Form 10-QSB
[ x ] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ending June 30, 1998
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 333-10109
UNITED MORTGAGE TRUST
(Exact Name of Registrant as Specified in its
Governing Instruments)
(a Maryland trust) (IRS Employer Identification
Number 75-6496585)
1701 N. GREENVILLE, SUITE 403
RICHARDSON TX 75081
(972) 705-9805
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
___
<PAGE>
UNITED MORTGAGE TRUST
INDEX TO FORM 10-QSB
Page Number
PART I -- FINANCIAL INFORMATION . . . . . . . . . . . . . 3
Item 1. Financial Statements . . . . . . . . . . . . . . . 3
Balance Sheets
June 30, 1998 and December 31, 1997 . . . . . . . F1
Statements of Operations
Three and Six Months Ending June 30, 1998
and 1997. . . . . . . . . . . . . . . . . . . . . F2
Statements of Cash Flows
Six Months Ending June 30, 1998 and 1997 . . . . .F3
Notes to Financial Statements . . . . . . . . . . . . 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations . . . . 6
PART II -- OTHER INFORMATION . . . . . . . . . . . . . . .10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . .10
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. Financial Statements
<TABLE>
Balance Sheets
June 30, 1998 and December 31, 1997
<CAPTION>
June 30, December 31,
1998 1997
(unaudited) (audited)
ASSETS
<S> <C> <C>
Cash $ 187,039 $ 248
Investment in first lien mortgage notes 5,744,322 2,722,036
Interim mortgage loans 1,774,911 877,275
Accrued interest receivable 64,436 38,746
Receivable from affiliate (Note 4) 24,510 12,116
Equipment, less accumulated depreciation
of $996 and $736, respectively 2,206 1,850
Other assets 7,996 2,337
Total Assets $7,805,420 $3,654,608
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Note payable (Note 3) $ 318,193 $ 138,000
Dividend payable 68,988 33,799
Accounts payable & accrued liabilities 56 883
Total Liabilities $ 387,237 $ 172,682
Shareholders' equity:
Shares of beneficial interest; $.01 par
Value; 100,000,000 shares authorized
421,417 and 202,508 shares
outstanding $ 4,214 $ 2,025
Additional paid-in capital 7,383,577 3,467,964
Retained earnings 30,392 11,937
Total Shareholders' Equity $7,418,183 $3,481,926
Total $7,805,420 $3,654,608
<FN>
See accompanying notes to financial statements.
Page F1
</FN>
</TABLE>
<TABLE>
Statements of Operations
For the Three Months and Six Months Ended
June 30, 1998 and 1997
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
(unaudited) (unaudited) (audited) (audited)
<S> <C> <C> <C> <C>
Revenues:
Interest income $222,756 $ 907 $386,872 $ 1,463
Expenses:
Salaries and wages 18,619 16,148 35,066 32,595
General and
administrative 66,423 7,135 95,389 8,718
Interest expense 6,160 1,408 9,806 1,408
Expense reimburse-
ment from affiliate
(Note 4) (73,125) -- (108,939) --
18,077 24,691 31,322 42,721
Net income (loss) $204,679 $(23,784) $355,550 $(41,258)
Net income (loss) per
share of beneficial
interest $0.53 $(2.38) $1.08 $(4.13)
Weighted average shares
outstanding 386,179 10,000 328,818 10,000
<FN>
See accompanying notes to financial statements.
Page F2
</FN>
</TABLE>
<TABLE>
Statements of Cash Flows
For the Six Months Ending June 30, 1998 and 1997
<CAPTION>
June 30, June 30,
1998 1997
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 355,550 $ (41,258)
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 350 (10)
Amortization of discount on mortgage notes (23,509) --
Accrued interest receivable (25,690) 137
Other assets (6,365) (1,600)
Accounts payable and accrued liabilities (827) 20,946
Net cash provided by operating activities: $ 299,509 $ (21,785)
Cash flows from investing activities:
Investment in first lien mortgage notes $(2,923,125) $ (102,070)
Principal receipts on first lien mortgage notes 17,972 20
Investment in interim mortgage notes (897,635) --
Loan acquisition costs (93,625) --
Net cash used in investing activities: $(3,896,413) $ (102,050)
Cash flows from financing activities:
Proceeds from issuance of shares of
beneficial interest $ 3,917,801 --
Offering costs -- (52,426)
Net borrowings on note payable 180,194 163,469
Receivable from affiliate (12,394) --
Dividends (301,906) --
Net cash provided by financing activities: $ 3,783,695 $ 111,043
Net increase (decrease) in cash 186,791 (12,792)
Cash at beginning of period 248 13,051
Cash at end of period $ 187,039 $ 259
Interest paid $ 6,160 $ --
<FN>
See accompanying note to financial statements.
