SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1O-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2000.
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 No.0-23965
easyQual.com, Inc.
------------------
formerly known as Centennial Banc Share Corp.
(Exact name of Registrant as specified in its charter)
Colorado 84-1374481
-------------- -----------------------
(State or other (IRS Employer File Number)
jurisdiction of
incorporation)
6795 E. Tennessee Ave., 5th Floor 80224
--------------------------------------- -----------
(Address of principal executive offices) (zip code)
(303) 840-2000
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) had 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
--- ---
The number of shares outstanding of Registrant's common stock, par value
$.0000001 per share, as of June 30, 2000 were 15,994,941 common shares.
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM I. Financial Statements
REPORT ON REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
EasyQual.Com.Inc.
Denver, CO
We have reviewed the accompanying consolidated balance sheet of
EasyQual.Com.Inc. and subsidiaries as of June 30, 2000 and the related
consolidated statement of income and cash flow for the six-months ended June 30,
2000, included in the accompanying Securities and Exchange Commission Form 10-Q
for the period ended June 30, 2000. These consolidated financial statements are
the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the consolidated financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as December 31, 1999 and the related
consolidated statements of income, stockholders' equity and cash flows for the
year then ended (not presented herein). In report dated March 22, 2000, we
expressed an unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying consolidated balance
sheet as of June 30, 2000, is fairly stated in all material respects in relation
to the consolidated balance sheet from which it has been derived.
Michael Johnson & Co., LLC
Denver, CO
August 9, 2000
<PAGE>
<TABLE>
<CAPTION>
Easy.Com.Inc
Consolidated Balance Sheet
June 30, 2000
(Unaudited)
Six Months Year
Ended Ended
June 30, 2000 Dec. 31, 1999
------------- -------------
ASSETS:
Current assets:
<S> <C> <C>
Cash $ 278,930 $ 64,714
Accounts Receivable 353,504 404,339
Note Receivable - Note 2 283,482 279,937
Loan Receivables 159,597 159,597
Loans Receivable - Warehouse 8,453,098 12,006,590
------------ ------------
Total current assets 9,528,611 12,915,177
Fixed assets - Note 1
Computers & Equipment 225,070 206,578
Furniture & Fixtures 261,769 255,969
Leasehold Improvements 4,096 12,424
------------ ------------
Total fixed assets 490,935 474,971
Less accumulated depreciation (90,042) (50,005)
------------ ------------
Net fixed assets 400,893 424,966
Other assets:
Prepaid Expenses 147,218 41,181
Marketable Security 148,000 148,000
Title Co. Advances 200,169 112,900
Intangible Assets 1,878,065 1,865,641
Deposit 13,595 13,028
------------ ------------
2,387,047 2,180,750
Less Amortization (129,548) (73,689)
------------ ------------
Total other assets 2,257,499 2,107,061
TOTAL ASSETS $ 12,187,003 $ 15,447,204
============ ============
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 90,254 $ 151,308
Accrued Expenses 30,499 97,254
Loans Payable - First Payable 6,805 --
Impounds 14,705 --
Loan Payables 117,880 --
Notes Payable 45,130 94,104
Debenture Payable 350,000 500,000
Warehouse Line Payable 8,429,521 11,974,835
------------ ------------
Total current liabilities 9,084,794 12,817,501
Stockholder's equity:
Preferred stock, $.0000001 Par Value
1,000,000 Shares Authorized. None Issued -- --
Common stock, $.0000001 Par Value
50,000,000 Shares Authorized, 15,994,941 were
issued and outstanding for 2000 and 3,397,983 were 1 1
issued and outstanding for1999
Additional Paid-In Cash 4,851,059 3,969,259
Retained Earnings (Deficit) (1,748,851) (1,339,704)
------------ ------------
Total Stockholders' Equity 3,102,209 2,629,556
TOTAL LIABILITIES & STOCKHOLDER'S EQUITY: $ 12,187,003 $ 15,447,057
============ ============
The accompanying note are an intergral part of these financial statements
</TABLE>
<PAGE>
EasyQual.Com.Inc.
