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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 nine-month period ended
September 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
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<S> <C>
WASHINGTON 34-1471323
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
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2500 South Main Street
Lebanon, Oregon 97355
(Address of principal executive offices)
(541) 451-1414
(Issuer's telephone number)
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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 September 30, 2000, the
Registrant had 7,936,928 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
September 30, 2000 and December 31, 1999
ASSETS
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September 30, 2000 December 31, 1999
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(Unaudited) (Audited)
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Current Assets
Cash $ 42,590 0
Management Fee receivable 21,280 0
Accounts receivable 134,350 81,378
Prepaid expenses 80,463 0
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TOTAL ASSETS $ 278,683 $ 81,378
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LIABILITIES AND STOCKHOLDERS' EQUITY
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September 30, 2000 December 31, 1999
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(Unaudited) (Audited)
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Current Liabilities
Accounts payable $ 205,680 $ 178,824
Accrued expenses 173,536 180,179
Unearned revenue 0 3,554
Bank overdraft 0 126
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Total current Liabilities 379,216 362,683
Other Liabilities
Due to stockholders 1,032,695 1,032,695
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Total Liabilities 1,411,911 1,395,378
Stockholder's Equity
Common Stock 2,769,252 2,769,252
Preferred Stock 100,000 0
Excess Liabilities at
Inception (60,000) (60,000)
Retained Deficit (3,942,480) (4,023,252)
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Total Stockholder's Equity (1,133,228) (1,314,000)
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Total Liabilities & Stockholder's
Equity 278,683 81,378
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COUNTRY MAID FINANCIAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three and Nine Months Ended September 30, 2000 and September 30, 1999
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Three Months Ended Nine Months Ended
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September 30, September 30, September 30, September 30,
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2000 1999 2000 1999
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Revenues $1,260,930 $ 751,019 $2,901,630 $1,419,211
Operating Costs
Lease payments 234,603 157,251 609,505 298,764
Direct costs 610,641 299,130 1,376,829 533,856
Administrative costs 108,972 43,462 221,449 73,727
Total Operating Costs 954,216 499,843 2,207,783 906,347
Gross Profit 306,714 251,176 693,847 512,864
Expenses
Payroll and payroll taxes 82,277 100,427 249,441 200,799
Professional Fees 76,093 47,097 199,311 112,946
General & Administrative 60,009 53,010 164,323 155,573
Total expenses 218,379 200,534 613,075 469,318
Net Income 88,335 50,642 80,772 43,546
Primary earnings per share 0.01 0.01 0.01 .01
Diluted earnings per share 0.01 0.01 0.01 .01
Weighted average number of 7,956,928 7,936,928 7,956,928 7,936,928
common shares outstanding
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COUNTRY MAID FINANCIAL, INC.
Consolidated Statement of Cash Flows
For Nine Months Ended September 30, 2000 and September 30, 1999
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September 30, 2000 September 30, 1999
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Cash Flows from Operating Activities
Net Income from Operations $ 80,772 $ 43,546
Changes in assets and liabilities
Prepaid expenses and other (80,463) 0
Accounts payable 26,856 131,947
Accrued payroll and payroll taxes (6,643) 40,412
Management fees (24,834) 62,704
Property expenses (52,972) (101,438)
Net cash flow from operating activities (57,284) (177,171)
Cash flows from investing activities
Payments on shareholder loans 0 (141,000)
Cash Flows from Financing Activities
Issuance of Common Stock 0 170,000
Costs Advanced for Issuance of Common Stock 0 (140,387)
Issuance of Preferred Stock 100,000 0
Total Cash Flows from Financing Activities 100,000 29,613
Net Cash Flows 42,716 65,784
Cash Balance Beginning (126) (22,032)
Cash Balance Ending $ 42,590 $ 43,752
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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, Missouri, 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 and has since
been resolved. The Company intends to continue the management of the nine (9)
Best Inns based on the oral agreement effective March 1, 1999.
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 Nine months ended September 30, 2000 Compared
to Same Period in 1999
Revenues. Revenues for the three-month periods ended September 30, 1999
and September 30, 2000 increased from $751,019 to $1,260,930, respectively.
Revenues for the nine months ended September 30, 1999 and September 30, 2000
increased from $1,419,211 to $2,901,630 respectively. During the three and nine
month periods ended September 30, 2000, our revenue was generated by our
property-leasing and management activities. The increase in gross revenue during
the three and nine
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months periods ending September 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 September 30, 1999 and September 30, 2000 decreased
from $100,427 to $82,277, respectively. During the nine months ended September
30, 1999 and September 30, 2000, our labor and benefits expenses increased from
$200,799 to $249,441, respectively. The fluctuation in labor and benefits
expenses from the third quarter and the first nine 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 September 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 September 30, 1999 and September 30, 2000
increased from $53,010 to $60,009 respectively. General and administrative
expenses for the nine months ended September 30, 1999 and September 30, 2000
increased from $155,573 to $164,323, respectively. In each period, these
expenses consisted primarily of the costs associated with purchasing supplies,
property management, facility renovation, human resources, employee training,
advertising and marketing costs, and general management and administrative
costs. This increase was due to an increase in these costs.
We believe that our general and administrative expenses may increase in
dollar amount for the remainder of fiscal 2000 as a result of an anticipated
expansion of our operations.
Net Gain. CMF recognized a net gain for the three-month period ended
September 30, 2000 of $88,335 compared to a net gain of $50,642 for the same
period in 1999. The Company recognized a net gain of $80,772 for the nine-month
period ended September 30, 2000, as compared with a net gain of $43,546 for the
same period in 1999. The change in net gain reflected in the three-month period
ending September 30, 2000 and September 30, 1999, respectively, and the change
in net gain reflected in the nine month periods ending September 30, 2000 and
September 30, 1999 reflected shifting property management and administrative
costs.
Liquidity and Capital Resources. At September 30, 2000, the Company had
cash and cash equivalents of $42,590. In the first nine months of 2000, total
cash used in operating activities was $57,284, which was primarily due to
property management and operating expenses. During the first nine months of
1999, total cash used in operating activities was $177,171, which was primarily
due to expenses derived from the Company's management activities. During the
first nine months of 1999, investing activities used net cash of $141,000 to
payoff loans to shareholders. The company did not expend any capital for
investing activities during the first nine months of 2000.
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.
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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: November 9, 2000 By: /s/ C. RICHARD KEARNS
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C. RICHARD KEARNS
Chief Executive Officer
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