SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the quarter period ended 9/30/00
[ ] Transitional report under Section 13 or 15(d) of Exchange A
For the quarter period ended: (n/a)
Commission File number 0-27987
Premier Mortgage Resources, Inc.
(Name of Small Business Issuer in its charter)
Nevada 88-0343833
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
280 Windsor Highway New Windsor, NY 12553
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (914) 561-7770
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date: 5,554,294 as of 11/07/00
Transitional Small Business Disclosure Format (Check one) Yes[ ] No [x]
<PAGE>
TABLE OF CONTENTS
PART I FINANCIAL STATEMENTS
Item 1 Financial Statements 3
Item 2 Management's Discussion and Analysis or Plan of Operation 12
PART II OTHER INFORMATION
Item 1 Legal Proceedings 16
Item 2 Changes in Securities 16
Item 3 Default upon Senior Securities 16
Item 4 Submission of Matters to a Vote of Security Holders 16
Item 5 Other Information 16
Item 6 Exhibits and Reports on Form 8-K 17
ITEM I FINANCIAL STATEMENTS
<PAGE>
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
<PAGE>
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Page
number
--------------------------------------------------------------------------------
Consolidated balance sheets at September 30, 2000
(unaudited) and December 31, 1999 F-1
Consolidated statements of operations for the three months
ended September 30, 2000 and 1999 (unaudited) F-2
Consolidated statements of operations for the nine
months ended September 30, 2000 and 1999 (unaudited) F-3
Consolidated statement of stockholders' equity for the
nine months ended September 30, 2000 (unaudited) F-4
Consolidated statements of cash flows for the nine
months ended September 30, 2000 and 1999 (unaudited) F-5
Notes to consolidated financial statements (unaudited) F-6 - F-11
<PAGE>
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
September 30,
2000
December 31,
(unaudited) 1999
----------------------- ----------------------
<S> <C> <C>
Current assets:
Cash $ 1,143 $ 250
----------------------- ---------------------
Total current assets 1,143 250
----------------------- ---------------------
Investment in affiliate, at cost 2,371,032 1,796,032
----------------------- ---------------------
Total assets $ 2,372,175 $ 1,796,282
======================= =====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses $ 207,805 $ 159,852
Due to related parties 216,355 70,554
Note payable 50,000 50,000
----------------------- ---------------------
Total current liabilities 474,160 280,406
----------------------- ---------------------
Redeemable, cumulative preferred stock 850,000 380,000
----------------------- ---------------------
Commitments and contingencies (Note 5) -- --
----------------------- ---------------------
Stockholders' equity:
Preferred stock - $.001 par value, 10,000,000 shares
authorized, -0- shares issued and outstanding -- --
Common stock - $.001 par value, 50,000,000 shares authorized,
3,878,960 and 3,628,794 shares issued and outstanding, respectively 3,879 3,629
Additional paid-in capital 1,700,784 1,564,284
Accumulated deficit (656,648) (432,037)
----------------------- ---------------------
Total stockholders' equity 1,048,015 1,135,876
----------------------- ---------------------
Total liabilities and stockholders' equity $ 2,372,175 $ 1,796,282
======================= =====================
</TABLE>
See accompanying notes to consolidated financial statements (unaudited)
F-1
<PAGE>
<TABLE>
<CAPTION>
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
<S> <C> <C>
2000 1999
---------------------- ------------------------
Income - Related Party $ -- $ 45,000
---------------------- ------------------------
Expenses:
Selling, general, and administrative expenses 90,549 2,831
Selling, general, and administrative expenses - related party -- 85,846
---------------------- ------------------------
Total expenses 90,549 88,677
---------------------- ------------------------
Loss from operations before interest expense and provision
for income taxes (90,549) (43,677)
Interest expense -- 1,543
---------------------- ------------------------
Loss before provision for income taxes (90,549) (45,220)
Provision for income taxes -- -
---------------------- ------------------------
Net (loss) (90,549) (45,220)
Other items of comprehensive income -- -
---------------------- ------------------------
Comprehensive net (loss) $ (90,549) $ (45,220)
======================= =========================
Basic:
Net (loss) $ (.02) $ (.02)
======================= =========================
Weighted average number of
common shares outstanding 3,731,134 2,158,364
======================= ========================
</TABLE>
See accompanying notes to consolidated financial statements (unaudited)
F-2
<PAGE>
<TABLE>
<CAPTION>
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
<S> <C> <C>
2000 1999
----------------------- ------------------------