Consolidated Statement of Operations
For the Six-Months Ended June 30, 2000
(Unaudited)
Six Months Six Months
Ended Ended
June 30, 00 June 30, 99
------------ ------------
REVENUE:
Loan Origination Fees $ 2,712,576 $ 1,165,866
Miscellaneous Income 1,166 14,000
------------ ------------
Total Revenue 2,713,742 1,179,866
OPERATING EXPENSES:
Loan Origination Costs 2,713,924 1,323,934
General & Administrative 408,965 79,729
------------ ------------
Total Operating Expenses 3,122,889 1,403,663
------------ ------------
NET DEFICIT $ (409,147) $ (223,797)
============ ============
NET LOSS PER COMMON STOCK $ (0.03) $ (0.01)
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 14,188,324 2,062,522
============ ============
The accompanying note are an intergral part of these financial statements
<PAGE>
EasyQual.Com.Inc.
STOCKHOLDERS EQUITY
June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Additional Retained Total
COMMON STOCKS Paid- In Earnings Stockholder's
Shares Amount Capital (Deficit) Equity
------ ------ ------- --------- ------
<S> <C> <C> <C> <C> <C>
Issuance of Stock for Cash & Services 6,953,406 $ 1 $ 108,510 $ -- $ 108,511
Net Deficit 12/31/97 (3,080) (3,080)
----------- ----------- ----------- ----------- -----------
Balance December 31, 1997 6,953,406 1 108,510 (3,080) 105,431
Issuance of Stock for Cash 12,900 -- 10,750 -- 10,750
Cancelled Stock (7,500) -- (6,250) -- (6,250)
Issuance of Stock for Cash 49,995 -- 24,998 24,998
Net Deficit 12/31/98 -- (67,566) (67,566)
----------- ----------- ----------- ----------- -----------
Balance December 31, 1998 7,008,801 1 138,008 (70,646) 67,363
----------- ----------- ----------- ----------- -----------
April and Dec 1999 Issuance for Acquisition 5,100,000 -- 2,889,412 -- 2,889,412
Issuance for Cash 519,999 -- 520,000 -- 520,000
Issuance for Cash 733,200 -- 371,839 371,839
Issuance for Services 300,000 -- 50,000 50,000
Net Deficit 12/31/99 -- -- (1,269,058) (1,269,058)
----------- ----------- ----------- ----------- -----------
Balance December 31, 1999 13,662,000 1 3,969,259 (1,339,704) 2,629,556
----------- ----------- ----------- ----------- -----------
Issuance of Stock for Services 600,000 100,000 100,000
Issuance of Stock for Cash 225,000 -- 450,000 -- 450,000
Issuance of Stock for Services 40,000 -- 6,800 -- 6,800
Issuance to Repay Debenture 74,996 -- 50,000 -- 50,000
Issuance to Repay Debenture 867,945 -- 75,000 -- 75,000
Issuance to Repay Debenture 225,000 -- 150,000 -- 150,000
Issuance of Stock for Cash 300,000 -- 50,000 -- 50,000
Net Defict 6/30/2000 -- -- (409,147 (409,147)
----------- ----------- ----------- ----------- -----------
Balance June 30, 2000 15,994,941 $ 1 $4,851,059 $(1,748,851) $ 3,102,209
=========== ----------- =========== =========== ===========
The accompanying note are an intergral part of these financial statements
</TABLE>
<PAGE>
EasyQual.Com.Inc.
Consolidated Statement of Cash Flow
For the Six-Months Ended June 30, 2000
(Unaudited)
Six Months Six Months
Ended Ended
June 30, 2000 June 30, 1999
----------- -----------
Cash Flows from Operating Activities:
Net Income (Loss) $ (409,147) $ (233,924)
Depreciation and Amortization 52,073 18,945
Changes in Assets & Liabilities:
Notes Receivable (283,482) 2,698,065
Loans Receivable (2,209) --
Deposits (532) 52,622
Accounts Payable 31,602 55,173
Notes Payable (325,811) (2,971,539)
Intangibles (9,463) (1,868,602)
Debenture Payable (150,000) 500,000
Accrued Expenses -- (77,302)
----------- -----------
Net Cash Provided by Operating Activities (1,096,969) (1,826,562)
Cash Flows Used for Investing Activities:
Capital Expenditures (44,536) (367,291)
----------- -----------
Net Cash Used for Investing Activities (44,536) (367,291)
Cash Flows from Financing Activities:
Issuance of Common Stocks 881,800 2,914,410
----------- -----------
Net Cash Provided by Financing 881,800 2,914,410
Net Increase in Cash & Cash Equivalents (259,705) 720,557
Cash & Cash Equivalents at Beginning of Period 538,635 11,598
----------- -----------
Cash & Cash Equivalents at End of Period $ 278,930 $ 732,155
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid During the Year for:
Interest 67,201 69,516
Income Taxes -- --
=========== ===========
NON-CASH TRANSATIONS
Common stock issued in exchange for services $ -- $ --
=========== ===========
The accompanying note are an intergral part of these financial statements
<PAGE>
EASYQUAL.COM.INC.
