entire offering was the subject of a qualification on
Form 1-A, pursuant to Regulation A of the General Rules and Regulations
under the Securities Act of 1933, File No.24-3710.
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
------ -----------
1.1* Sales Agency Agreement with Huntleigh Securities Corp. and
Medallion Equities, Inc.
3.1 Amended and Restated Articles of Incorporation of the
Registrant
3.2 Amended and Restated By-laws of the Registrant
4.1 Article III.A., page 1 of the Amended and Restated Articles
of Incorporation and Article III of the Amended and Restated
By-laws (Reference is made to Exhibits 3.1 and 3.2)
4.2 Description of common stock certificate
4.3 Form of Series B Certificate of Indebtedness
4.4 Trust Indenture for Series B Certificates of Indebtedness
4.5 Trust Indenture for Series A Certificates of Indebtedness
4.6 Amendment to Series A Trust Indenture
5* Opinion and consent of counsel with respect to the legality
of the shares being registered
10.1 Administrative Services Agreement with Presbyterian Investors
Fund, Inc.
23.1* Consent of T. Jackson McDaniel III, Certified Public
Accountant
23.2 Consent of Counsel (reference is made to Exhibit 5)
24 Power of Attorney
25* Statement of eligibility of trustee, form T-1
27 Financial Data Schedule (submitted only in electronic format)
- -----------------------
* Filed with this pre-effective amendment no. 2
<PAGE>
Item 28. Undertakings.
(a) The Registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time
to be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(d) The registrant has been advised that, in the opinion of the Securities
and Exchange Commission, indemnification to directors, officers and
controlling persons of the registrant for liabilities arising under the
Securities Act is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
<PAGE>
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 Pre-effective
Amendment No. 2 to Registration Statement to be signed on its behalf by the
undersigned, in Norcross, Georgia, on March 16, 2000.
CORNERSTONE MINISTRIES INVESTMENTS, INC. (Issuer)
By S/ CECIL A. BROOKS
----------------------------------------------
Cecil A. Brooks, Chief Executive Officer
<TABLE>
In accordance with the requirements of the Securities Act of 1933, this
pre-effective amendment No. 2 to registration statement was signed by the
following persons in the capacities and on the dates stated.
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
S/CECIL A. BROOKS Chief Executive Officer, President and March 16, 2000
- -------------------------------------------- Chairman of the Board of Directors
Cecil A. Brooks
S/JOHN T. OTTINGER Vice President, Chief Financial Officer March 16, 2000
- -------------------------------------------- Secretary, Treasurer and Director
John T. Ottinger (Principal financial and accounting officer)
S/THEODORE R. FOX* Director March 16, 2000
- --------------------------------------------
Theodore R. Fox
S/RICHARD E. MCLAUGHLIN* Director March 16, 2000
- --------------------------------------------
Richard E. McLaughlin
S/JAYME SICKERT* Director March 16, 2000
- --------------------------------------------
Jayme Sickert
S/IRVING B. WICKER* Director March 16, 2000
- --------------------------------------------
Irving B. Wicker
S/TAYLOR MCGOWN* Director March 16, 2000
- --------------------------------------------
Taylor McGown
S/HENRY R. DARDEN* Director March 16, 2000
- --------------------------------------------
Henry Darden
S/WILLLIAM LAMBERTH* Director March 16, 2000
- --------------------------------------------
William Lamberth
* S/CECIL A. BROOKS March 16, 2000
----------------------------------------
Cecil A. Brooks
Attorney-in-fact
</TABLE>
Cornerstone Ministries Investments, Inc.
UP TO 350,000 SHARES OF COMMON STOCK ($2,275,000)
AND $17,000,000 OF CERTIFICATES OF INDEBTEDNESS
Purchase Price $ 6.50 Per Share
$2,500 (Minimum Purchase) Certificates of Indebtedness
SALES AGENCY AGREEMENT
____________, 2000
Ladies and Gentlemen:
Cornerstone Ministries Investments, Inc., a Georgia corporation, hereby
confirms its respective agreements with ______________________________________
("Agent"), a broker-dealer registered with the Securities and Exchange
Commission ("Commission") and a member of the National Association of Securities
Dealers, Inc. ("NASD"), as follows:
1. Introduction. The Company desires to offer up to 350,000 shares of
its common stock (the "Common Stock") and up to $17,000,000 certificates of
indebtedness for an aggregate purchase price of up to $19,275,000 in an offering
pursuant to Regulation SB-2 under the Securities Act of 1933, as amended (the
"1933 Act"). The Company has been advised by Agent that it desires to use its
best efforts to assist the Company with its sale of the Common Stock and
Certificates in the Offering as described in the Offering Circular attached
hereto as Exhibit "A" and made a part hereof.
2. Representations and Warranties of the Company. The Company
represents and warrants to Agent that:
(a) The Company has filed with the Commission an offering
statement on Form SB-2, including exhibits and all amendments and supplements
thereto (No. 24-3710), including the Offering Circular, for the registration of
the Common Stock and Certificates under the 1933 Act. Such offering statement
has been qualified under the 1933 Act and no proceedings therefor have been
initiated or, to the best of the Company's knowledge, threatened by the
Commission (provided that for this purpose the Company shall not regard any such
proceeding as "threatened" unless the Commission has manifested to the
management of the Company, or to its counsel, a present intention to initiate
such proceeding). Such offering statement, as amended or supplemented, if
amended or supplemented, on file with the Commission at the time the offering
statement becomes effective, including the Offering Circular, financial
statements, schedules, exhibits and all other documents filed as part thereof,
is herein called the "Offering Statement," and the Offering Circular, as amended
or supplemented, if amended or supplemented, on file with the Commission at the
time the Offering Statement becomes effective is herein called the "Offering
Circular," and shall include any amendments or supplements thereto from and
after their dates of qualification or use, respectively.