Income - Related Party $ 18,000 $ 197,040
---------------------- ------------------------
Expenses:
Selling, general, and administrative expenses 123,908 36,636
Selling, general, and administrative expenses - related party 77,750 239,704
---------------------- ------------------------
Total expenses 201,658 276,340
---------------------- ------------------------
Loss from operations before interest expense and provision
for income taxes (183,658) (79,300)
Interest expense 2,000 7,800
---------------------- ------------------------
Loss before provision for income taxes (185,658) (87,100)
Provision for income taxes - -
---------------------- ------------------------
Net (loss) (185,658) (87,100)
Other items of comprehensive income - -
---------------------- ------------------------
Comprehensive net (loss) $ (185,658) $ (87,100)
======================= =========================
Basic:
Net (loss) $ (.05) $ (.04)
========================= =========================
Weighted average number of
common shares outstanding 3,663,336 2,158,364
====================== ========================
</TABLE>
See accompanying notes to consolidated financial statements (unaudited)
F-3
<PAGE>
<TABLE>
<CAPTION>
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED)
Common Stock Additional Total
------------ Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
--------- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1999 3,628,794 $ 3,629 $ 1,564,284 $ (432,037) $ 1,135,876
Issuance of common stock in
lieu of consideration for
services rendered to the
company 3,500 3 1,747 -- 1,750
Officers' contribution -- -- 30,000 -- 30,000
Accrued dividends on convertible
redeemable preferred stock -- -- --
(38,953) (38,953)
Repurchased and cancelled shares
of common stock (3,334) (3) (19,997) -- (20,000)
Sale of common stock 250,000 250 124,750 -- 125,000
Net loss for the nine months ended
September 30, 2000 -- -- -- (185,658) (185,658)
--------- --------- ----------- ------------ -------------
Balances at September 30, 2000 3,878,960 $ 3,879 $ 1,700,784 $ (656,648) $ 1,048,015
========= ========= =========== ============ =============
</TABLE>
See accompanying notes to consolidated financial statements (unaudited)
F-4
<PAGE>
<TABLE>
<CAPTION>
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
2000 1999
---------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $ (185,658) $ (87,100)
Adjustments to reconcile net (loss) to net
cash used for operating activities:
Amortization 189
Officers' contribution 30,000 --
Issuance of common stock for services 1,750 --
Increase (decrease) in:
Accrued expenses 9,000 27,767
---------------- ---------------
Net cash used for operating activities (144,908) (59,144)
----------------- ----------------
Cash flows from investing activities:
Investment in affiliate (575,000) (674,357)
----------------- ----------------
Net cash used for investing activities (575,000) (674,357)
----------------- ----------------
Cash flows from financing activities:
Sale of common stock in connection with
private placement, net of costs -- 791,360
Redemption of common stock (20,000) --
Proceeds from sale of redeemable preferred stock 595,000 --
Repayments of convertible notes payable -- (100,000)
Advances from (repayments to) related parties 145,801 40,817
---------------- ---------------
Net cash provided by financing activities 720,801 732,177
---------------- ---------------
Net increase (decrease) in cash 893 (1,324)
Cash, beginning of period 250 2,053
---------------- ---------------
Cash, end of period $ 1,143 $ 729
================ ===============
Supplemental disclosure of non-cash flow information: Cash paid during the year
for:
Interest $ -- $ --
================ =================
Income taxes $ -- $ --
================ =================
</TABLE>
See accompanying notes to consolidated financial statements (unaudited)
F-5
<PAGE>
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - NATURE OF BUSINESS
The Company
Premier Mortgage Resources, Inc. (the "Company") was incorporated
in the State of Nevada on August 17, 1995 under the name "Mortgage
Resources, Inc." The name of the Company was changed on August 20,
1997 to its current name. Until the acquisition of United National,
Inc. ("United") in June 1998, the Company had no operations. The
Company acquired United during June 1998 in order to commence
operations in the mortgage banking industry.
Reorganization
During June 1998, pursuant to an Agreement and Plan of
Reorganization (the "Reorganization Agreement"), an officer
received 377,778 then representing 48.6% of the common stock
outstanding after the cancellation of 433,333 shares of the former
officers as discussed in the next paragraph, in consideration for
100% of the shares of common stock of United. Such transaction was
considered a capital transaction whereby United contributed its
stock for the net assets of the Company which was consummated
simultaneously with a recapitalization of the Company.
