SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number: 0-24736
Midland, Inc.
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(Exact name of small business issuer as specified in its charter)
Colorado 84-1078201
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
1073 4th Street, No. 3, Stone Mountain, Georgia 30083
- ----------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (770) 413-8734
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date: As of November 12, 1999, there
were 3,696,807 shares of common stock outstanding and 16,228,638 common share
equivalents.
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<TABLE>
<CAPTION>
I. PART I FINANCIAL INFORMATION
Item 1. Financial Statements
MIDLAND, INC.
BALANCE SHEETS
September 30, December 31,
1999 1998
---- ----
(Unaudited)
ASSETS:
CURRENT ASSETS
<S> <C> <C>
Cash $ 43 $ 43
Restricted cash-escrow 867 37,381
Note receivable 90,000 90,000
TOTAL CURRENT ASSETS 90,910 127,424
INVESTMENT (Note C) 23,125 23,125
TOTAL ASSETS $ 114,035 $ 150,549
LIABILITIES AND SHAREHOLDERS' DEFICIT:
CURRENT LIABILITIES
Accounts payable $ 192,544 $ 209,116
Notes payable 45,000 45,000
Accrued interest 26,041 26,041
Accrued payroll taxes 8,510 8,510
Accrued income tax 800 800
TOTAL CURRENT LIABILITIES 272,895 289,467
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIT
Series A preferred stock, $0.40 par value, 360,000
shares authorized, 295,911 issued and outstanding 118,365 118,365
Series B preferred stock, $0.40 par value, 149,259
shares authorized, no shares issued or outstanding -- --
Common stock, $0.40 par value, 10,000,000 shares authorized,
3,696,807 shares issued and outstanding 1,106,928 1,106,928
Additional paid in capital 1,789,134 1,789,134
Accumulated deficit (3,173,287) (3,153,345)
TOTAL SHAREHOLDERS' DEFICIT (158,860) (138,918)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 114,035 $ 150,549
</TABLE>
<PAGE>
MIDLAND, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
For the nine months ended
September 30, 1999 September 30, 1998
------------------ ------------------
SALES $ -- $ --
COST OF SALES -- --
Gross profit -- --
OPERATING EXPENSES
General and administrative 39,942 237,613
TOTAL OPERATING EXPENSES 39,942 237,613
LOSS FROM OPERATIONS (39,942) (237,613)
OTHER INCOME (EXPENSES)
Interest income -- 2,188
Release of debt 20,000 --
LOSS BEFORE INCOME TAXES (19,942) (235,425)
Provision for income tax -- --
NET LOSS $ (19,942) $ (235,425)
Net loss per common share (.001) (.07)
Weighted average number
of shares outstanding 3,696,807 3,272,513
<PAGE>
MIDLAND, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the nine months ended
September 30, 1999 June 30, 1998
------------------ -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (19,942) $ (235,425)
Adjustments to reconcile net loss to net cash
used in operating activities: -- --
Changes in operating assets and liabilities: -- --
Increase (decrease) in:
Subscription receivables -- (100,000)
Accounts payable (16,572) (7,726)
Accounts payable: related party -- (153,000)
Accrued expenses -- 2,026
NET CASH USED IN OPERATING ACTIVITIES (36,514) (494,125)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in subsidiary -- (529,967)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from long term debt -- --
Proceeds from sale of series A preferred stock -- 106,881
Proceed from sale of common stock -- 259,822
Proceeds from additional paid in capital -- 888,006
NET CASH PROVIDED BY FINANCING ACTIVITIES -- 1,254,709
NET INCREASE (DECREASE) IN CASH (36,514) 230,617
CASH, BEGINNING OF PERIOD 37,424 7,984
CASH, END OF PERIOD $ 910 $ 238,601
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations: The Company has had recurring losses from operations
since inception and had a net capital deficiency at December 31, 1998, and
September 30, 1999, each of which raised substantial doubts about the ability of
the Company to continue as a going concern. The Company, as a result of the
cessation of its coffee business, the recision of two separate acquisitions and
the failure of its other reported acquisitions, had no operations during 1999 or
1998; thus, no meaningful comparison can be made to prior periods. The Company
generated no sales or cost of sales during the period, and incurred only general
and administrative expenses in regards of its operations. Daymar Corporation:
The Company settled an account payable in the amount of $25,000 with Daymar
Corporation through its agreement to pay $5,000 in cash. The settlement was
effective on execution and delivery of the agreement and the payment of $1,500,
which resulted in income of $20,000 to the Company during the period under
consideration, as well as a reduction of cash in the amount of $1,500 and a
reduction in accounts payable of $21,500, leaving an account payable of $3,500.