(b) As of the date of the Offering Circular (i) the Offering
Statement and the Offering Circular (as amended or supplemented, if amended or
supplemented) complied and will comply in all material respects with the 1933
Act, (ii) the Offering Statement (as amended or supplemented, if amended or
supplemented) did not and will not contain an untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
(iii) the Offering Circular (as amended or supplemented, if amended or
supplemented) did not and will not contain any untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. Representations or warranties in this subsection shall not apply to
statements or omissions made in reliance upon and in conformity with written
information furnished to the Company relating to Agent by or on behalf of Agent
expressly for use in the Offering Statement or the Offering Circular.
<PAGE>
(c) The Company is duly organized as a business corporation
under the laws of the State of Georgia, and is validly existing and in good
standing under the laws of the State of Georgia with full power and authority to
own its property and conduct its business as described in the Offering Circular.
(d) The Company has good, marketable and insurable title to
all assets material to its business and to those assets described in the
Offering Circular as owned by the Company, free and clear of all material liens,
charges, encumbrances or restrictions, except as are described in the Offering
Circular, and all of the leases and subleases of the Company under which it
holds properties, including those described in the Offering Circular, are in
full force and effect as described therein.
(e) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary action on the part of the Company, and this
Agreement is a valid and binding obligation of the Company, enforceable in
accordance with its terms (except as the enforceability thereof may be limited
by bankruptcy, insolvency, moratorium, reorganization or similar laws relating
to or affecting the enforcement of creditors' rights generally or by general
equity principles, regardless of whether such enforceability is considered in a
proceeding in equity or at law, and except to the extent that the provisions of
Sections 7 and 8 hereof may be unenforceable as against public policy).
(f) There is no litigation or governmental proceeding pending
or, to the knowledge of the Company, threatened against or involving the Company
or any of its assets except as required to be disclosed in the Offering
Circular. Any litigation or governmental proceeding is not considered
"threatened" unless the potential litigant or governmental authority has
manifested to the management of the Company, or to their counsel, a present
intention to initiate such litigation or proceeding.
(g) The Company has all power, authority, authorizations,
approvals and orders as may be required to enter into this Agreement, to carry
out the provisions and conditions hereof and to issue and sell the Common Stock
and Certificates to be sold by it as provided herein.
(h) The financial statements of the Company which are included
in the Offering Statement and are part of the Offering Circular fairly present
the financial condition, results of operations, retained earnings and cash flows
of the Company at the respective dates thereof and for the respective periods
covered thereby and comply as to form in all material respects with applicable
accounting requirements of the regulations promulgated under the 1933 Act (the
"1933 Act Regulations"). Such financial statements have been prepared according
to generally accepted accounting principles consistently applied throughout the
periods involved except as noted therein. The tables in the Offering Circular
accurately present the information purported to be shown thereby at the
respective dates thereof and for the respective periods covered thereby.
(i) There has been no material change with respect to the
condition (financial or otherwise) results of operations, business, assets or
properties of the Company since the latest date as of which such condition on
the latest period for which such operations is set forth in the Offering
Circular except as referred to therein; and the capitalization, assets,
properties and businesses of the Company conform in all material respects to the
descriptions thereof contained in the Offering Circular as of the date specified
and, since such date, there has been no Material Adverse Effect on the Company.
The Company does not have any contingent liabilities, except as set forth in the
Offering Circular.
(j) No default exists, and no event has occurred which with
notice or lapse of time, or both, would constitute a default, on the part of the
Company, to the best knowledge of the Company, on its part in the due
performance and observance of any material term, covenant or condition of any
agreement which would result in a Material Adverse Effect on the Company; said
agreements are in full force and effect; and no other party to any such
agreement has instituted or, to the best knowledge of the Company, threatened
any action or proceeding wherein the Company, would be alleged to be in default
thereunder.
(k) The Company is not in violation of its articles of
incorporation or bylaws or in default in the performance of any material
obligation, agreement or condition contained in any bond, debenture, note or any
other evidence of indebtedness. The execution and delivery of this Agreement,
the fulfillment of the terms set forth
<PAGE>
herein and the consummation of the transactions contemplated hereby shall not
violate or conflict with the articles of incorporation or bylaws of the Company
or violate, conflict with or constitute a breach of, or default (or an event
which, with notice or lapse of time, or both, would constitute a default) in any
material respects under, any agreement, indenture or other instrument by which
any of the Company is bound, or under any governmental license or permit or any
law, administrative regulation, authorization, approval, order, court decree,
injunction or order, except as may be required under the blue sky laws and
regulations (collectively, the "Blue Sky Laws") of various jurisdictions.
(l) Subsequent to the respective dates as of which information
is given in the Offering Circular and prior to the Closing Date, except as
otherwise may be indicated or contemplated therein, the Company has not issued
any securities or incurred any liabilities or obligation, direct or contingent,
for borrowed money, or entered into any transaction which is material in light
of the businesses and properties of the Company.
(m) The authorized, issued and outstanding equity capital of
the Company shall be as set forth in the Offering Circular under the caption
"Capitalization," and no equity or debt securities of the Company has been or
shall be issued and outstanding prior to the Closing Date; the issuance and the
sale of the Common Stock have been duly authorized by all necessary action of
the Company and shall be validly issued, fully paid and nonassessable and shall
conform to the description thereof contained in the Offering Circular; the
issuance of the Common Stock is not subject to preemptive rights; and good title
to the Common Stock will be transferred to the purchasers thereof upon issuance
thereof against payment therefore, free and clear of all claims, encumbrances,
security interests and liens whatsoever, with respect to the Company's interest
in such Common Stock. The certificates representing the Common Stock will
conform with the requirements of applicable laws and regulations.
(n) No approval of any regulatory, supervisory or other public
authority is required in connection with the execution and delivery of this
Agreement or the issuance of the Common Stock and Certificates, except as may be
required by the Commission and under the Blue Sky Laws of various jurisdictions.