Simultaneously with the execution of the Reorganization Agreement,
the former officers of the Company canceled 433,333 shares of
common stock and resigned as officers of the Company. In connection
with the resignation of the former officers of the Company, the
former sole shareholder of United was elected as President of the
Company. Accordingly, after such capital transaction, United became
a wholly owned subsidiary of the Company.
United
United was incorporated in the State of Nevada on November 21,
1997. Since the date of incorporation and through August 1998,
United had limited operations. Form August 1998 to June 30, 2000,
United had performed loan processing and telemarketing services for
United National Mortgage, LLC (the "LLC"). As of September 30,
2000, United owns approximately a 2% interest in the LLC which is
accounted for under the cost method.
LLC
The LLC is a limited liability company whereby an officer of the
Company owns approximately 98% as of September 30, 2000. The
Company currently has an option to purchase the remaining 98%
interest (for a nominal amount) from this officer subject to the
approval by New York State Banking Department. The LLC is a
licensed mortgage banker in ten states which primarily originates
conforming conventional loans and sells those loans to investors
with servicing rights released. The intent of the Company is to
execute its options and have the LLC become a wholly owned
subsidiary in order to enter the mortgage banking industry.
F-6
<PAGE>
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 - INTERIM RESULTS AND BASIS OF PRESENTATION
The unaudited financial statements as of September 30, 2000 and for
the three and nine month periods ended September 30, 2000 and 1999
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with instructions
to Form 10-QSB and Items 303 and 301(B) of Regulation S-B. In the
opinion of management, the unaudited financial statements have been
prepared on the same basis as the annual financial statements and
reflect all adjustments, which include only normal recurring
adjustments, necessary to present fairly the financial position as
of September 30, 2000 and the results of our operations and cash
flows for the three and nine month periods ended September 30, 2000
and 1999. The financial data and other information disclosed in
these notes to the interim financial statements related to these
periods are unaudited. The results for the three and nine month
periods ended September 30, 2000 are not necessarily indicative of
the results to be expected for any subsequent quarter or the entire
fiscal year ending December 31, 2000. The balance sheet at December
31, 1999 has been derived from the audited financial statements at
that date.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
the Securities and Exchange Commission's rules and regulations. It
is suggested that these unaudited financial statements be read in
conjunction with our audited financial statements and notes thereto
for the year ended December 31, 1999 as included in our report on
Form 10-KSB.
NOTE 3 - INVESTMENT IN AFFILIATE AT COST
On July 29, 1998, United entered into a LLC Interest
Acquisition Agreement (the "LLC Acquisition Agreement") with the
Company's former President whereby for an initial $508,000 it
acquired a 1% interest in the LLC and the option to acquire the
remaining 99% interest in the LLC as follows; 1% based on required
capital by the LLC in order to remain in compliance with its net
capital requirements with various state banking laws until it
reaches its expected level of revenues sufficient to maintain its
capital requirements and the remaining 98% (which is contingent
upon obtaining approval from the New York Banking Department) for
nominal consideration. As of September 30, 2000, United has a 2%
interest in the LLC and has invested an aggregate of $2,371,032
into the LLC based on the above agreement.
NOTE 4 - LOAN PAYABLE
During March 1998, an outside third party loaned United $50,000
bearing interest at 12% per annum. The loan is due on demand and no
formal terms have been established. As of September 30, 2000, the
loan remains unpaid. Accrued interest on the loan amounted to
$16,200 as of September 30, 2000.
F-7
<PAGE>
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5 - COMMITMENTS AND CONTINGENCIES
a) Pending litigation
i) During 1998, the Company's previous transfer agent issued an
aggregate of approximately 677,000 shares of common stock to
certain parties in return for marketing and investor relations
services. During August 1999, the Company filed a formal
complaint in the state of Florida whereby the courts granted a
temporary restraining order against the individuals and/or
entities which received such stock to prohibit the transfer
thereof. The Company contends that such shares held by these
individuals and/or entities were wrongfully issued. As of
September 30, 2000 such shares are not included as outstanding in
the Company's financial statements. Although the Company has made
a contingency loss accrual of $69,000 which is included in
accrued expenses, it expects to settle such litigation more
favorably.
ii) The LLC, which the Company currently owns 2%, is presently
seeking recovery in the amount of approximately $757,000 plus
daily interest and other costs from a law firm for which it had
retained to perform closings of mortgages on its behalf. The LLC
has retained legal counsel to represent it in various legal
remedies for the purpose of obtaining recovery of these monies.