Notes to Financial Statements
For the Six-Months Ended June 30, 2000
(Unaudited)
Note 1 - Organization and Summary of Significant Accounting Policies:
------------------------------------------------------------
Organization - Nature of Operations
-----------------------------------
The Company was formed on November 8, 1996, and incorporated under the laws of
the State of Colorado. The Company spent several months of preparation and
research before beginning formal operations on March 10, 1997. No financial
transactions occurred in 1996. The Company is primarily engaged in mortgage
banking . The Company official changed it's name to EasyQual.Com.In.c on June
20, 2000.
The Company is a Colorado Corporation organized for the purpose of developing
and maintaining the business associated with mortgage banking. The Company name
has been approved by the State of Colorado division of banking. The Company is
an approved banker, which has a correspondent relationship with several large
wholesale banks. On April 30, 1999 the Company purchased 100% of Entrust
Mortgage, Inc. for Eight Hundred Thousand shares of restricted 144 common stock.
Entrust Mortgage, Inc. became a wholly owned subsidiary of Centennial Banc Share
Corp. and is included in these consolidated financial statements utilizing the
purchase method of accounting.
Entrust Mortgage, Inc. was incorporated under the laws of the State of Colorado
on March 4, 1999. The Company originates residential loans in over thirty states
and sells them to investors.
The Company originates residential real estate loans and assigns them to various
lenders. The Company receives fees from borrowers and yield spread premiums on
loans sold to lenders. Management believes that the Company is not economically
dependent on any one lender because the Company does assign loans to numerous
lenders and has ability to select lenders for assignment.
The Company has entered into various loan purchase and sale agreements. The
Company acts as a loan correspondent for lenders for certain loans closed and
funded by the company and sold to the lenders. The transfers of the mortgage
loans that are subject to these agreements are subject to the warranties,
representations and provisions in the agreement. Certain lenders have the right
to require the Company to repurchase a mortgage loan for any of the following
reasons: (a) if a representation and warranty given by the Company as to a
particular mortgage loan is breached, (b) if there has been a breach of any
other terms and conditions of the agreement, and (c) if final post-closing
documentation is improper or incomplete after a reasonable period of time, the
determination of which is at the bank's discretion. At the lender's option, the
Company shall be required either promptly to cure such a breach in all material
respects or to repurchase the mortgage loan at a price equal to the following:
The principle balance of the mortgage loan plus interest at the mortgage loan
rate from the date to which the interest has last been paid to the date of
repurchase.
<PAGE>
EASYQUAL.COM.INC.
Notes to Financial Statements
For the Six-Months Ended June 30, 2000
(Unaudited)
Note 1 - Organization and Summary of Significant Accounting Policies (Cont):
-------------------------------------------------------------------
Capital Stock Transactions
--------------------------
The authorized capital stock of the corporation is 50,000,000 shares of common
stock at $.0000001 and 1,000,000 shares of preferred stock at $.0000001 par
value. No preferred stock has been issued.
Cash and Cash Equivalents:
-------------------------
The Company considers all highly liquid debt instruments, purchased with an
original maturity of ninety (90) days or less, to be cash equivalents.
Concentration of Credit Risk
----------------------------
Financial instruments, which potentially subject the Company to concentration of
credit risk, consist primarily of mortgage notes receivable. The Company grants
credit to mortgage borrowers nationwide. Concentrations of credit with respect
to trade receivables are limited due to the large number of customers comprising
the Company's customer base and the fact that the commissions and fees paid to
the Company are remitted to the Company within a short period after the closing.
As of June 30, 2000, the Company has one account with $154,210, which could have
a significant concentration of credit risk with regard to this financial
instrument.
Pervasiveness of Estimates
--------------------------
The preparation of a financial statement in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statement. Actual results could differ from those estimates.
