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U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly and six-month period ended June
30, 2000.
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _________ to
_________
COUNTRY MAID FINANCIAL, INC.
(Exact name of small business issuer as specified in its charter)
Commission file number: 0-30730
<TABLE>
<CAPTION>
WASHINGTON 34-1471323
<S> <C>
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
</TABLE>
2500 South Main Street
Lebanon, Oregon 97355
(Address of principal executive offices)
(541) 451-1414
(Issuer's telephone number)
-------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of June 30, 2000, the Registrant
had 7,706,896 shares of Common Stock outstanding.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (check one): Yes [ ] No [X]
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PART I: FINANCIAL STATEMENTS AND MANAGEMENT'S
DISCUSSION AND ANALYSIS
Item 1: Financial Statements
COUNTRY MAID FINANCIAL, INC.
CONSOLIDATED BALANCE SHEETS
June 30, 2000 and December 31, 1999
ASSETS
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
(Unaudited) (Audited)
<S> <C> <C>
Current Assets
Cash $196,507 0
Certificates of deposit 0 0
Accounts receivable 83,109 81,378
Prepaid expenses 53,419 81,378
Other assets 0 0
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TOTAL ASSETS $330,035 $81,378
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</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
(Unaudited) (Audited)
<S> <C> <C>
Current Liabilities
Accounts payable $ 309,268 $ 178,824
Accrued expenses 212,365 112,433
Unearned revenue 0 0
Notes payable 0 0
Bank overdraft 0 126
Amounts payable to
stockholders 1,032,695 1,032,695
Total current liabilities 1,553,328 1,324,078
</TABLE>
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COUNTRY MAID FINANCIAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three and Six Months Ended June 30, 2000 and June 30, 1999
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
<S> <C> <C> <C> <C>
Revenues $ 904,600 $ 598,762 $ 1,326,566 $ 438,482
Operating Costs
Lease payments 211,482 141,513 374,902 141,513
Direct costs 442,538 234,726 766,188 234,726
Administrative costs 75,132 30,265 112,477 30,265
Total loss from operations (729,152) (406,504) 1,253,567 406,504
Total loss from operations (729,152) (406,504) 1,253,567 406,504
Expenses
Payroll and payroll taxes 97,080 45,915 167,164 100,372
General and administrative
expenses 109,221 84,966 227,532 168,412
Total expenses 206,301 130,881 394,696
Net Income (Loss) 59,019 62,637 (7,563) (7,096)
Primary earnings per share 0.01 0.01 0 0
Diluted earnings per share 0.01 0.01 0 0
Weighted average number of
common shares outstanding
</TABLE>
COUNTRY MAID FINANCIAL, INC.
Consolidated Statement of Cash Flows
For Six Months Ended June 30, 2000 and June 30, 1999
CASH FLOWS FROM OPERATING ACTIVITIES
<TABLE>
<CAPTION>
June 30, 2000 June 30, 1999
<S> <C> <C>
Net Income from Operations $ (7,563) $ (7,096)
Changes in operating assets and liabilities
Prepaid expenses and other (53,419) 0
Accounts payable 130,444 84,740
Accrued expenses including payroll and
payroll taxes 32,456 (159)
Management fees (21,377) 106,427
Property expenses 16,092 (14,351)
Net cash flow from operating activities 96,633 169,561
Cash flows from investing activities
Payments on shareholder loans 0 (141,000)
</TABLE>
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COUNTRY MAID FINANCIAL, INC.
Notes To Unaudited Consolidated Financial Statements
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-QSB and therefore do not
include all disclosures necessary for a fair presentation of financial position,
results of operations, and cash flows in conformity with generally accepted
accounting principles. The operating results for interim periods are unaudited
and are not necessarily an indication of the results to be expected for the full
fiscal year. In the opinion of management, the results of operations as reported
for the interim period reflect all adjustments which are necessary for a fair
presentation of operating results.
Note 2. Per Share Information
Basic earnings per share is computed by dividing income available to
common shareholders by the weighted average number of common shares outstanding
in the period. Diluted earnings per share takes into consideration common shares
outstanding (computed under basic earnings per share) and potentially dilutive
common shares.