In the opinion of management, the LLC has not yet determined the
probability of the recovery of the monies, and accordingly, no
provision for the potential loss has been recorded in the
financial statements of LLC or the Company.
b) Investment in affiliate at cost
The Company is committed to funding the LLC in order for the LLC to
remain in compliance with various state banking requirements as to
its net capital requirements until such time that it reaches its
expected revenue level thereby becoming self funding. As of
September 30, 2000, the Company has invested $2,371,032 in the LLC.
NOTE 6 - STOCKHOLDER'S EQUITY
Issuance of common stock for services
During the nine months ended September 30, 2000, the Company issued
an aggregate of 3,500 shares of its common stock as consideration
for professional fees.
NOTE 7 - REDEEMABLE CONVERTIBLE PREFERRED STOCK
a) The 1999 Convertible Preferred Stock
------------------------------------
On December 27, 1999, the Company sold 38,000 shares of preferred
stock to an investor at $10 per share or $380,000. The holder of
such preferred stock shall be entitled to receive a dividend of 8%
or $.80 per share per annum.
F-8
<PAGE>
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 7 - REDEEMABLE CONVERTIBLE PREFERRED STOCK (cont'd)
a) The 1999 Convertible Preferred Stock (cont'd)
---------------------------------------------
The dividend shall be paid, whether or not declared, out of funds of
the Company whether or not the Company has any earnings and profits.
No dividend shall be paid on the Company's common stock or any other
series of preferred stock until such dividend on these preferred
shares have been paid in full. Commencing March 1, 2000, the holder
can have the shares redeemed at $10 per share within 10 business days
following receipt of notice to the Company.
At any time after December 31, 2001, the Company, at its option, may
redeem the whole of, or from time to time any part of, the preferred
stock by paying $14.70 per share in cash in addition to all accrued
and unpaid dividends.
Lastly, such preferred shares shall be convertible to common stock
after December 31, 1999 at the option of the holder at the lower of
$.50 per common share or the average of the bid and asked closing
prices for 20 consecutive trading days ending on the day prior to
conversion. Accrued and accumulated dividends shall be convertible in
the same manner.
b) The 2000 Convertible Preferred Stock
------------------------------------
During the quarter ended March 31, 2000, the Company sold an
aggregate of 47,000 shares of preferred stock to an investor at $10
per share or $470,000. The holder of such preferred stock shall be
entitled to receive a dividend of 8% or $.80 per share per annum. The
dividend shall be paid, whether or not declared, out of funds of the
Company whether or not the Company has any earnings and profits. No
dividend shall be paid on the Company's common stock or any other
series of preferred stock until such dividend on these preferred
shares have been paid in full. Commencing March 31, 2001, the holder
can have the shares redeemed at $10 per share within 10 business days
following receipt of notice to the Company. At any time after
December 31, 2001, the Company, at its option, may redeem the whole
of, or from time to time any part of, the preferred stock by paying
$14.70 per share in cash in addition to all accrued and unpaid
dividends.
Lastly, such preferred shares shall be convertible to common stock
after December 31, 2000 at the option of the holder at the lower of
$.33 per common share or the average of the bid and asked closing
prices for 20 consecutive trading days ending on the day prior to
conversion. Accrued and accumulated dividends shall be convertible in
the same manner.
In connection with the Company's 1999 and 2000 convertible preferred
stock issuance, as of September 30, 2000, the Company accrued
$38,953 in dividends pursuant to the terms of the convertible
preferred stock agreements which have been included in accrued
expenses.
F-9
<PAGE>
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 8 - RELATED PARTY TRANSACTIONS
a) Exclusive Telemarketing Agreement
On August 12, 1998, United entered into an Exclusive Telemarketing
Agreement ("Telemarketing Agreement") with the LLC whereby United is
the exclusive telemarketing agent for the LLC until it acquires the
remaining interest in the LLC. As consideration for performing
telemarketing services for the LLC, the LLC will pay United an hourly
rate for its telemarketing services. For the three months ended
September 30, 2000 and 1999, United generated telemarketing income
amounting to $ -0- and $36,000, respectively and $ -0- and $132,240
for the nine months ended September 30, 2000 and 1999, respectively.