Geographic Area of Operations and Interest Rates
------------------------------------------------
The Company originates residential loans in over thirty states and most
geographic areas of the United States. The potential for severe financial impact
which can result from negative effects of economic conditions within the market
of geographic areas are limited due to the Company's diverse geographic
origination's. The interest rates at which borrowers can refinance or obtain new
financing for real estate acquired has a direct effect on the demand for the
Company's services. Changes in interest rates could result in potential severe
impacts on future operations of the Company.
<PAGE>
EASYQUAL.COM.INC.
Notes to Financial Statements
For the Six-Months Ended June 30, 2000
(Unaudited)
Note 1 - Organization and Summary of Significant Accounting Policies (Cont):
-------------------------------------------------------------------
Property and Equipment
----------------------
Property and equipment is stated at cost. The cost of ordinary maintenance and
repairs is charged to operations while renewals and replacements are
capitalized. Depreciation is computed on the straight-line method over the
following estimated useful lives:
Furniture and fixtures 7 years
Computers & Equipment 5 years
Leasehold Improvements 7 years
Intangible Assets
-----------------
Intangible assets consist of the following at December 31, 1999:
Estimated Useful Life
---------------------
Client Contracts 1,200,000 20 years
Corporate Set-up 65,641 7 years
Technology Rights 200,000 10 years
State Approvals 400,000 40 years
Intangible assets represents the excess of acquisition costs over the fair
market value of the net assets of acquired business and is being amortized on a
straight-line basis over their estimated useful lives ranging from seven to
forty years. In accordance with APB 17, "Intangible Assets", the Company
continues to evaluate the amortization period to determine whether events or
circumstances warrant revised amortization periods. Additionally, the Company
considers whether the carrying value of such assets should be reduced based on
the future benefits of its intangible assets.
Revenue Recognition:
--------------------
Premiums, discounts and loan fees on warehouse loans held for sale are
recognized in income when the related loans are sold. Premiums, yield spreads
and loan fees on other loans are recognized when earned.
Fair value of Financial Instruments
-----------------------------------
The carrying amount of cash, accounts receivable, accounts payable and accrued
expenses are considered to be representative of their respective fair values
because of the short-term nature of these financial instruments. The carrying
amount of the notes payable are reasonable estimates of fair value as the loans
bear interest based on market rates currently available for debt with similar
terms.
The fair value estimates presented herein are based on relevant information
available to management as of December 31, 1999 and 1998. Management is not
aware of any factors that would significantly affect these estimated fair value
amounts.
<PAGE>
EASYQUAL.COM.INC.
Notes to Financial Statements
For the Six-Months Ended June 30, 2000
(Unaudited)
Note 2 - Notes Receivable
----------------
<TABLE>
<CAPTION>
Notes receivable as of June 30, 2000 consist of the following:
<S> <C>
Note receivable from EMB Mortgage dated 1/21/98 with an
interest rate of prime plus 4.25% annually. Payable upon demand $100,000
Note receivable from EMB Mortgage dated 3/18/99 with no
interest rate. Payable upon demand. 90,512
Note receivable from Jim Saunders and Scott Sax with an
interest rate of 10% annually. To mature on 12/31/2000 58,446
Note receivable from J. Dean Burden dated 5/28/99 with no
interest rate. Payable upon sale of Mr. Burden's stock. 34,524
Total Notes Receivable $283,482
========
Note 3 - Note Payable
------------
Notes payable as of June 30, 2000 consist of the following:
Note payable to Jim Saunders dated May 28, 1999. No interest
rate and due upon demand. $ 36,682
Note payable to First Bank dated Dec. 1, 1998. With an annual
interest rate of 10.5% with a maturity date of Nov. 1, 2000. 8,448
Total notes payable $ 45,130
=========
</TABLE>
Debenture
In 1999, $500,000 worth of Debentures were sold to one individual. This
Debenture is due in May 2000, has an interest rate of ten percent per annum, and
is convertible into common shares at $2.00 per share at any time during its
term. The due date of the Debenture, has been extended as well as its
convertibility, for an additional six months. On June 20, 2000 $50,000 of the
debenture was converted to 74,996 shares of stock. On June 7, 2000 $100,000 of
the debenture was converted to 225,000, this transaction also included $50,000
of interest on the debenture.