(o) All contracts and other documents required to be filed as
exhibits to the Offering Statement have been filed with the Commission.
(p) T. Jackson McDaniel, who has certified the financial
statements of the Company included in the Offering Circular, is, and was during
the periods covered in its report in the Offering Circular, an independent
public accountant with respect to the Company within the meaning of the 1933
Act, the 1933 Act Regulations, the Code of Professional Ethics of the American
Institute of Certified Public Accountants and 12 C.F.R. 571.2(c)(3).
(q) The Company has not made any payment of funds of the
Company prohibited by law, and no funds of the Company have been set aside to be
used for any payment prohibited by law.
(r) All documents delivered by the Company in connection with
the issuance and sale of the Common Stock and the Certificates, except for those
documents which were prepared by parties other than the Company were on the
dates on which they were delivered, true, complete and correct.
(s) To the best knowledge of the Company, the Company complies
with all laws, rules and regulations relating to environmental protection, and
the Company has not been notified or is otherwise aware that it is potentially
liable, or is considered potentially liable, under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, or
any similar state or local laws. There are no actions, suits, regulatory
investigations or other proceedings pending or, to the best knowledge of the
Company, threatened against the Company relating to environmental protection,
nor does the Company have any reason to believe any such proceedings may be
brought against it. To the best knowledge of the Company, no disposal, release
or discharge of hazardous or toxic substances, pollutants or contaminants,
including petroleum and gas products, as any of these terms may be defined under
applicable federal, state or local laws, has occurred on, in, at or about any of
the facilities or properties of the Company or any of the facilities or
properties pledged to the Company as collateral for any loan or other extension
of credit granted by the Company.
<PAGE>
2. Representations and Warranties of Agent. Agent represents and
warrants to the Company that:
(a) Agent is registered as a broker-dealer with the Commission
and a member of the NASD, and is in good standing with the Commission and the
NASD.
(b) Agent is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation, with full
corporate power and authority to provide the services to be furnished to the
Company hereunder.
(c) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of Agent, and this
Agreement is a legal valid and binding obligation of Agent, enforceable in
accordance with its terms (except as the enforceability thereof may be limited
by bankruptcy, insolvency, moratorium, reorganization or similar laws relating
to or affecting the enforcement of creditors' rights generally or by general
equity principles, regardless of whether such enforceability is considered in a
proceeding in equity or at law, and except to the extent that the provisions of
Sections 7 and 8 hereof may be unenforceable as against public policy).
(d) Agent and each of its employees, agents and
representatives who shall perform any of the services required hereunder to be
performed by Agent shall be duly authorized and shall have all licenses,
approvals and permits necessary, to perform such services, and Agent is a
registered selling agent in the jurisdictions in which the Common Stock and
Certificates are to be offered for sale and will remain registered in such
jurisdictions in which the Company is relying on such registration for the sale
of the Common Stock and/or Certificates.
(e) The execution and delivery of this Agreement by Agent, the
fulfillment of the terms set forth herein and the consummation of the
transactions contemplated hereby shall not violate or conflict with the
corporate charter or bylaws of Agent or violate, conflict with or constitute a
breach of, or default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, any material agreement, indenture or other
instrument by which Agent is bound or under any governmental license or permit
or any law, administrative regulation, authorization, approval or order or court
decree, injunction or order.
(f) Any funds received by Agent to purchase shares of Common
Stock or Certificates will be handled in accordance with Rule 15c2-4 under the
1934 Act.
(g) There is not now pending nor, to Agent's knowledge,
threatened against Agent any action or proceeding before the Commission, the
NASD, any state securities commission or any state or federal court concerning
Agent's activities as a broker-dealer.
3. Employment of Agent; Sale and Delivery of the Shares and
Certificates. On the basis of the representations and warranties herein but
subject to the terms and conditions set forth in this Section 3, the Company
hereby employs Agent as its agent to use its best efforts in assisting the
Company with the Company's sale of the Shares of Common Stock and Certificates
in the Offering as described in the Offering Circular attached hereto as Exhibit
"A" and made a part hereof. The employment of Agent hereunder shall terminate
upon completion of the Offering.
As provided for in the Escrow Agreement dated as of
_________between the Company and American Securities Transfer and Trust
("ASTT"), Agent shall forward all proceeds received from the sale of the Shares
of Common Stock and Certificates to ASTT by noon of the next business day. Agent
shall cause all checks received by it in payment for such Shares of Common Stock
and Certificates to be made payable to ASTT.
When the Offering is completed, the Company agrees to issue or
have issued such shares of Common Stock and to release for delivery certificates
to subscribers thereof for such shares of Common Stock and Certificates as soon
as possible.
Agent shall receive as compensation for its services
hereunder, a commission equal to seven percent (7.0%) of the aggregate dollar
amount of shares of Common Stock sold by Agent in the Offering. Agent
<PAGE>
shall also receive as compensation for its services hereunder, a commission
equal to the following percentages of the aggregate dollar amount of
Certificates sold by Agent in the Offering:
Term of Certificates Percentage
-------------------- ----------
5-Year Certificate 5%
3-Year Certificate 3%
The Company shall wire, or shall cause to be wired, payment of
the foregoing commissions to Agent within five (5) business days of the
Company's receipt of an invoice from Agent. The Company shall pay all stock
issue and transfer taxes with respect to the sale of the shares of Common Stock
and Certificates. The Company shall pay all expenses of the Company relating to
any required Blue Sky or state securities laws, research and filings.
4. Offering. Subject to the provisions of Section 6 hereof, Agent is
assisting the Company on a best efforts basis in offering up to $2,275,000 in
shares of Common Stock and $17,000,000 of Certificates in the Offering. The
shares of Common Stock and Certificates are to be offered to the public at the
price set forth on the cover page of the Offering Circular and the first page of
this Agreement.
5. Further Agreements. The Company covenants and agrees that:
(a) The Company shall deliver to Agent, from time to time,
such number of copies of the Offering Circular as Agent reasonably may request.