The Company discontinued such services effective July 1, 2000.
b) Exclusive Loan Processing Agreement
On August 12, 1998, United entered into an Exclusive Loan Processing
Agreement ("Processing Agreement") with the LLC whereby United is the
exclusive processing service for the LLC until it acquires the
remaining interest in the LLC. As consideration for performing
processing services for the LLC, the LLC will pay United a processing
fee for each loan processed. For the three months ended September 30,
2000 and 1999, United generated loan processing fee income amounting
to $-0- and $9,000, respectively, and $18,000and $64,800 for the nine
months ended September 30, 2000 and 1999, respectively. The Company
discontinued such services effective July 1, 2000.
c) Occupancy and Support Expenses
For the three months ended September 30, 2000 and 1999, pursuant to
the Telemarketing and Processing Agreement, United incurred expenses
of $-0- and $78,858, respectively which it pays to the LLC for rent
and other support services in connection with the space utilized in
performing telemarketing and processing services. For the nine months
ended September 30, 2000 and 1999 those costs amounted to $77,750 and
$232,716, respectively. The Company discontinued such services
effective July 1, 2000.
d) Due to related parties
The amount due to related parties as of September 30, 2000 amounting
to $216,355 represents funds owed to the LLC in connection with the
agreements and arrangements discussed in Note 8(a), through 8(c).
F-10
<PAGE>
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 9 - PRO FORMA BALANCE SHEET
The following pro forma balance sheet presents in a condensed format
as of September 30, 2000, as if the acquisition of the LLC by United
was consummated and considered in effect at January 1, 2000:
Pro forma
balance sheet at
September 30, 2000
-----------------------
Total assets $ 1,861,227
=======================
Total liabilities $ 2,036,420
=======================
Redeemable preferred stock $ 850,000
=======================
Total stockholders' deficiency $ (1,025,193)
=======================
This pro forma information regarding the Company's balance sheet has
been presented for disclosure purposes and does not purport to be
indicative of the Company's financial position which would have actually
resulted had the acquisition of the LLC occurred as of January 1, 2000.
NOTE 10 - SUBSEQUENT EVENTS
a) Form S-8 Registration Statement
On October 5, 2000, the Company filed a Form S-8 Registration Statement
in connection with a newly established Consultants Compensation Plan
(the "Plan"). Pursuant to the Plan, the Company registered a total of
500,000 shares of its common stock. The Company issued 448,000 of such
shares for the settlement of certain accounts payables and accrued
expenses and a portion of the debts of the LLC which totaled $112,000.
b) Sale of Common Stock
Pursuant to a private transaction, during October 2000, the Company sold
700,000 shares of its common stock yielding net proceeds of $175,000
whereby a substantial portion of the proceeds was invested in the LLC.
F-11
<PAGE>
ITEM II MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
financial statements of Premier Mortgage Resources, Inc. ("the Company") and
summary of selected financial data for United National Mortgage, LLC ("UNM"),
the Company's 2% owned subsidiary, as shown below. This discussion should not be
construed to imply that the results discussed herein will necessarily continue
into the future, or that any conclusion reached herein will necessarily be
indicative of actual operating results in the future. Such discussion represents
only the best present assessment of the management of the Company.
Overview
The Company is organized to act as a holding company responsible for raising
funds for United National, Inc. ("UNI"), its wholly owned subsidiary and UNM. As
a holding company, the Company, through its wholly owned subsidiary UNI,
provides certain executive management functions to UNM, but has no significant
business operations of its own. All business operations are conducted by UNM,
which performs all line functions. We provide staff functions to our
subsidiaries, such as overall management, strategic direction, financing, legal
services, accounting and related services including cash management and
budgeting, marketing, and public relations/advertising.
We provide services and financing to our subsidiary, UNI, which in turn,
provides marketing and processing services to our other currently 2% owned
subsidiary, UNM. The function of UNM is to offer mortgage banking business
operations.
Analysis of Premier Mortgage Resources, Inc.
The revenues of the Company were $0 for the third Quarter 2000, and $45,000 for
third quarter 1999. These revenues had been derived from the Company's efforts
in providing telemarketing and loan processing services for UNM. The decrease in
2000 over 1999 is due to the discontinuance of the UNM's telemarketing and
processing division. Telemarketing was deemed to be unprofitable and UNM has
since begun to emphasize mortgage origination activities toward UNM's retail and
wholesale mortgage banking division.