Note 4 - Officer's Compensation
----------------------
During the organization meeting of the corporation 1,107,500 shares of common
stock were issued to the officers and directors of the Company at par value for
past service rendered. During the period from January 1 to December 31, 1997 no
further compensation was issued to the officers or directors for their
contributed services during the preparation and research period.
<PAGE>
EASYQUAL.COM.INC.
Notes to Financial Statements
For the Six-Months Ended June 30, 2000
(Unaudited)
Note 5 - Impact of Recently Issued Accounting Standards
----------------------------------------------
SFAS No. 131 requires disclosure of certain information regarding operating
segments, products, and services, geographic areas of operation and major
customers. SFAS No. 134 accounting for mortgage-backed securities retained after
the securitization of mortgage loans held for sale by a mortgage banking
enterprise. Adoption of these statements is expected to have no impact on the
Company's financial position, results of operation, or cash flows.
Note 6 - Marketable Security
-------------------
The Company owns 200,000 shares of EMB Corp. common stock; a NASDAQ bulletin
board company traded under EMBU. The shares were issued on December 23, 1997,
and were subject to Rule 144 of the Securities Act of 1933. The shares are
listed at their fair market value, which is the initial cost basis of the
security.
Note 7 - Commitments
-----------
The Company leases its' offices under long-term leases that are accounted for as
operating leases. Future minimum rental payments on all non-cancelable operating
leases with initial or remaining lease terms in excess of one year are as
follows:
Year Ending Offices
March 12, 2000 $ 141,994
March 12, 2001 108,650
---------
$ 250,644
Note 8 - Income Taxes
------------
Significant components of the Company's deferred tax liabilities and assets are
as follows:
Deferred Tax Liability $ 0
===========
Deferred Tax Assets
Net Operating Loss Carryforwards $ 1,748,851
Book/Tax Differences in Bases of Assets 219,590
Less Valuation Allowance (1,968,441)
-----------
Total Deferred Tax Assets $ 0
===========
Net Deferred Tax Liability $ 0
===========
<PAGE>
EASYQUAL.COM.INC.
Notes to Financial Statements
For the Six-Months Ended June 30, 2000
(Unaudited)
Note 8 - Income Taxes (Cont)
-------------------
As of June 30, 2000, the Company had a net operating loss carryfoward for
federal tax purposes approximately equal to the accumulated deficit recognized
for book purposes, which will be available to reduce future taxable income. The
full realization of the tax benefit associated with the carryforward depends
predominantly upon the Company's ability to generate taxable income during the
carryforward period, Because the current uncertainty of realizing such tax
assets in the future, a valuation allowance has been recorded equal to the
amount of the net deferred tax asset, which caused the Company's effective tax
rate to differ from the statutory income tax rate. The net operating loss
carryforward, if not utilized, will begin to expire in the year 2010.
Note 9 - Loans Receivable and Warehouse Line Payable
-------------------------------------------
Loan receivable represents loans that have been placed for purchase as of June
30, 2000. The Warehouse Line Payable is the amount of money set aside to finance
these Loans receivable. These items are offset items.
Note 10 - Subsequent Events
-----------------
In the summer of 1999, the Company was victimized by a fraud, which caused the
Company to significantly increase the Company's infrastructure and overhead for
the period of time until the fraud was uncovered. The Company has begun legal
proceedings to recover the losses suffered from the fraud. The principal
perpetrators of the fraud have been convicted and are in prison.
<PAGE>
ITEM 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations.
Forward-Looking Statements
The following discussion contains forward-looking statements regarding
us, our business, prospects and results of operations that are subject to
certain risks and uncertainties posed by many factors and events that could
cause our actual business, prospects and results of operations to differ
materially from those that may be anticipated by such forward-looking
statements. Factors that may affect such forward-looking statements include,
without limitation: our ability to successfully develop new products for new
markets; the impact of competition on our revenues, changes in law or regulatory
requirements that adversely affect or preclude customers from using our products
for certain applications; delays in our introduction of new products or
services; and failure by us to keep pace with emerging technologies.
When used in this discussion, words such as "believes", "anticipates",
"expects", "intends" and similar expressions are intended to identify
forward-looking statements, but are not the exclusive means of identifying
forward-looking statements. 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 revise any forward-looking statements in
order to reflect events or circumstances that may subsequently arise. Readers
are urged to carefully review and consider the various disclosures made by us in
this report and other reports filed with the Securities and Exchange Commission
that attempt to advise interested parties of the risks and factors that may
affect our business.