Page F3
</FN>
</TABLE>
UNITED MORTGAGE TRUST
Notes to Financial Statements
June 30, 1998
1. Description of Business
The Company
United Mortgage Trust ("UMT" or the "Company") is a
Maryland real estate investment trust which intends to
qualify as a real estate investment trust under federal
income tax laws. The advisor to the Company is Mortgage
Trust Advisors, Inc. (the "Advisor"), a Texas corporation.
The Company invests in the following types of Mortgage
Investments: (1) first lien, fixed rate mortgages secured
by single family residential property throughout the United
States ("Residential Mortgages"), and (2) loans of 12
months or less in term, made to borrowers for the purchase,
renovation and sale of single family homes ("Interim
Mortgages"). Such loans will be originated by others to the
Company's specifications or to specifications approved by
the Company. Most, if not all, of such loans are not
insured or guaranteed by a federally owned or guaranteed
mortgage agency.
Operations commenced on March 5, 1997 when approval
was given by the Securities and Exchange Commission for the
Company's initial public offering of shares. The Company is
currently offering up to 2,500,000 shares at an offering
price of $20 per share.
2. Basis of Presentation
The accompanying unaudited financial statements have
been prepared in accordance with generally accepted
accounting principles for interim financial information and
with the instructions to Form 10-QSB of Regulation S-B.
They do not include all information and footnotes required
by generally accepted accounting principles for complete
financial statements. However, except as disclosed herein,
there has been no material change in information disclosed
in the notes to the financial statements for the year
ending December 31, 1997 included in the Company's 10-KSB
filed with the Securities and Exchange Commission. The
interim unaudited financial statements should be read in
conjunction with those financial statements. In the opinion
of management, all adjustments considered necessary for a
fair presentation, consisting solely of normal recurring
adjustments, have been made. Operating results for the
three months and six months ending June 30, 1998 are not
necessarily indicative of the results that may be expected
for the year ending December 31, 1998.
3. Notes Payable
On March 27, 1998 the Company renewed and increased
its Revolving Loan Agreement (the "Agreement") with Abrams
Centre National Bank (the "Bank"), wherein the Company can
borrow up to $500,000 on a revolving basis for a term of
one year from the date of the Agreement. Interest on the
outstanding principal balance of the loan is paid monthly
at a varying rate per annum of one and one-half percent (1-
1/2%) in excess of the Bank's prime rate of interest. The
borrowing base in the Agreement is an amount equal to fifty
percent (50%) of the aggregate unpaid principal of the
Collateral pledged to the Bank. Collateral for the
Agreement is $1,000,000 unpaid principal balance of
residential mortgages owned by the Company. As security for
the prompt satisfaction of all obligations of the
Agreement, the Company agreed to assign, transfer and set
over to the Bank all of its right, title and interest in
and to the Collateral. As of June 30, 1998 the outstanding
balance of the Revolving Line of Credit was $318,193. The
Company used the funds to purchase Mortgage Investments.
4. Related Party Transactions
In 1997 UMT entered into a Funding Agreement with the
Advisor whereby the Advisor agreed to fund the Company's
general and administrative expenses. In connection with
this Agreement, the Company received $73,125 and $108,939
in expense reimbursements for the three months and six
months ending June 30, 1998, respectively. In consideration
of the Agreement, the Company contributed to the Advisor an
amount equal to one-half of one percent (.5%) of the
Company's average invested assets for the immediately
preceding month.
The Company also paid the Advisor Acquisition Fees of
$57,724 and $93,625 during the three months and six months
ending June 30,1998,respectively, calculated at 3% of the
unpaid principal balance of the Residential Mortgages as of
the purchase date.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
Results of Operations
During the quarter ending June 30, 1998 UMT purchased
30 Residential Mortgages secured by single family,
residential property in Texas, with an unpaid principal
balance of $1,196,675 as of the purchase dates of the
notes. The Residential Mortgages were acquired for
$1,116,085, or 93.27% of the outstanding unpaid principal
balance of the notes, as of the purchase date. They had a
blended annual interest rate of 11.52%, a current annual
yield of 12.35% and an investment-to-value ratio of 81.11%
(the Company's investment in the note divided by the value
of the home that is security for the note.) On average, the
notes had an unpaid principal balance $39,889 and a term
remaining of 327 months. Twenty-two of the notes were
acquired from South Central Mortgage, Inc. and eight were
acquired from private individuals. This compares to the
quarter ending June 30, 1997, during which time UMT owned
one Residential Mortgage with an unpaid principal balance
of $29,990, interest of 11.50%, a current annual yield of
12.34% and a loan-to-investment ratio of 78.41%, as of the
purchase date of the mortgage note. The note had an unpaid
principal balance of $27,834, a term remaining of 356
months and was acquired for 92.81% of the unpaid principal
balance as of the purchase date.