Total expenses for the Company were $ 90,549 for third quarter 2000. For the
three months ending September 1999, total expenses were $88,677. Selling,
general and administrative expenses for related party for 2000 decreased over
1999 due to a reduction of expenses associated with the discontinued
telemarketing efforts. However, in the third quarter of 2000, the Company
recorded expenses of $90,549 related to legal, accounting and advisory services
in connection with capital raising efforts as well as legal costs associated
with its claim involving shares that were issued without the Company's approval
and in which it seeks to have those shares cancelled. Premier believes that many
of these costs are associated with one-time non-recurring public start-up costs
associated with its capital raising efforts and successful efforts to obtain a
stock exchange listing.
The Company recorded a net loss of $185,658 for the nine months ended September
30, 2000 vs. a net loss of $87,100 for the nine months ending September 30,
1999. The net loss increased due to non-recurring costs assocated with
discontinued operations and costs incurred with capital raising efforts.
In the first and second quarter 2000, through issuance of convertible preferred
stock, the Company raised $470,000 in capital. During 1999, the Company raised
$380,000 in capital through the issuance of convertible preferred stock.
We believe that our marketing plan will have a positive impact on capital
resources and liquidity. As such, our reliance on capital contributions to fund
operating losses should dissipate in favor of positive cash flow, self-funding
operations. While there is no guarantee that these marketing plans, revenue
enhancement goals and acquisition strategies will be successful, we believe that
we have identified specific short-term objectives that should impact cash flow
on a positive basis and restore profitability.
Analysis of United National, Inc.
Our first tier subsidiary, United National, Inc. ("UNI") derived revenues by
billing UNM at a contractually agreed upon rate for mortgage loan processing.
Its expenses include the payroll cost, leased space, and general and
administrative costs of mortgage personnel engaged in these activities. These
contractual services have been discontinued due to UNM's decision to close its
telemarketing division in favor of expanding its traditional retail and
wholesale mortgage banking activities.
The transactions between UNI and UNM are of an inter-company nature and
therefore do not form the basis for a more complete understanding of the nature
of the core mortgage banking activities of UNM. The results of UNM are currently
not combined into our results. Upon approval of the change in control by the New
York State Banking Department, as discussed elsewhere in this document, the
remaining 98% of UNM will be transferred to United National, Inc. At that time,
our results of operations will include the results of operations of UNM and
thereby give the reader a more complete understanding of UNM's core business.
15
<PAGE>
Analysis of United National Mortgage, LLC ("UNM")
Reorganization efforts:
In the fourth quarter of 1999 UNM entered into a management reorganization
involving the appointment of Joseph A. Cilento, CPA, CMB, as new President and
Chief Executive Officer. The plan included the closing of marginal and
unprofitable branch offices, involuntary headcount reductions and significantly
curtailed discretionary expenditures. UNM focused on recruitment and retention
of qualified, commission based loan officers. UNM believes that these efforts
have produced increased sales and origination activity, reduced overhead,
improved gross pricing margins, and enabled more efficient operations. The
pipeline of mortgage loans in process has increased since December 1999 and is
expected to generate increased cash flow for operations in fiscal year 2000.
As discussed elsewhere in this document, our operations and potential for
success are largely based upon the outcome of operations for the core mortgage
banking business of UNM.
UNM is engaged in the business of mortgage banking and is focused on expanding
its origination of residential mortgage loans. UNM is in the residential and
wholesale mortgage banking business. Its primary focus is the retail and
wholesale origination and sale of mortgage loans for one-to-four family
properties. UNM is an approved loan correspondent with several major national
lenders such as Countrywide Credit, Provident Bank, Interfirst, IndyMac,
Alliance Mortgage, and other national prime and sub prime mortgage lenders. UNM
originates loans and closes them in UNM's name using funds from a warehouse line
of credit. UNM does not close loans unless one of our mortgage purchasers has
given UNM an approval for the loan and has agreed to purchase the loan. After
the closing of the loan, a package of documents is sent to the mortgage
purchaser, the investor reviews the documents and purchases the loan by wiring
the funds to our warehouse bank. The difference between the amounts we close the
loan for and the amount the investor pays the warehouse line constitutes part of
the profit on that particular transaction.
UNM's strategy is to expand its retail and wholesale loan origination business.
Increased loan origination will expand its revenue base. UNM intends to continue
to sell loans after closing to permanent investors and does not foresee our
maintenance of the mortgage's servicing rights. Servicing is a process whereby a
mortgage company collects the mortgage payment and any escrows for taxes and
insurance from borrowers. Companies that service loans make a small fee on each
transaction. UNM does not plan to enter the servicing business. UNM sells its
right to collect the payments to the permanent investor to whom the loans have
been sold. As a result, the company realizes immediate cash from the sale of
these mortgage-servicing rights. By selling the servicing rights, UNM does not
retain the risk of the underlying mortgage being refinanced by the borrower thus
ending the income stream from servicing.