The Company authorizes Agent to use the Offering Circular in connection with the
offer and sale of the shares of Common Stock and the Certificates.
(b) The Company shall notify Agent immediately, and confirm
the notice in writing, (i) when the Offering Statement is qualified, (ii) of the
issuance by the Commission of any stop order relating to the Offering Statement
or of the initiation or the threat of any proceedings for that purpose, (iii) of
the receipt of any notice with respect to the suspension of the qualification of
the shares of Common Stock or Certificates for offering or sale in any
jurisdiction, and (iv) of the receipt of any comments from the staff of the
Commission relating to the Offering Statement. If the Commission enters a stop
order relating to the Offering Statement, the Company will make every reasonable
effort to obtain the lifting of such order(s) as soon as possible.
(c) During the time when the Offering Circular is required to
be delivered under the 1933 Act, the Company will comply with all requirements
imposed upon it by the 1933 Act, as now in effect and hereafter amended, and by
the 1933 Act Regulations, as from time to time in force, so far as necessary to
permit the continuance of offers and sales of or dealings in the shares of
Common Stock and Certificates in accordance with the provisions hereof and the
Offering Circular. If during the period when the Offering Circular is used in
connection with the offer and sale of the shares of Common Stock and
Certificates any event relating to or affecting the Company shall occur as a
result of which it is necessary, in the opinion of both counsel for Agent and
counsel for the Company, to amend or supplement the Offering Circular in order
to make the Offering Circular not false or misleading in light of the
circumstances existing at the time it is delivered to a purchaser of the shares
of Common Stock and/or Certificates, the Company forthwith shall prepare and
furnish to Agent a reasonable number of copies of an amendment or amendments or
of a supplement or supplements to the Offering Circular (in form and substance
satisfactory to counsel for Agent) which shall amend or supplement the Offering
Circular so that, as amended or supplemented, the Offering Circular shall not
contain an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances
existing at the time the Offering Circular is delivered to a purchaser of the
Common Stock, not misleading. The Company will not file or use any amendment or
supplement to the Offering Statement or the Offering Circular of which Agent has
not first been furnished a copy or to which Agent shall reasonably object after
having been furnished such copy. For the purposes of this subsection (c) the
Company shall furnish such information with respect to itself as Agent from time
to time may reasonably request.
<PAGE>
(d) The Company shall take all necessary action and furnish to
counsel for the Company such information as may be required to qualify or
register the shares of Common Stock and Certificates for offer and sale by the
Company under the Blue Sky Laws of such jurisdictions as Agent and the Company
may reasonably agree upon; provided, however, that the Company shall not be
obligated to qualify as a foreign corporation to do business under the laws of
any such jurisdiction. In each jurisdiction where such qualification or
registration shall be effected, the Company, unless Agent agrees that such
action is not necessary or advisable in connection with the distribution of the
shares of Common Stock and Certificates, shall file and make such statements or
reports as are, or reasonably may be, required by the laws or regulations of
such jurisdiction.
(e) For three (3) years from the date of this Agreement, the
Company shall furnish Agent, (i) as soon as publicly available after the end of
each fiscal year, a copy of its annual report to shareholders for such year; and
the Company will furnish Agent a copy of each report mailed to shareholders,
(ii) at least twenty-four (24) hours prior to dissemination to shareholders or
Certificate holders, a facsimile of any letter, notice or other similar
communication, provided that the foregoing in no way obligates the Company to
await Agent approval of such letter, notice or similar communication prior to
dissemination, and (iii) from time to time, such other public information
concerning the Company as Agent may reasonably request.
(f) The Company shall use the net proceeds from the sale of
the Common Stock and the Certificates in the manner set forth in the Offering
Circular under the caption "Use of Proceeds."
(g) The Company shall not deliver the shares of Common Stock
or the Certificates until it has satisfied all conditions set forth in Section 6
hereof, unless such condition is waived in writing by Agent.
(h) The Company will take such actions and furnish such
information as are reasonably requested by Agent in order for Agent to ensure
compliance with any NASD requests.
(i) The terms and conditions provided to Agent by the Company
hereunder are at least as favorable as those offered to any other selected
dealer of the Company and will remain so during the term of this Agreement.
6. Conditions of Agent's Obligations. Except as may be waived in
writing by Agent, the obligations of Agent as provided herein shall be subject
to the accuracy of the representations and warranties contained in Section 2
hereof as of the date hereof, to the accuracy of the statements of officers and
directors of the Company made pursuant to the provisions hereof, to the
performance by the Company of their obligations hereunder and to the following
conditions:
(a) At the date hereof, Agent shall receive an opinion of
counsel of the Company that:
(i) the Company is incorporated, validly existing and
in good standing under the laws of State of Georgia and with full power
and authority to own its properties and conduct its business as
described in the Offering Circular;
(ii) to the best knowledge of such counsel, all such
licenses, permits and other governmental authorizations are in full
force and effect and the Company is complying in all material respects
therewith;
(iii) the Company has authorized Common Stock as set
forth in the Offering Statement and the Offering Circular;
(iv) the issuance and sale of the shares of Common
Stock have been duly and validly authorized by all necessary corporate
action on the part of the Company; the shares of Common Stock, upon
receipt of payment and issuance will be fully paid and non-assessable,
and, to the best knowledge of such counsel, the purchasers of the
Common Stock from the Company, upon issuance thereof against payment
therefor, will acquire such shares of Common Stock and Certificates
free and clear of all claims, encumbrances, security interests and
liens.
