SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: March 31, 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: (303) (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 March 31, 1999, there
were 3,696,807 shares of common stock outstanding and 16,228,638 common share
equivalents.
<PAGE>
I. PART I FINANCIAL INFORMATION
Item 1. Financial Statements
MIDLAND, INC.
BALANCE SHEETS
March 31, December 31,
ASSETS 1999 1998
------ ---- ----
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 43 $ 43
Restricted cash-escrow 8,134 37,381
Note receivable 90,000 90,000
TOTAL CURRENT ASSETS 98,177 127,424
INVESTMENT (Note C) 23,125 23,125
TOTAL ASSETS $ 121,302 $ 150,549
LIABILITIES AND
SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 209,116 $ 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 289,467 289,467
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 (3,182,592) (3,153,345)
TOTAL SHAREHOLDERS' DEFICIT (168,165) (138,918)
TOTAL LIABILITIES AND
SHAREHOLDERS' DEFICIT $ 121,302 $ 150,549
The accompanying notes are an integral part of these financial statements.
<PAGE>
MIDLAND, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
For the three months ended
March 31, March 31,
1999 1998
---- ----
SALES $ 0 $ 0
COST OF SALES 0 0
Gross profit 0 0
OPERATING EXPENSES
General and administrative 29,247 220,863
Depreciation 0 0
TOTAL OPERATING EXPENSES 0 220,863
LOSS FROM OPERATIONS 0 (220,863)
OTHER INCOME (EXPENSES)
Interest income 0 1,264
Interest expense 0 0
LOSS BEFORE INCOME TAXES (29,247) (219,599)
Provision for income tax 0 800
NET LOSS $ (29,247) $ 219,599)
Net loss per common share (.001) (.08)
Weighted average number
of shares outstanding 3,696,807 2,823,207
The accompanying notes are an integral part of these financial statements.
<PAGE>
MIDLAND, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the three months ended
March 31, March 31,
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (29,247) $(219,599)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation 0 0
Gain on sale of property
and equipment 0 0
Changes in operating assets and liabilities:
Accounts receivables 0 0
Inventory 0 0
Prepaid expenses 0 0
Other assets 0 0
Increase (decrease) in:
Subscription receivables 0 (100,000)
Accounts payable 0 (7,726)
Accounts payable: related party 0 (153,000)
Accrued expenses 0 1,013
Bank overdraft 0 0
NET CASH USED IN
OPERATING ACTIVITIES 0 (479,312)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in subsidiary 0 (329,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long term debt 0 0
Net proceeds from long term debt 0 0
Proceeds from sale of
series A preferred stock 0 86,202
Proceed from sale of
common stock 0 156,215
Proceeds from additional
paid in capital 0 720,143
NET CASH PROVIDED BY
FINANCING ACTIVITIES 0 962,560
NET INCREASE (DECREASE) IN CASH (29,247) 154,248
CASH, BEGINNING OF PERIOD 37,381 7,984
CASH, END OF PERIOD $ 8,134 $ 162,232
The accompanying notes are an integral part of these financial statements.
<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, 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.
At March 31, 1998, the Company reported a cash balance of $162,232 and an
investment in subsidiary of $329,000. (The subsidiary was ArconEnergy.) This
cash was misappropriated by Mr. Daniel W. Fisher and/or invested in ArconEnergy
, and became the basis of a law suit which was subsequently settled. The
subsidiary investment was then written off as a loss. At that date there was
also a subscription receivable in the amount $100,000 from Mr. King and his
StockstoWatch.com which was subsequently written off as uncollectible. Accounts
payable at March 31, 1998, aggregated $121,000 to related parties. This
represented a $153,000 decrease from year end which was the result of the
delivery of 90,000 shares of Series A Preferred Stock to a former officer and
director in exchange for his services from August 29, 1997, through and
including January 22, 1998. The sum of $153,000 was accrued at year end for
these services and an additional $27,000 was incurred during the first quarter
of 1998, all of which was satisfied through the delivery of the stock. The
remaining $121,000 in related party accounts payable was subsequently satisfied
as well.
In the final quarter of 1998, the Company made a loan to an unaffiliated entity
of approximately $90,000 on a short term basis at an above market rate and
invested $23,125 in common stock from this entity.
<PAGE>
In the first quarter of 1999 the sole business of the Company has been directed
towards obtaining an audit of its financial statements for 1999 and 1998 and
towards the filing of the appropriate annual and quarterly reports with the
Securities and Exchange Commission. Management was successful in these
endeavors. Secondly, management has dedicated itself towards obtaining a listing
of the securities of the Company on the Bulletin Board maintained by the
National Association of Securities Dealers, Inc. The Company has obtained the
services of a broker/dealer who is sponsoring the securities for trading and
management is currently in the process of answering the questions of the NASD
prior to the re-listing of the securities.
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.
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.
<PAGE>
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. If served, the Company intends to vigorously defend the suit.
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 9th day of April, 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 9th day of April, 1999.
By: /s/ Roger F. Tompkins
- -------------------------
Roger F. Tompkins, Director
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<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
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<SECURITIES> 23,125
<RECEIVABLES> 0
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<CURRENT-LIABILITIES> 289,467
<BONDS> 0
0
118,365
<COMMON> 1,106,928
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<TOTAL-LIABILITY-AND-EQUITY> 121,302
<SALES> 0
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