Management of UNM believes that its business plan of combining expanded loan
origination along with the Company's continuing objective of improving operating
efficiencies will place it in a strong competitive position in the mortgage
industry.
UNM sells the mortgage loans it originates as well as their related servicing
rights to institutional buyers. There are no plans, at present, to hold onto
loans for investment purposes. UNM is dependent on the sale of these loans into
the secondary market in order to generate cash to support operations.
UNM's primary focus is to expand the network of regional sales offices that
employ commission based loan officers. These loan officers will solicit loan
applications by calling on established referral sources. The cost of the
regional sales offices will be borne by UNM. UNM attracts successful loan
officers into the Company in key markets through this retail branch strategy.
All branches operate under the United National Mortgage corporate name. UNM's
corporate office provides marketing, technology and business systems to UNM's
sales Office. UNM believes this will enable UNM to rapidly grow into a mortgage
institution national in scope by attracting the best available mortgage
personnel.
During February 2000, UNM opened a new retail mortgage sales office in Westport,
CT.
UNM also solicits mortgage loans through a wholesale mortgage strategy whereby
the loans are originated through wholesale mortgage brokers and submitted to UNM
for prior approval and funding. In April 2000, UNM opened a new wholesale
mortgage sales branch in Schenectady, New York. This office originates primarily
FHA mortgages loan transactions that it attracts through its network of
wholesale mortgage brokers. During March 2000, UNM opened a new wholesale
mortgage sales office in upstate NY.
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The traditional loan origination channels that UNM currently employs include the
following current objectives:
- Open new retail and wholesale branch offices in selected markets
- Hire additional loan officers to solicit loans
- Increase consumer awareness through direct advertising and marketing
- Selectively consider and pursue strategic alliances with
national-based referral sources such as affinity groups, trade
associations, etc.
- Strategic acquisitions of mortgage companies in the industry
SELECTED FINANCIAL DATA
Selected Summary Financial Data of United National Mortgage, LLC
<TABLE>
<CAPTION>
THIRD QUARTER ENDED: NINE MONTHS ENDED:
9/30/00 9/30/99 9/30/00 9/30/99
Income Statement Data:
<S> <C> <C> <C> <C>
Revenues $ 498,852 $ 131,950 $ 841,797 $ 652,039
Selling, General and
Admin. Expenses $ 643,703 $ 423,358 $ 1,510,448 $ 1,245,347
(Loss) Before Income
Taxes $ (144,851) $ (291,408) $ (668,651) $ (593,308)
Net Loss
Comprehensive LOSS $ (144,851) $ (291,408) $ (668,651) $ (593,308)
Balance Sheet Data:
Cash & Cash Equivalents $ 63,500 $ 123,150
Mortgage Loans
Held for Sale, Net $ 990,300 $ 647,693
Total Assets $ 2,074,900 $ 1,456,814
Warehouse line of
Credit Payable $ 969,900 $ 509,781
Other Liabilities $ 807,400 $ 621,247
Total Stockholder
Equity $ 297,600 $ 325,786
Operating Data:
Total Mortgage
Originations $ 13,662,000 $ 3,000,000 $ 29,000,000 $ 12,000,000
</TABLE>
Analysis of Three months ended September 30,2000 vs. September 30,1999
Revenues from the sale of mortgages and other income for the third quarter ended
September 30, 2000 and September 30, 1999 was $ 498,852 and $131,950,
respectively, representing an increase of 278%. These revenues are derived from
origination fees, discount points, service released premium and ancillary fee
income from residential mortgage transactions as well as interest income and
rental income. The increase in revenues is attributable to a higher volume of
closed loan transactions over the prior year comparable quarter as well as
higher average fee income per loan.
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Operating expense including warehouse line of credit interest expense was $
643,703 for the quarter ending September 30, 2000, and $ 423358 for the quarter
ending September 30, 1999. Operating expenses primarily include commission
expense to sales people, payroll and related payroll taxes as well as general
and administrative expenses. Commission expense, a variable expense, increased
over the comparable quarter of the prior year due to higher closed loan volume.
