UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15D OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to __________
Commission File Number: 0-3825
MPEL HOLDINGS CORP.
(Exact name of registrant as specified in its current charter)
NEW YORK 22-1842747
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
25 Melville Park Road, Melville, NY 11747
(Address of registrant's principal executive offices including Zip Code)
(516) 364-2700
(Registrant's telephone number, including area code)
No Change (Former name, former address and former fiscal year if changed
since last report)
Indicated 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 [ ].
As of June 30, 1999, the registrant had 11,201,142 shares outstanding of
common stock, $.01 par value.
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MPEL HOLDINGS CORP. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
Expenses. Commissions, wages and benefits decreased $1,203,589, or 55.3% to
$1.0 million. The decrease in commissions, wages and benefits was primarily due
to a reduction of staff resulting from the closing of five branches and, in the
three months ended June 30, 1998, the Company incurred a one time charge of
$341,000 relating to the principal shareholders purchasing the Company's stock
from another shareholder below the May 1998 offering price. As of June 30, 1999,
the Company had 95 employees as compared to 155 employees as of June 30, 1998.
Selling and administrative expenses, which consist of marketing, occupancy,
supplies, selling and other expenses decreased $222,292, or 33.7% to $437,573.
This decrease was due primarily to the closing of five branches. Interest
expense increased $123,031, or 22.3%, to $675,531. This increase was due to
amortization of the convertible debentures discount of $308,000 which was
partially offset by a reduction in interest on the warehouse lines of credit due
to lower borrowings.
Net income. During the three month period ended June 30, 1999 net income
increased $823,323 compared to the three month period ended June 30, 1998. This
increase is primarily the result of the decrease in commissions, wages and
benefits related to the closing of 5 branch locations, a one time $341,000
compensation charge in the three months ended June 30 1998, and is partially
offset by a $308,000 noncash charge related to the issuance of convertible
debentures.
Six Months Ended June 30, 1999 Compared to the Six Months Ended June 30,
1998
Mortgage origination. Mortgage loan origination volume decreased $5.5
million or 5.6% to $93.3 million during the six month period ended June 30, 1999
from $98.8 million during the corresponding period of 1998. This decrease in
mortgage loan origination volume was primarily due to the closing of five
branches, partially offset by increased origination volume at existing branches
which resulted from expanded marketing campaign, including increased
telemarketing, television exposure and loan officers.
Revenue. Mortgage origination, net, decreased $423,543 or 9.5% to $4.0
million. The decrease was due to decreased margins on B/C loans and a reduction
in overall volume. Interest income decreased $57,870, or 10.1% to $513,250. The
decrease was due to a reduction of overall volume.
Expenses. Commissions, wages and benefits decreased $1,386,580 or 39.6% to
$2.1 million. The decrease in commissions, wages and benefits was primarily due
to a reduction of staff resulting from the closing of five branches. As of June
30, 1999, the Company had 95 employees as compared to 155 employees as of June
30, 1998. Selling and administrative expenses, which consist of marketing,
occupancy, supplies, selling and other expenses decreased $575,569, or 30.4% to
$1,318,377. This decrease was due primarily to a one time $341,000 compensation
charge in the three month period ended June 30, 1998 and the closing of five
branches. Interest expense increased $76,669, or 8.9% to $934,762. This increase
was due to amortization of the convertible debentures discount of $308,000 which
was partially offset by a reduction of interest on the warehouse lines of credit
due to lower borrowings.
Net income. During the six month period ended June 30, 1999 net income
increased $1,404,067 compared to the six month period ended June 30, 1998. This
increase is the result of a one time $341,000 compensation charge in the three
months ended June 30, 1998 and of the decrease in expenses relating to the
closing of 5 branch locations. In addition, although interest expense increased,
the increase was the result of a $308,000 noncash charge related to the issuance
of convertible debentures, substantially offset by the reduction in overall
borrowing levels.
Liquidity and Capital Resources
The Company's primary operating cash requirements include the funding or
payment of: (i) mortgage loan originations pending their sale; (ii) interest
expense incurred on warehouse and other financing; (iii) capital expenditures;
(iv) personnel and commission costs; and (v) other ongoing operating and
administrative expenses. The Company generates cash flow from fees received from
its borrowers for mortgage originations, the sale of mortgage loans into the
secondary market and interest income on loans held for sale. The Company must be
able to sell loans and obtain adequate credit facilities and other sources of
funding in order to continue to originate loans.
Management expects to increase its production of mortgage loan
originations, through, among other things, increased advertising and promotion,
expanded telemarketing capabilities and continued expansion into new markets.
This expected increase in mortgage loan originations is expected to be funded by
cash flow from operations and increased borrowings under warehouse facilities.
To the extent that additional borrowings under the warehouse facilities or other
arrangements are not available on satisfactory terms, the Company will explore
alternative means of financing, including raising capital through additional
offerings of securities.
In October, 1998, the Company entered into a $10 million warehouse line of
credit expiring September 1, 1999, renewable annually. In February, 1999, The
Company entered into an additional $10 million warehouse line of credit with
another lender. This warehouse line of credit may be canceled by the lender upon
30 days notice. The warehouse lines of credit are personally guaranteed by the
Company's principal shareholders and contain certain covenants requiring, among
other things, minimum adjusted net worth, and are collaterized by specific
mortgage loans held for sale and amounts due from investors. Interest is
variable, based on the prime rate and type of collateral. These revolving credit
facilities, permit the Company to borrow to originate mortgage loans, repay and
borrow again to originate additional mortgage loans. Interest is charged on the
outstanding principal balance. The Company expects to be able to renew or
replace the existing warehouse lines when the current terms expire.
The Company is required to comply with various operating and financial
covenants as provided in the agreements described above which are customary for
agreement of their type. The Company does not believe that its existing
financial covenants will restrict its operations or growth. The continued
availability of funds provided to the Company under these agreements is subject
to the Company's continued compliance with these covenants. Management believes
it is in compliance with all such covenants under these agreements as of June
30, 1999.
On June 14, 1999, the Company sold convertible debentures in the aggregate
principal amount of $2,250,000 convertible on or prior to June 14, 2003 and
convertible into common stock at the lesser of $0.60 per share or 70% of the
closing market value on the conversion date, as defined. Unless the Company is
in default, at maturity the outstanding debentures convert to the Company's
common stock. Interest at 10% per annum is payable in cash or in shares of
common stock of the Company, at the holders' option. In connection with the
debentures, the Company issued warrants to purchase 2,437,500 shares at an
exercise price of $0.60 and warrants to purchase 225,000 shares at an exercise
price of $0.85.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MPEL HOLDINGS CORP.
(Registrant)
Dated: August 20, 1999 By:/s/ STEVEN M. LATESSA
------------------------
STEVEN M. LATESSA
President and Chief Executive Officer
Dated: August 20, 1999 By:/s/ CARY WOLEN
-----------------
CARY WOLEN
Treasurer and Principal Financial Officer