Results of Operations
For the six months ended June 30, 2000, we had revenues of $2,713,742
compared to revenues of $1,179,666 for the same period ended June 30, 1999.
Total operating expenses for the six months ended June 30, 2000 were $3,122,889,
compared to expenses of $1,403,663 for the same period ended June 30, 1999. Our
major components of operating expenses are independent contractor fees, office
salaries and associated payroll costs, general and health insurance costs, rent
and telephone expenses.
As a result, we had a net loss of $409,147, or a loss of $0.03 per
share, for the six months ended June 30, 2000, compared to $223,797, or a loss
of $0,01 per share, for the same period ended June 30, 1999.
During the reporting period, we continued to increase our loan
origination staff and mortgage infrastructure to handle the increased business.
Additionally, we have continued development of our Internet application service
<PAGE>
provider. Our increased revenues are tied directly to significantly greater
mortgage originations from the previous year. We generate wholesale mortgage
originations as Entrust Mortgage and retail originations as Mortgage 2000.
During the reporting period, we entered into a contract with a major
financial institution to offer unsecured lines of credit to consumers with
marginal credit scores and for loan amounts up to $50,000. This loan features
thirty minute approval and immediate funding. The loan is offered online through
our easyQual.com web page or by phone in which calls come into an easyQual.com
toll free number, but the calls are handled by our partner call center at no
cost to the Company.
Also, during the reporting period, we entered into a contract with
eBoats.com, Inc., to finance boat loans.
Our basic strategy remains to develop a program to deliver into the
U.S. mortgage industry automated underwriting and loan application processing.
The present mortgage industry conducts its business through many manual steps,
in an antiquated system prone to mistakes. Our planned system will be set up to
permit the mortgage customer to process an application much quicker, typically
one to three minutes. Currently, the pre-approval and stipulations for a
mortgage in the industry typically need one to two days to complete before
sending out. The more loan programs offered by the mortgage company, the more
complexity sets in, pushing those averages out.
In the competitive loan environment providing a diverse range of
programs, for every 10 applications that the underwriter pre-approves, a
significant number are pre-approved for the wrong program. On average five
pre-approvals per day have to be redone.
On average, out of every 10 loans submitted, one-half are pre-qualified
and generate a customer list of stipulations. Of the customers receiving a list
of stipulations, only one half return a full package. The time delays to get
pre-approval encourage the customer to shop around for other product. Document
completion by the customer (assisted by the broker) can take another 7 to 10
days on average. Of the customers responding to the stipulations completely,
one-half actually close their loans. On average, out of ten initial mortgage
loan applications submitted, fewer than one (.833) is funded in an industry
completion process of 18 days.
With our planned system, the industry standard would change. Out of ten
initial loan applications, we believe three will close in a major positive shift
in cost and time. In our planned system, the loan application is a "smart
application." One long, tedious form no longer fits every customer. As the
computer asks the broker (or customer) a question, the response determines the
next question. Each new question fits the applicant's prior responses in a
design to limit questions to what is directly relevant. Broker data input time
is thereby reduced.
By integrating the smart application into an automated underwriting
program, our search engine would be able to examine a thousand loan programs, if
necessary, to find an exact match for each customer profile without mistakes.
Pre-approval and document stipulations are complete in about 6o seconds, not two
days.
<PAGE>
With our planned system, management evaluation of a sales person's
prospect is eliminated. Back office data entry is also eliminated. Applications
that would sit for two days in a back office file disappear as well. There is
only one human interface in the underwriting process involving a review of the
authenticity of tax returns and the other stipulated documents. With our planned
system, the cost of back office personnel would go down, providing margins for
employing a higher quality personnel using systems that ensure an efficient
document review process. Consequently, everything is speeded up without error.
Our planned system turns an inexperienced loan officer into a seemingly
experienced loan officer, able to provide the customer with definite answers
instantaneously without the customary mistakes. With every requirement of the
loan process scripted, the customer gets accurate information from the broker
who no longer has to constantly call the home office for answers. With our
planned system, a loan officer's time is released to sell rather than study
dozens of loan programs offered by the firm. The system also removes the
insecurity that currently prevails when an inexperience sales person attempts to
describe complex loan options. In addition, the current limits on the number of
loans a top producer or any producer can manage is dramatically expanded. The
confidence that the lender has for the integrity of the underwriting/loan
process is enhanced as well.