<PAGE>
(v) this Agreement has been duly authorized by all
necessary corporate action on the part of the Company and has been duly
executed and delivered on behalf of the Company. This Agreement is
enforceable in accordance with its terms against each of the Company,
except to the extent that the provisions of Section 7 and 8 hereof may
be unenforceable as against public policy;
(vi) except as set forth in the Offering Circular,
based solely on conferences with the senior executive officers of the
Company, and an investigation of certain corporate records made
available to counsel by the Company as conducted in connection with the
preparation of the Offering Statement, there are no material legal or
governmental proceedings pending or, to the best knowledge of such
counsel, threatened against or involving the assets of the Company
required to be disclosed in the Offering Circular, provided that for
this purpose such counsel shall not regard any litigation or
governmental procedure to be "threatened" unless the potential litigant
or government authority has manifested to the management of the
Company, or to such counsel, a present intention to initiate such
litigation or proceeding; nor are there any statutes, regulations,
contracts or other documents required to be described or disclosed in
the Offering Circular which are not so described or disclosed and the
description in the Offering Circular of such statutes, regulations,
contracts and other documents therein described are accurate summaries
and fairly present the information required to be shown;
(vii) the Offering Statement has been qualified by
the Commission; and no further approval of any other governmental
authority is required for the issuance and sale of the Common Stock and
Certificates excluding any necessary qualifications or registration
under the Blue Sky Laws of the various jurisdictions in which the
Common Stock and Certificates were offered as to which no opinion is
expressed); and no proceedings are pending by or before the Commission
seeking to revoke or rescind the qualifying the Offering Statement or
the Offering Circular or, to the best knowledge of such counsel, are
any such proceedings contemplated or threatened; provided that for this
purpose such counsel not regard any litigation or governmental
procedure to be "threatened" unless the potential litigant or
government authority has manifested to the management of the Company,
or to such counsel, a present intention to initiate such litigation or
proceeding;
(viii) to such counsel's best knowledge the execution
and delivery by the Company of, and performance of their agreements in
this Agreement, shall not conflict with nor result in a breach of the
articles of incorporation or bylaws of the Company, nor constitute a
breach of or default (or an event which, with notice or lapse of time
or both, would constitute a default) under, nor give rise to any right
of termination, cancellation or acceleration contained in, or result in
the creation or imposition or any material lien, charge or other
encumbrance upon any of the properties or assets of the Company
pursuant to any of the terms, provisions or conditions, any material
agreement, contract, indenture, bond, debenture, note, instrument or
obligation to which the Company is a party or by which it or its assets
or properties may be bound or is subject, or any governmental license
or permit; nor will any of such actions violate any law, administrative
regulation or order or court order, writ, injunction or decree; and
(ix) to the best knowledge of such counsel based
solely on the conferences and other investigations and officers'
certificates, there has been no breach of the Company's articles of
incorporation or bylaws, or material breach or default (or the
occurrence of any event which, with the lapse of time or action, or
both, by a third party, would result in a material breach or a material
default), under any agreement, contract, indenture, bond, debenture,
note, instrument or obligation to which the Company is a party or by
which any of them or any of their respective assets or properties may
be bound, or any governmental license or permit, or a violation of any
law, administrative regulation or order, or court order, writ,
injunction or decree.
In giving such opinion, such counsel may rely as to all
matters of fact on certificates of officers and directors of the Company and
certificates of public officials delivered pursuant hereto. Such opinion shall
be governed by, and interpreted in accordance with, the Legal Opinion Accord
("Accord") of the ABA Section of Business Law (1991) whereby it shall be subject
to the qualifications, exceptions, definitions, limitations on coverage and
other limitations all as more particularly described in the Accord, which
opinion should be read in conjunction therewith. For purposes of such opinion,
any litigation or governmental proceeding is not considered to
<PAGE>
be "threatened" unless the potential litigant or governmental authority has
manifested to the management of the Company, or to their counsel, a present
intention to initiate such litigation or proceeding.
(b) Counsel for Agent shall have been furnished such documents
as they reasonably may require for the purpose of enabling them to review or
pass upon the matters required by Agent, and for the purpose of evidencing the
accuracy, completeness or satisfaction of any of the representations, warranties
or conditions herein contained, including but not limited to, resolutions of the
Board of Directors of the Company regarding the authorization of this Agreement
and the transactions contemplated hereby.
(c) Upon the completion of the Offering, in the reasonable
opinion of Agent, (i) there shall have been no material adverse change in the
condition or affairs, financial or otherwise, of the Company from that as of the
latest date as of which such condition is set forth in the Offering Circular,
except as referred to therein; (ii) there shall have been no material
transactions entered into by the Company from the latest date as of which the
financial condition of the Company is set forth in the Offering Circular other
than transactions referred to or contemplated therein and transactions by the
Company in the ordinary course of business; (iii) no action, suit or proceeding,
at law or in equity or before or by any federal or state commission, board or
other administrative agency, shall be pending or to the Company's best knowledge
threatened against the Company or affecting any of their respective assets,
wherein an unfavorable decision, ruling or finding would result in a material
adverse effect on the Company; and (iv) the shares of Common Stock and
Certificates shall have been qualified or registered for offering and sale by
the Company under the Blue Sky Laws of such jurisdictions as Agent and the
Company shall have agreed upon.
(d) Upon the completion of the Offering, Agent shall receive a
certificate of the President of the Company, dated as of the completion date of
the Offering, that states: (i) each has carefully examined the Offering Circular
and the Offering Circular, and it does not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; (ii) since the date the Offering Circular became authorized for
final use, no event has occurred which should have been set forth in an
amendment or supplement to the Offering Circular which has not been so set
forth, including specifically, but without limitation, any event that has or may
have a material adverse effect on the Company, and the conditions set forth in
clauses (ii) and (iii) of subsection (c) of this Section 6 have been satisfied;
(iii) no order has been issued by the Commission to suspend the Offering or the
effectiveness of the Offering Circular and, to the best knowledge of such
officers, no action for such purposes has been instituted or threatened by the
Commission; and, (iv) all of the representations and warranties contained in
Section 2 of this Agreement are true and correct, with the same force and effect
as though expressly made on the date of the completion of the Offering.