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Item 2. Management's Discussion And Analysis Of Financial Condition And Results
Of Operation
Statement of Forward-Looking Information
This discussion and analysis should be read together with our condensed
financial statements and related notes appearing in Item 1, above. This report
contains both objective historical information and subjective "forward-looking
statements" that are subject to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995, and bear certain risks and
uncertainties that could cause actual results to differ materially from those
projected. Generally, forward-looking statements are prefaced by the words:
"believe," "expect," "intend," "anticipate," and similar expressions; but their
absence does not mean that a statement is not forward-looking. Numerous factors
both within and outside our control could affect our actual results. These risk
factors, among others, could cause results to differ materially from those
presently anticipated by us. Readers are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of the date of this
report. We undertake no obligation to publicly release the results of any
revisions to these forward-looking statements that may be made to reflect events
or circumstances after the date of this report or to reflect the occurrence of
anticipated events.
General
Country Maid Financial ("CMF" or "the Company"), a Washington
corporation, incorporated in 1984, manages and maintains eighteen motel
properties located throughout the United States, through its subsidiary,
Territorial Inns Management. Currently, CMF operates in eight states: Florida,
Georgia, Illinois, Kansas, Oregon, Texas and Washington. The Company plans to
significantly expand its operations by obtaining additional motel operating
leases throughout the United States and Canada, and has undertaken a plan to
lease a number of economy-scale motels from motel owners with option to purchase
the motel at its current value. The Company is confident that these motel
properties can be operated at a significant net profit.
Since its inception, CMF has continually sought to maximize its revenues
by increasing the number of properties under its management, delivering fairly
priced and high-quality motel services to its guests, and hiring experienced,
talented, and personable on-site managers and staff to manage and maintain the
properties under its control. Additionally, CMF's unique policy of combined
leasehold ownership and property management allows CMF to control the entire
scope of property management, thereby increasing the individual motels' level of
operating efficiency. The combined impact of CMF's management policies has
yielded numerous competitive advantages over industry competitors who limit
their activities to either property management or leasehold ownership.
Franchising Activities
Eleven of the eighteen properties in CMF's portfolio are national motel
franchises. Two belong to the "Select Inns" chain, and nine are "Best Inns"
franchises. This arrangement has two primary advantages: First, name
recognition. Second, standardized quality. The combined impact of these
advantages is to increase the occupancy rates of the properties under CMF's
management, and to, thereby increase CMF's overall profitability
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The Company's Portfolio
Long-Term Leased Properties
Southfork Motel. Effective July 1, 1999, the Company entered into a
Lease Agreement with Option to Purchase the Southfork Motel located in
Bloomfield, Iowa. The lease provides for monthly lease payments calculated at
twenty-percent (20%) of the gross revenue of the motel. The lease grants the
Company an option to purchase the property at the price of $650,000 exercisable
only during the last sixty (60) days of the fourth five-year term of the lease.
The Company agreed to grant 650 shares of Class C Preferred Stock, without
dividend, valued at a Subscription Price of $130,000, convertible to the same
value of common stock twelve months from the date of issuance.
The Southfork motel currently subleases the on-site restaurant to a
third-party and the Company has assumed all rights and obligations of the
sublease. The Company receives $1,200 in monthly rental payments that are
included as part of the gross revenue of property used to calculate the monthly
lease payments payable to the motel owner.
Best Inns. On or about November 9, 1998, the Company and Best Inns,
Inc., a Kansas corporation ("Best Inns Kansas"), executed a Letter of Intent,
which sets forth the terms for the Company to lease with an option to purchase
nine Best Inns motel properties. The terms of the Letter of Intent provide that
the Company will receive the gross revenue generated by the properties and pay
to Best Inns a fixed annual lease payment of $1,980,000 payable monthly, and the
Company has an option to purchase the properties for the total amount of
$24,000,000. As consideration to Best Inns for the option to purchase, the
Company agreed to issue securities of the Company with an aggregate value of
$3,000,000.
On March 1, 1999, the previous management company of the Best Inns
properties voluntarily resigned from their duties and the Company assumed the
operation of the nine Best Inns properties on a straight management basis of
five percent (5%) of the gross revenue to the Company. Best Inns Kansas
proceeded with litigation in the Southern District of Illinois Federal Court
against the former management company for unsatisfactory management of the
properties. The case was settled and dismissed on April 11, 2000. The Company
intends to continue the management of the nine (9) Best Inns based on the oral
agreement effective March 1, 1999. The Company does not plan to close the lease
transaction until the litigation matter is resolved.