Automated underwriting can be found currently in limited pockets of the
industry. For the "prime market"--offering standard, government generated
mortgages to the creditworthy customer--automated underwriting is now available
on a limited basis. The "prime market," however, represents one-fourth of the
total mortgage business. For the "sub-prime" market involving more complexity,
including credit issues and the need for individual loan tailoring, the manual
mortgage system prevails everywhere in the industry.
The sub-prime market representing three-fourths of the total U.S.
mortgage origination business provides three to four times the profit margins of
the prime market. That is the market in which we are seeking to create a new
standard and, by this standard, and to establish a new industry leadership.
Our market roll-out of this new system is expected to target both the
wholesale and retail mortgage industry. Bringing our automated system into the
small to medium brokerage office currently operating in every rural and urban
region of the United States should be the basis of substantial business. Small
mortgage brokers dominate this industry.
Our plan for the U.S. wholesale mortgage industry uses relationships
with brokerage office which do require to giving up autonomy, name, ownership or
loan programs to participate in our mortgage origination program.
With the completion of the development of this program, which we expect
to occur in the fourth quarter of our current fiscal year, we intend to begin
providing this system to the mortgage industry through industry publications and
other media outlets, a web site, an industry newsletter and a team of account
executives.
<PAGE>
We also continue development of Focvs Technologies, which is to be our
ASP company subsidiary. Focvs is being created to provide full service software
application service to select vertical markets. The first two selected markets
are planned to be the mortgage brokerage community and small financial planners.
Our ASP will provide contractual services, offering to display, host,
manage, and lease access to software applications from a centrally managed
Network Operations Center to select vertical markets. Our ASP is anticipated to
minimize the cost of ownership, to provide total mobility, to eliminate the cost
of retaining skilled IT staff, and to provide instantaneous scalability. The ASP
market has been touted by many Internet experts as the next major Internet
expansion area. Focvs' initial clients are expected to come from the Entrust
Mortgage broker client base and from other affinity relationships which we have.
Focvs has already negotiated ASP pricing models with most of its required
software providers and expects to offer its customers software usage at a much
lower cost than current competitive pricing structures. We expect Focvs to begin
generating revenues during the third fiscal quarter of our current fiscal year.
A portion of current unprofitability came as a result of the effects of
the fraud perpetrated upon us by Vision One Technologies (Vision). As we
previously reported, the Vision fraud cost us $508,000 in payments to Vision and
approximately $400,000 of additional expenses for the discontinued operations.
We filed a civil suit against Vision, its principals, and their attorney. The
principals of Vision have been convicted of the numerous charges associated with
the fraud perpetrated upon us. We identified assets of the perpetrators of the
fraud and remain hopeful of being able to ultimately recover a substantial
portion of the losses, although we have not recovered any losses as yet.
Liquidity and Capital Resources
As of the end of the reporting period, we had cash or cash equivalents
of $276,930.
Net cash provide by our operating activities was ($1,096,969) for the six
months ended June 30, 2000, compared to ($1,826,562) for the six months ended
June 30, 1999.
Cash flows used for our investing activities provided ($44,536) for the six
months ended June 30, 2000, compared to ($367,291) for the six months ended June
30, 1999.
Cash flows from our financing activities accounted for $881,800 for the
six months ended June 30, 2000, compared to $2,914,410 for the six months ended
June 30, 1999.
Our current cash and cash equivalents are not sufficient to completely
meet our business plan objectives, particularly the funding of our mortgage
origination program. We plan to raise additional capital through a private
placement, by leveraging our assets and utilizing internally generated profits
to recover our cash position over the short-term. These funds will be necessary
for the funding of our mortgage origination program. Over the long term, we
remain convinced that we can recover a substantial portion of the fraud losses.
We believe that we can achieve profitability before the end of the current
fiscal year.
<PAGE>
During the reporting period, we issued common shares for cash and
services and for the conversion of debentures. We converted approximately
$150,000 in debentures to common shares at a price of $2.00 per share. Other
than as disclosed herein, there are no plans, proposals, arrangements, or
understandings with respect to the sale or issuance of additional securities by
us.