During the six months ending June 30, 1998 UMT
purchased 73 Residential Mortgages secured by single
family, residential property in Texas, with an unpaid
principal balance of $3,120,822 as of the purchase dates of
the notes. The Residential Mortgages were acquired for
$2,923,125, or 93.66% of the outstanding unpaid principal
balance of the notes, as of the purchase date. They had a
blended annual interest rate of 11.51%, a current annual
yield of 12.29% and an investment-to-value ratio of 83.11%
(the Company's investment in the note divided by the value
of the home that is security for the note.) On average, the
notes had an unpaid principal balance $42,752 and a term
remaining of 333 months. Fifty-five of the notes were
acquired from South Central Mortgage, Inc. and eighteen
were acquired from private individuals. This compares to
the six months ending June 30, 1997, during which time UMT
owned one Residential Mortgage with an unpaid principal
balance of $29,990, interest of 11.50%, a current annual
yield of 12.34% and a loan-to-investment ratio of 78.41%,
as of the purchase date of the mortgage note. The note had
an unpaid principal balance of $27,834, a term remaining of
356 months and was acquired for 92.81% of the unpaid
principal balance as of the purchase date.
UMT's total portfolio of Residential Mortgages as of
June 30, 1998 consisted of 145 Residential Mortgages with
an aggregate unpaid principal balance of $5,944,680 as of
the purchase dates of the notes. The Residential Mortgages
were acquired for an aggregate sum of $5,558,651, or for
93.50% of the outstanding principal balance of the notes as
of the purchase date. The Residential Mortgages had a
blended annual interest rate of 11.45%, a current annual
yield of 12.25% and an investment-to-value ratio of 83.13%.
On average the notes had an unpaid principal balance of
$40,998 and a term remaining of 321 months.
As of June 30, 1998 the Company had investments in 64
Interim Mortgages for an aggregate total of $1,774,911. The
Interim Mortgages had terms of no greater than 12 months
and were made to borrowers for the purchase, renovation and
sale of single family homes. These loans, which are first
lien mortgage notes secured by properties in Texas, had a
blended interest rate of 14.27% and investment-to-values of
no greater than 50%. UMT had no Interim Mortgages during
the quarter ending June 30, 1997.
All of the properties that are security for the
Residential Mortgages and Interim Mortgages are located in
Texas. Each of the properties was adequately covered by a
mortgagees title insurance policy and hazard insurance.
The Company's Residential Mortgages and Interim
Mortgages generated $222,756 of interest income during the
quarter ending June 30, 1998. Expenses of $91,202 were
offset by reimbursement from the Advisor of $73,125. During
the quarter the Company realized net income of $204,679 and
earnings per share of $.53. This compares to interest
income during the quarter ending June 30, 1997 of $907 and
expenses of $24,691, resulting in a net loss of $23,784 or
$2.38 per share.
For the six months ending June 30, 1998 Residential
Mortgages and Interim Mortgages generated $386,872 of
interest income. Expenses of $140,261 were offset by
reimbursement from the Advisor of $108,939. During the six-
month period the Company realized net income of $355,550
and earnings per share of $1.08. This compares to interest
income during the six months ending June 30, 1997 of $1,463
and expenses of $42,721, resulting in a net loss of $41,258
or $4.13 per share.
Capital Resources and Liquidity
During the quarter ending June 30, 1998 UMT added 69
new shareholders increasing the total number of
shareholders to 300. The Company issued 93,723 shares of
beneficial interest thereby increasing the outstanding
shares to 421,417. Gross Offering Proceeds increased by
$1,874,460 resulting in aggregate Gross Offering Proceeds
of $8,428,340. The Gross Offering Proceeds for the quarter
ending June 30, 1998 were distributed as follows:
$1,677,337 to the Company as Net Offering Proceeds; 10% or
$187,446 to the Selling Group Manager for Selling
Commissions; 0.5% or $9,372 to the Selling Group Manager
for Due Diligence Fees; and $305 to the Escrow Agent as
compensation for distributing interest accrued to
subscribers. This compares to the quarter ending June 30,
1997 when UMT had one shareholder, its Advisor, Mortgage
Trust Advisors, Inc. and had been initially capitalized
with $200,000 from the sale to the Advisor of 10,000 shares
of beneficial interest.