(e) Upon the completion of the Offering, Agent shall receive,
among other documents, (i) a copy of the order of the Commission declaring the
Offering Statement qualified; (ii) a copy of the letter from the Georgia
Secretary of State evidencing the good standing of the Company; (iii) a copy of
the Company's certificate of incorporation certified by the Georgia Secretary of
State.
All such opinions, certificates, letters and
documents shall be in compliance with the provisions hereof only if they are, in
the reasonable opinion of Agent and its counsel, satisfactory to Agent and its
counsel. Any certificates signed by an officer or director of the Company and
delivered to Agent or to counsel for Agent shall be deemed a representation and
warranty by the Company to Agent as to the statements made therein. If any
condition to Agent's obligations hereunder to be fulfilled prior to or upon the
completion of the Offering is not so fulfilled, Agent, in its sole discretion,
may terminate this Agreement or, if Agent, in its sole discretion so elects, may
waive any such conditions which have not been fulfilled, or may extend the time
of their fulfillment.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless Agent,
its officers, directors and employees and all persons who control Agent within
the meaning of Section 15 of the 1933 Act or Section 20(a) of the Securities
Exchange Act of 1934 (the "1934 Act"), against any and all loss, liability,
claim, damage and expense whatsoever that such indemnified persons shall suffer
and shall further reimburse promptly such persons for any legal or other
expenses reasonably incurred by each or any of them investigating, preparing to
defend or defending
<PAGE>
against any such action, proceeding or claim (whether commenced or threatened)
arising out of any misrepresentation by the Company in this Agreement, or any
breach of warranty by the Company with respect to this Agreement or arising out
of or based upon any untrue or alleged untrue statement of a material fact or
the omission or alleged omission of a material fact necessary to make it not
misleading in light of the circumstances under which it was made, any statements
contained in the Offering Statement or the Offering Circular or prepared or
executed by or on behalf of the Company or based upon information furnished by
or on behalf of the Company with their consent, whether or not filed in any
jurisdiction, to effect the qualification of the Common Stock under the Blue Sky
Laws thereof or filed with the Commission, unless such statement or omission was
made in reliance upon and in conformity with written information furnished to
the Company with respect to Agent by or on behalf of Agent expressly for use in
the Offering Circular or any amendment or supplement thereof, or any unwritten
statement made with the Company's consent to a purchaser of the Common Stock or
Certificates by any director or officer or any person employed by or associated
with the Company other than Agent, its officers, directors or employees. This
indemnity shall be in addition to any other liability the Company may have to
Agent.
(b) Agent agrees to indemnify and hold harmless the Company,
its officers, directors and employees and all persons who control the Company
within the meaning of Section 15 of the 1933 Act or Section 20(a) of the 1934
Act, to the same extent as the foregoing indemnity from the Company to Agent,
but only with respect to any statements or omissions made in the Offering
Circular or any amendment or supplement thereof in reliance upon, and in
conformity with, written information furnished to the Company with respect to
Agent by or on behalf of Agent expressly for use in the Offering Circular. This
indemnity shall be in addition to any other liability that Agent may have to the
Company.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 7, notify the indemnifying party of the commencement
thereof, but the omission to so notify the indemnifying party shall not relieve
the indemnifying party from any liability which it may have to any indemnified
party otherwise than under this Section 7. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it may wish, jointly with the other indemnifying
party similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 7 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than the
reasonable cost of investigation except as otherwise provided herein. In the
event the indemnifying party elects to assume the defense of any such action and
retain counsel acceptable to the indemnified party, the indemnified party may
retain additional counsel, but shall bear the fees and expenses of such counsel
unless (i) the indemnifying party shall have specifically authorized the
indemnified party to retain such counsel or (ii) the parties to such suit
include such indemnifying party and the indemnified party, and such indemnified
party shall have been advised by counsel that one or more material legal
defenses may be available to the indemnified party which may not be available to
the indemnifying party, in which case the indemnifying party shall not be
entitled to assume the defense of such suit notwithstanding the indemnifying
party's obligation to bear the fees and expenses of such counsel. An
indemnifying party against who indemnity may be sought shall not be liable to
indemnify an indemnified party under this Section 7 if any settlement of any
such action is effected without such indemnifying party's consent.
8. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Section 7 above is for any reason held to be unavailable to the Company or Agent
other than in accordance with its terms, the Company and Agent shall contribute
to the aggregate losses, liabilities, claims, damages, and expenses of the
nature contemplated by said indemnity agreement incurred by the Company and
Agent (i) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and Agent on the other from the offering
of the Common Stock and Certificates or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above, but also the relative fault of the Company on the one hand and Agent on
the other in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and Agent on the other shall be deemed to be in the same proportion as
the net proceeds from the Offering received by the Company bear to the total
fees received by Agent
<PAGE>
under this Agreement. The relative fault of the Company on the one hand and
Agent on the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by Agent and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company and Agent agree that it would not be just and
equitable if contribution pursuant to this Section 8 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who is
innocent of such fraudulent misrepresentation.
9. Survival of Agreements, Representations and Indemnities. The
respective indemnities of the Company and Agent and the representations and
warranties of the Company set forth in or made pursuant to this Agreement shall
remain in full force and effect, regardless of any termination or cancellation
of this Agreement or any investigation made by or on behalf of Agent or the
Company or any controlling person or indemnified party referred to in Section 8
hereof, and shall survive any termination or consummation of this Agreement
and/or the issuance of the Common Stock, and any legal representative of Agent,
the Company and any such controlling persons shall be entitled to the benefit of
the respective agreements, indemnities, warranties and representations.
10. Termination. The Company or Agent may terminate this Agreement by
giving the notice indicated in Section 11 below at any time after this Agreement
becomes effective as follows:
(a) If any domestic or international event or act or
occurrence has materially disrupted the U.S. securities markets such as to make
it, in Agent's reasonable opinion, impracticable to proceed with the offering of
the Common Stock or Certificates; or if the United States shall have become
involved in a war or major hostilities; or if a moratorium in foreign exchange
trading by major international banks or persons has been declared; or if there
shall have been a material adverse change in the capitalization, condition or
business of the Company.