We do not intend to pay dividends in the foreseeable future.
Year 2000 Compliance
Background
In the past, many computers, software programs, and other information
technology ("IT systems"), as well as other equipment relying on microprocessors
or similar circuitry ("non-IT systems"), were written or designed using two
digits, rather than four, to define the applicable year. As a result,
date-sensitive systems (both IT systems and non-IT systems) may recognize a date
identified with "00" as the Year 1900, rather than the year 2000. This is
generally described as the Year 2000 issue. If this situation occurs, the
potential exists for system failures or miscalculations, which could impact
business operations.
The Securities and Exchange Commission ("SEC") has asked public
companies to disclose four general types of information related to Year 2000
preparedness: the Company's state of readiness, costs, risks, and contingency
plans. See SEC Release No. 33-7558 (July 29, 1998). Accordingly, the Company has
included the following discussion in this report, in addition to the Year 2000
disclosures previously filed with the SEC.
State of Readiness
We believe that we have identified all significant IT systems and
non-IT systems that require modification in connection with Year 2000 issues.
Internal and external resources have been used and are continuing to be used, to
make the required modifications and test Year 2000 readiness. The required
modifications and testing of all significant systems have been completed
In addition, we have been communicating with customers, suppliers,
banks, vendors and others with whom we do significant business (collectively)
our "business partners") to determine their Year 2000 readiness. We believe that
our business partners have made all material required modifications and testing
of all of their significant systems.
Costs
The total cost to us of Year 2000 activities has been paid and was not
material.
<PAGE>
PART II- OTHER INFORMATION
ITEM 1. Legal Proceedings
We have a pending lawsuit in the Colorado District Court for the City and
County of Denver against Stephen B. Torres, J. Scott Oler, Berkley Rasband, and
Vision One Technologies, Inc. seeking damages and injunctive relief in
connection with our acquisition of the assets of Vision One Technologies, Inc.
We have alleged deceit based upon fraud, fraud in connection with the purchase
of securities, misappropriation of trade secrets, among other claims. We are
seeking actual and punitive damages, as well as injunctive relief against the
defendants. The case in the preliminary stages and no answer has been filed by
the defendants.
Otherwise, no legal proceedings of a material nature to which we are a
party were pending during the reporting period, and we know of no legal
proceedings of a material nature pending or threatened or judgments entered
against any of our directors or officers in his capacity as such.
ITEM 2. Changes in Securities and Use of Proceeds.
During the period ended June 30, 2000, we issued 865,000 common shares for
cash and services valued at $556,800. These transactions were exempt under
Section 4(2) of the Securities Act of 1933, as amended.
On May 5, 1999, we issued a Convertible Promissory Note for $500,000, with
an interest rate of 10% per annum. The Note was due May 5, 2000. A total of
$150,000 of the Note, plus accrued interest, was converted on June 7, 2000 into
225,000 common shares, and the remaining Note was extended for an additional six
months.
ITEM 3. Defaults upon Senior Securities. None.
ITEM 4. Submission of Matters to a Vote of Security Holders.
On June 20, 2000, we held our Annual Shareholders Meeting. At that
Meeting, we reelected our current Board of Directors, we changed our name to
"easyQual.com, Inc.," and we approved Michael Johnson & Company, LLC, as our
auditors for the fiscal year ending December 31, 2000. Each of these proposals
received at least a majority vote of our total issued and outstanding common
shares.
ITEM 5. Other Information. None.
ITEM 6. Exhibits and Reports on Form 8-K.
Exhibit No. 27.1- Financial Data Schedule
On June 28, 2000 we filed a report on Form 8-K announcing the results of
our Annual Meeting, which approved a change of our name to easyQual.com, Inc.
the assignment of a new trading symbol to us: EQLS.. This trading symbol is
currently effective.
<PAGE>
SIGNATURES
----------
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
easyQual.com, Inc.
Dated: 8/21/00 By: /s/ Patricia W. Saunders
-------------------- -------------------------------------------
Patricia W. Saunders
Chief Financial and Accounting Officer
Director
Dated: 8/21/00 By: /s/ Patricia W. Saunders
------------------- -------------------------------------------
Patricia W. Saunders
Chief Financial and Accounting Officer
Director