During the six months ending June 30, 1998 UMT added
128 new shareholders increasing the total number of
shareholders to 300. The Company issued 218,909 shares of
beneficial interest thereby increasing the outstanding
shares to 421,417. Gross Offering Proceeds increased by
$4,378,180 resulting in aggregate Gross Offering Proceeds
of $8,428,340. The Gross Offering Proceeds for the six
months ending June 30, 1998 were distributed as follows:
$3,917,801 to the Company as Net Offering Proceeds; 10% or
$437,818 to the Selling Group Manager for Selling
Commissions; 0.5% or $21,891 to the Selling Group Manager
for Due Diligence Fees; and $670 to the Escrow Agent as
compensation for distributing interest accrued to
subscribers. This compares to the six months ending June
30, 1997 when UMT had one shareholder, its Advisor,
Mortgage Trust Advisors, Inc. and had been initially
capitalized with $200,000 from the sale to the Advisor of
10,000 shares of beneficial interest.
During the quarter ending June 30, 1998 UMT used Net
Offering Proceeds to purchase 30 Residential Mortgages for
$1,116,084, or for 93.27% of the unpaid principal balance
of the notes as of the purchase date. Net Offering proceeds
were used to increase the Interim Mortgage Loan balance
outstanding from $1,200,785, at March 31, 1998, to
$1,774,911. Net Offering Proceeds were also used to pay an
Acquisition Fee of $35,900 to the Advisor, calculated at 3%
of the unpaid principal balance of the Residential
Mortgages as of the purchase date. Comparing the quarter
ending June 30, 1997 UMT used part of the proceeds from its
initial capitalization to purchase one Residential Mortgage
for $27,834 or for 92.81% of the unpaid principal balance
of the note as of the purchase date. No acquisition fee was
paid to the Advisor in the transaction. There were no
Interim Mortgage Loans at the quarter ended June 30,1997.
During the six months ending June 30, 1998 UMT used
Net Offering Proceeds to purchase 73 Residential Mortgages
for $2,923,125, or for 93.66% of the unpaid principal
balance of the notes as of the purchase date. Net Offering
proceeds were used to increase the Interim Mortgage Loan
balance outstanding from $877,275, at December 31, 1997, to
$1,774,911 at June 30, 1998. Net Offering Proceeds were
also used to pay an Acquisition Fee of $93,625 to the
Advisor, calculated at 3% of the unpaid principal balance
of the Residential Mortgages as of the purchase date.
Comparing the six months June 30, 1997 UMT used part of the
proceeds from its initial capitalization to purchase one
Residential Mortgage for $27,834 or for 92.81% of the
unpaid principal balance of the note as of the purchase
date. There were no Interim Mortgage Loans at the quarter
ended June 30,1997.
No acquisition fee was paid to the Advisor in the
transaction.
UMT declared and paid three dividends to shareholders
during the quarter ending June 30, 1998. The annualized
rate-of-return to shareholders was 10.38%. Six dividends
were declared and paid to shareholder during the six months
ended June 30, 1998. The annualized rate-of-return to
shareholders for the six months period was 10.47%. No
dividends were paid during the six months ending June 30,
1997.
On March 27, 1998 UMT renewed and increased its
Revolving Loan Agreement (the "Agreement") with its lending
bank (the "Bank") wherein the Company can borrow up to
$500,000 on a revolving basis for a term of one year from
the date of the Agreement. Interest on the outstanding
principal balance of the loan is paid monthly at a varying
rate per annum, which is one and one-half percent (1-1/2%)
in excess of the Bank's prime rate of interest. The
outstanding balance of the line of credit at June 30, 1998
was $318,193. The Company uses the line of credit to
purchase Mortgage Investments prior to its two monthly
closings.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Reports on Form 8-K
During the period covered by this report, the Company
filed reports on Form 8-K dated April 30, 1998 and May 31,
1998 to report the status of its offering of shares.
SIGNATURES
In accordance with the requirements of the Exchange
Act, the registrant caused this report to be signed on its
behalf by the undersigned, thereunder duly authorized.
UNITED MORTGAGE TRUST
(Registrant)
Date: July 29, 1998 /S/Christine A. Griffin
Christine A. Griffin
President
14
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