(b) If any party hereto elects to terminate this Agreement as
provided in this Section, such party shall notify the other parties hereto
promptly by telephone or telegram, confirmed by letter and delivered by an
overnight courier service the same day.
11. Notices. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and if sent to Agent shall be mailed,
delivered or faxed and confirmed to _________________________________________,
if sent to the Company 6035 Atlantic Boulevard, Suite C, Norcross, Georgia
30071-1345, Attention: Cecil A. Brooks, President (with a copy to Drew Field,
Esq. 534 Pacific Ave. San Francisco, CA 94133.).
12. Governing Law. This Agreement shall be governed by the laws of the
State of Georgia unless Federal law shall be deemed to apply.
13. Severability. Any provision of this Agreement found to be invalid,
unenforceable, or otherwise limited by law or regulation shall not effect the
validity or enforceability of the remaining terms of this Agreement.
14. Miscellaneous.
(a) Time shall be of the essence of this Agreement.
(b) This Agreement is made solely for the benefit of and will
be binding upon the parties hereto and their respective successors and the
controlling persons, directors and officers referred to in Section 7 hereof, and
no other person will have any right or obligation hereunder. The term
"successors" shall not include any purchaser of any of the Common Stock.
<PAGE>
(c) This Agreement sets forth the entire understanding and
agreement among the parties hereto representing the subject matter hereof and
supersedes and cancels all prior agreements and understanding, written or oral.
(d) This Agreement may be signed in various counterparts which
together will constitute one agreement.
If the foregoing correctly sets forth the arrangement between the
Company and Agent, please indicate acceptance thereof in the space provided
below for that purpose, whereupon this letter and your acceptance shall
constitute a binding agreement.
Yours very truly,
CORNERSTONE MINISTRIES INVESTMENTS, INC.
By: ______________________________________
Cecil A. Brooks, President
Agreed to and accepted this
___ day of ___________, 199__.
______________________________________
By:
Name:
Title:
Drew Field
Law Offices
534 Pacific Avenue 415/296-9795
San Francisco, CA 94133 FAX/434-3441
March 31, 2000
Board of Directors
Cornerstone Ministries Investments, Inc.
6035 Atlantic Boulevard, Suite C
Norcross, Georgia 30071-1345
Dear Directors:
You have requested my opinion as to the legality of the securities
being registered by Cornerstone Ministries Investments, Inc. (the Company) under
the Securities Act of 1933, as amended (the Act), by filing a registration
statement on Form SB-2, relating to the offering of certificates of
indebtedness, up to a principal amount of $17,000,000 (the Certificates) and up
to 350,000 shares of its common stock (the Shares) as described in the
registration statement.
In connection with your request for my opinion, you have provided me
and I have reviewed the Company's Articles of Incorporation, as amended, Bylaws,
resolutions of the Board of Directors of the Company concerning the offering,
the registration statement and such other corporate documents as I have
considered necessary or appropriate for the purposes of this opinion.
Upon the basis of such examination, it is my opinion that, when the
registration statement shall have become effective under the Act, when all
required registrations with state securities regulators shall have become
effective, and when the Certificates and the Shares shall have been duly issued
and delivered to the purchasers against payment of the consideration therefor,
the Certificates and the Shares will, when sold, be legally issued, fully paid
and non-assessable.
I hereby consent to the filing of this opinion as an exhibit to the
registration statement.
Very truly yours,
S/Drew Field
Exhibit 5
T. JACKSON McDANIEL III
Certified Public Accountant
1439 McLendon Drive
Suite C
Decatur, GA 30033
(770) 491-0609
I consent to the use of my reports and financial statements included in the
prospectus for Cornerstone Ministries Investments, Inc. and the reference to me
under the heading "Experts" in Pre-effective Amendment No. 2 to its registration
statement on form SB-2.
S/T. JACKSON MCDANIEL III, CPA March 23, 2000
- --------------------------------
T. Jackson McDaniel III, CPA
Exhibit 23.1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
Securities Act of 1933 File No: 333-93475
(If application to determine eligibility of trustee for
delayed offering pursuant to Section 305(b)(2))
<TABLE>
<CAPTION>
<S> <C>
Exact Name of Trustee as specified in its charter: Fidelity National Bank
Jurisdiction of incorporation or organization
if not a U.S. national bank: N/A
I.R.S. Employer Identification No.: 58-1839553
Address of principal executive officers: 3490 Piedmont Road, Suite 1450
Atlanta, GA 30305
Name, address and telephone number of Alice Jackson
agent for service: Fidelity National Bank
3490 Piedmont Road, Sixth Floor
Atlanta, GA 30329
(404) 639-6808
Exact name of obligor as specified in its charter: Cornerstone Ministries Investments, Inc.
State or other jurisdiction of incorporation
or organization: Georgia
I.R.S. Employer Identification No.: 58-2232313
Address of principal executive offices: 6035 Atlantic Boulevard, Suite C
Norcross, GA 30071-1345
Title of the indenture securities: $17 million Series B Certificates of
Indebtedness
</TABLE>
Item 1. General Information.
Furnish the following information as to the trustee -
(a) Name and address of each examining or supervising authority to which it is
subject.
FDIC
1201 Peachtree Street, N.E., Suite 1600
Atlanta, GA 30309-3449
Federal Reserve Bank
104 Marietta Street, N.W.
Exhibit 25
<PAGE>
Atlanta, GA 30303-2713
Office of the Comptroller of Currency
1117 Perimeter Way, Suite W041
Atlanta, GA 30338-5417
(b) Whether it is authorized to exercise corporation trust powers.
Yes.
Item 2. Affiliations with the obligor.
If the obligor is an affiliate of the trustee, describe such affiliation.
Obligor maintains commercial bank accounts with trustee. No other affiliation.