Properties under Management Agreements
The Company operates six other motel properties and an apartment complex
under individual management agreements, which set the management fee at a fixed
percentage, generally five percent (5%) of the gross revenue received from the
property. The motel owners are obligated to pay all expenditures with limited
authority to the Company to pay recoverable expenditures on the owners' behalf
up to an amount of $5,000 per month.
We believe that our strategy of obtaining motel operating leases with
purchase options will enable us to increase the number of properties in our
portfolio, and that the combined effect of this growth strategy and our strong
management group will enable us to increase our market penetration into the
motel operating industry.
Results of Operation - Three and Six Months Ended June 30, 2000 Compared to Same
Period in 1999
Revenues. Revenues for the three-month periods ended June 30, 1999 and
June 30, 2000 increased from $598,762 to $904,600, respectively. Revenues for
the six months ended June 30, 1999 and June 30, 2000 increased from $438,482 to
$1,3226,566 respectively. During the three and six month
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periods ended June 30, 2000, our revenue was generated by our property-leasing
and management activities. The increase in gross revenue during the three and
six months periods ending June 30, 2000, compared to the same period in the
prior year is attributable primarily to a decrease in management costs and
leasing expenses.
Labor and Benefits Expenses. This category comprises all internal labor
costs including: salaries, taxes, employee benefits, and all other direct costs
related to Company performance, including labor costs, supplies and other
miscellaneous related expenses. Our labor and benefits expenses for the
three-month period ended June 30, 1999 and June 30, 2000 increased by from
$45,915 to $97,080, respectively. During the six months ended June 30, 1999 and
June 30, 2000, our labor and benefits expenses increased from $100,372 to
$167,164, respectively. The increase in labor and benefits expenses from the
second quarter and the first six months of 1999 compared to the same period in
2000 was directly attributable to an increase in costs associated with leasing
and managing CMF's various properties. At June 30, 2000, we had thirteen full
time employees and seventeen part-time employees engaged in administration,
on-site operations, and property management. In addition, from time to time, CMF
may hire additional independent consultants or contractors to support its
property management and administrative organizations. Moreover, we may hire
additional staff, as needed, to meet the demands of our management and leasing
operations.
General and Administrative Expenses. General and administrative expenses
for the three-month periods ended June 30, 1999 and June 30, 2000 increased from
$168,412 to $109,221 respectively. In each period, these expenses consisted
primarily of the costs associated with purchasing supplies, property management,
facility renovation, human resources, employee training, advertising and
marketing costs, and general administrative costs. This increase/decrease was
due to an increase in these costs.
General and administrative expenses for the six months ended June 30,
1999 and June 30, 2000 increased from $168,412 to $227,532, respectively. This
increase was due primarily to increased management and administrative costs.
We believe that our general and administrative expenses may increase in
dollar amount for the remainder of fiscal 2000 as a result of an anticipated
expansion of our operations.
Net Gain. CMF recognized a net gain for the three-month period ended
June 30, 2000 of $59,019 compared to a net gain of $62,637 for the same period
in 1999. The Company recognized a net loss of $7,563 for the six month period
ended June 20, 2000, as compared with a net loss of $7,096 for the same period
in 1999 The change in net gain reflected in the three month period ending June
30, 2000 and June 30, 1999, respectively, and the change in net loss reflected
in the six month periods ending June 30, 2000 and June 30, 1999 reflected
shifting property management and administrative costs.
Liquidity and Capital Resources. At June 30, 2000, the Company had cash
and cash equivalents of $330,035 as compared to $81,378 for the same period in
1999. In the first six months of 2000, total cash used in operating activities
was $799,152, which was primarily due to property management and operating
expenses. During the first six months of 1999, total cash used in operating and
management activities was $406,504, which was primarily due to expenses derived
from the Company's management activities. During the first six months of 1999
and 2000, investing activities used net cash of $141,000 and $0.00 respectively,
to pay-off loans to shareholders.
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Miscellaneous Accounting Information
Statement of Financial Standards No. 133 ("SFAS 133"), "Accounting for
Derivative Instruments and Hedging Activities," established accounting and
reporting standards for derivative instruments and for hedging activities. SFAS
133 has no impact on our financial statements because we do not currently engage
in any derivatives or hedging activities.
Statement of Financial Standards No. 134, "Accounting for
Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise," does not apply to us.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K.
None.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
COUNTRY MAID FINANCIAL, INC.
Dated: October 9, 2000 By: /S/ C. RICHARD KEARNS
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C. RICHARD KEARNS
Chief Executive Officer
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