Brother's Gourmet Coffee: Brother's Gourmet Coffee has agreed to settle its
account for $50,000; however, the Company does not presently have the funds
necessary to bring the account to a close; thus, accounts payable at September
30, 1999, include the full amount due this creditor. This account comprises
almost all of the stated accounts payable at the end of the period under
consideration. Legal counsel to Brothers Gourmet Coffee has stated that the
offer will remain outstanding indefinitely or until Brothers Gourmet Coffee
indicates it is no longer willing to settle the debt for the $50,000 agreed. As
of the date of this report, the offer remains outstanding. DayStar Litigation:
On May 14, 1998, Business Growth Fund of Southern California, LP, and Daystar
Partners, Inc., sued the Company in Los Angeles Superior Court (Case No.
BC191159) alleging that the Company failed to deliver to them Common Stock and
warrants which they claim to have been entitled as a result of their agreements
concerning certain bridge loans to the Company during 1996, the proceeds of
which were used, in part, to provide for the secondary offering made by the
Company in August, 1996, and further claiming moneys due to them in regards of
their exercise of certain bridge loan warrants issued them. The Company has not
been served with the suit, but has responded by letter to the plaintiffs
informing them that they have no basis for the suit and seeking to find an
accommodation so as to avoid the incurrence of unnecessary legal fees. Legal
counsel to the Company has orally informed management that the law suit has been
unilaterally withdrawn by the plaintiffs.
In 1999 the sole efforts of the Company have been directed towards (1) obtaining
an audit of its financial statements for 1999 and 1998, (2) the filing of the
appropriate periodic reports with the Securities and Exchange Commission
required under the Securities Exchange Act of 1934 and (3) obtaining a listing
of the securities of the Company on the Bulletin Board maintained by the
National Association of Securities Dealers, Inc. Management has been successful
in the first two of these endeavors. Regarding the third, the Company obtained
the services of a broker/dealer who sponsored the common stock of the Company
for trading; however, management determined not to pursue this application due
to the failure of the broker/dealer to adequately and timely respond to the NASD
and to keep the Company informed on the progress of the application.
Liquidity and Capital Resources: The Company, from inception and until August
14, 1996, the date on which a secondary offering of stock was concluded, had two
sources of working capital for its operations and expansion, those being the
cash flow generated from existing operations and the extension of credit by its
coffee supplier. The Company, during the final quarter of 1995 and until August
14, 1996, relied on a series of bridge loans to provide for the expenses
incurred in conducting the secondary public offering. The secondary offering
closed on August 14, 1996, and a substantial portion of the proceeds received
from the offering were used to repay the bridge loans incurred. During the
fourth quarter of 1996, the Company negotiated a release of its contract with
Ralph's and subsequently received the release of liabilities aggregating
$707,234 from creditors following the cessation of its coffee business in
exchange for partial payments against the debt owed. The Company, subsequent to
August 14, 1996, and through December, 1997, relied on the proceeds received
from the exercise of outstanding bridge loan warrants registered under the
secondary offering to provide liquidity. Since December, 1997, the Company has
principally relied on the cash proceeds resulting from the Fisher settlement and
the exercise of Series A Warrants to provide operating capital.
<PAGE>
PART II-OTHER INFORMATION
Item 1. Litigation.
DayStar Litigation: On May 14, 1998, Business Growth Fund of Southern
California, LP, and Daystar Partners, Inc., sued the Company in Los Angeles
Superior Court (Case No. BC191159) alleging that the Company failed to deliver
to them Common Stock and warrants which they claim to have been entitled as a
result of their agreements concerning certain bridge loans to the Company during
1996, the proceeds of which were used, in part, to provide for the secondary
offering made by the Company in August, 1996, and further claiming moneys due to
them in regards of their exercise of certain bridge loan warrants issued them.
The Company has not been served with the suit, but has responded by letter to
the plaintiffs informing them that they have no basis for the suit and seeking
to find an accommodation so as to avoid the incurrence of unnecessary legal
fees. Legal counsel to the Company has orally informed management that the law
suit has been unilaterally withdrawn by the plaintiffs.
Item 2. Change in Securities.
This item is not applicable to the Company.
Item 3. Defaults Upon Senior Securities.
This item is not applicable to the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
This item is not applicable to the Company.
Item 5. Other Information.
This item is not applicable to the Company.
Item 6. Exhibits and Reports on Form 8 K.
This item is not applicable to the Company.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, this 15th day of November, 1999.
MIDLAND, INC.
(Registrant)
By: /s/ Roger F. Tompkins
- -------------------------
Roger F. Tompkins, Chief Executive,
Financial and Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the registrant in the
capacity on this 15th day of November, 1999.
By: /s/ Roger F. Tompkins
- -------------------------
Roger F. Tompkins, Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 910
<SECURITIES> 0
<RECEIVABLES> 90,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 90,910
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 114,035
<CURRENT-LIABILITIES> 272,895
<BONDS> 0
0
118,365
<COMMON> 1,106,928
<OTHER-SE> (1,384,153)
<TOTAL-LIABILITY-AND-EQUITY> 114,035
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 39,942
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (19,942)
<INCOME-TAX> 0
<INCOME-CONTINUING> (19,942)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19,942)
<EPS-BASIC> (.001)
<EPS-DILUTED> (.001)
</TABLE>