Item 3. Voting securities of the trustee.
Furnish the following information as to each class of voting securities of the
trustee: As of April 15, 2000.
Col. A. Col. B.
Title of Class Amount Outstanding
Preferred 2,240,000/shares
Common 154,428/shares
Item 4. Trusteeships under other indentures.
If the trustee is a trustee under another indenture under which any other
securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, furnish the following information:
(a) Title of the securities outstanding under each such other indenture.
N/A.
(b) A brief statement of the facts relied upon as a basis for the claim that no
conflicting interest within the meaning Section 310(b)(1) of the Act arises as a
result of the trusteeship under any such other indenture, including a statement
as to how the indenture securities will rank as compared with the securities
issued under such other indenture.
N/A.
Item 5. Interlocking directorates and similar relationships with the obligor or
underwriters. If the trustee or any of the directors or executive officers of
the trustee is a director, officer, partner, employee, appointee, or
representative of the obligor or of any underwriter for the obligor, identify
each such person having any such connection and state the nature of each such
connection.
Neither the trustee nor any of the directors or executive officers of the
trustee is a director, officer, partner, employee, appointee, or representative
of the obligor or of any underwriter for the obligor.
Item 6. Voting securities of the trustee owned by the obligor or its officials.
Furnish the following information as to the voting securities of the trustee
owned beneficially by the obligor and each director, partner, and executive
officer of the obligor.
As of April 15, 2000.
There are no voting securities of the trustee owned beneficially by the obligor,
any director, partner, or executive officer of the obligor.
<PAGE>
Item 7. Voting securities of the trustee owned by underwriters or their
officials. Furnish the following information as to the voting securities of the
trustee owned beneficially by each underwriter for the obligor, and each
director, partner, and executive officer of each such underwriter.
As of April 15, 2000.
No voting securities of the trustee are owned beneficially by any underwriter
for the obligor or any director, partner, or executive officer of such
underwriter.
Item 8. Securities of the obligor owned or held by the trustee.
Furnish the following information as to securities of the obligor owned
beneficially or held as collateral security for obligations in default by the
trustee.
As of April 15, 2000.
No securities of the obligor are owned beneficially or held as collateral
security for obligations in default by the trustee.
Item 9. Securities of underwriters owned or held by the trustee.
If the trustee owns beneficially or holds as collateral security for obligations
in default any securities of an underwriter for the obligor, furnish the
following information as to each class of securities of such underwriter any of
which are so owned or held by the trustee.
As of April 15, 2000.
The trustee does not own beneficially or hold as collateral security for
obligations in default, any securities of an underwriter of the obligor.
Item 10. Ownership or holdings by the trustee of voting securities of certain
affiliates or security holders of the obligor.
If the trustee owns beneficially or holds as collateral security for obligations
in default voting securities of a person who, to the knowledge of the trustee
(1) owns 10 percent or more of the voting securities of the obligor or (2) is an
affiliate, other than a subsidiary, of the obligor, furnish the following
information as to the voting securities of such person:
As of April 15, 2000.
The trustee does not own beneficially or hold as collateral security for
obligations in default, voting certificates of a person who, to the knowledge of
the trustee, owns ten percent or more of the securities of the obligor, or is an
affiliate other than a subsidiary for the obligor.
Item 11. Ownership or holdings by the trustee of any securities of a person
owning 50 percent or more of the voting securities of the obligor.
If the trustee owns beneficially or holds as collateral security for obligations
in default any securities of a person who, to the knowledge of the trustee, owns
50 percent or more of the voting securities of the obligor, furnish the
following information as to each class of securities of such person any of which
are so owned or held by the trustee.
As of April 15, 2000.
The trustee does not own beneficially or hold as collateral security for
obligations in default, any securities of a person who, to the knowledge of the
trustee, owns fifty percent of the obligor.
Item 12. Indebtedness of the Obligor to the Trustee.
Except as noted in the instructions, if the obligor is indebted to the trustee,
furnish the following information:
As of April 15, 2000.
The obligor is not indebted to the trustee, except that Cecil A. Brooks, an
officer of obligor, has a note outstanding to the trustee with a balance owed of
$11,688.13.
<PAGE>
Item 13. Defaults by Obligor.
(a) State whether there is or has been a default with respect to the securities
under this indenture. Explain the nature of any such default.
To the best of knowledge and belief of the trustee, there has been no default
with respect to the securities under this indenture.
(b) If the trustee is a trustee under another indenture under which any other
securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, or is trustee for more than one
outstanding series of securities under the indenture, state whether there has
been any such indenture or series, identify the indenture or series affected,
and explain the nature of any such default.
The trustee is not a trustee under another indenture under which any other
securities or certificates of interest or participation in any of the securities
of the obligor are outstanding. Furthermore, no indenture series under this
indenture are in default.
Item 14. Affiliations with the Underwriters.
If any underwriter is an affiliate of the trustee, describe each affiliation.
The underwriter is not an affiliate of the trustee.
Item 15. Foreign Trustee.
Identify the order or rule pursuant to which the foreign trustee is authorized
to act as sole trustee under indentures qualified or to be qualified under the
Act.
The trustee is not a foreign trustee.
Item 16. List of exhibits.
List below all exhibits filed as a part of this statement of eligibility.
1. A copy of the articles of association of the trustee as now in effect,
containing the certificate of authority of the trustee to commence
business.
2. A copy of the authorization of the trustee to exercise corporate trust
powers.
3. A copy of the existing bylaws of the trustee.
4. A copy of the latest report of condition of the trustee published pursuant
to law or the requirements of its supervising or examining authority.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
trustee, Fidelity National Bank, a national banking corporation organized and
existing under the laws of Georgia, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Atlanta, and State of Georgia, on the 24th day of
April, 2000.
/s/ James Perry
----------------------------------
FIDELITY NATIONAL BANK, Trustee
By: James Perry, Vice President