Recurring fixed expenses for salaries, rent and general and administrative
expenses decreased due to UNM's cost reductions implemented in 2000. These
reductions were partially offset by non-recurring costs associated with
curtailed or closed operations due to the previously announced restructuring of
UNM's business.
The net loss for the three months ended September 30,2000 was $ 144,851 vs. a
loss for the three months ended September 30, 1999 of $ 291,408. The decrease in
loss is due to the cumulative effect of enhanced revenues and reduced recurring
expenses associated with the company's restructure of operations.
Analysis of Nine months ended September 30,2000 vs. September 30,1999
Revenues from the sale of mortgages and other income for the nine months ended
September 30, 2000 and September 30, 1999 was $ 841,797 and $ 652,039,
respectively, representing an increase of 29 %. These revenues are derived from
origination fees; discount points; service released premium and ancillary fee
income from residential mortgage transactions as well as interest income and
rental income. The increase in revenues is attributable to a higher volume of
closed loan transactions over the prior year comparable quarter as well as
higher average fee income per loan.
Operating expenses including warehouse line of credit interest expense was $
1,510,448 for the nine months ending September 30, 2000, and $ 1,245,347 for the
quarter ending September 30, 1999. Operating expenses primarily include
commission expense to sales people, payroll and related payroll taxes as well as
general and administrative expenses. Commission expense, a variable expense,
increased over the comparable quarter of the prior year due to higher closed
loan volume. Recurring fixed expenses for salaries, rent, and general and
administrative expenses decreased due to UNM's cost reductions implemented in
2000. These reductions were partially offset by non-recurring costs associated
with curtailed or closed operations due to the previously announced
restructuring of UNM's business.
The net loss for the nine months ended September 30,2000 was $ 668,651 vs. a
loss for the nine months ended September 30, 1999 of $ 593,308. The increase in
loss is due to the costs associated with the company's restructuring of
operations partially offset by cumulative positive effects of enhanced revenues
and reduced recurring expenses associated with the company's ongoing streamlined
operations.
We have not generated any profits since inception. This is due to non-recurring
start up costs, limited operating history as well as certain reorganization
costs associated with discontinued branch offices, headcount reductions and
other expenses in the fourth quarter of 1999 designed to restore the Company to
profitability. Revenues from mortgage closings do not cover operating expenses
due to an insufficient number of mortgage closings to cover operating costs and
start up costs. There can be no guarantee that expected revenues for fiscal year
2000 will increase enough to cover operating costs or that the Company will add
enough closing volume to reach profitability.
Capital Resources and Liquidity
On October 5,2000, the Company filed a Form S-8 registration in connection with
a newly established Consultants Compensation Plan (the "plan"). Pursuant to the
plan, the Company registered a grand total of 500,000 shares of its common stock
whereby it issued 448,000 of such shares for the settlement of a portion of its
accounts payable and accrued expenses of the Company and UNM for an aggregate
total of $ 112,000.
Pursuant to a separate private placement transaction in October 2000, the
Company sold 700,000 shares for net proceeds of $ 175,000 which was invested and
transferred to UNM for the purpose of settlement of accounts payable and accrued
expenses and general purposes.
We have been highly dependent on capital raised through stock investors to fund
operations. On September 30, 2000, UNM had $ 63,500 cash on hand, which is not
expected to be sufficient to cover net operating expenses through the fourth
quarter of 2000. UNM did receive a cash infusion of $175,000 from the private
placement described above and $112,000 from the Consultants Compensation Plan,
described above, which was used to reduce the company's accrued expenses and
payables. This has enabled the company to reduce its reliance on outside capital
contributions to fund operations. Further, UNM is entirely reliant on warehouse
lines of credit to fund mortgage loans. Currently, there are open warehouse
lines of credit in the amount of $5,000,000 available. The company is not in
default of any loan covenants regarding these warehouse lines of credit.
However, there can be no guarantee that warehouse lenders will continue the
lines of credit if losses were to continue or net worth was to fall below
required levels.
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It is expected that cash generated from operations during the fourth quarter of
2000 will increase significantly. This is due to a higher volume of loan
applications taken during the third quarter, which are expected to close in the
fourth quarter 2000. Cash generated from operations is expected to reduce the
Company's reliance on capital raised through stock offerings as UNM becomes
self-sufficient.
PART II
ITEM I LEGAL PROCEEDINGS
Except as described below we are not engaged in any pending legal proceedings.
We are not aware of any legal proceedings pending, threatened or contemplated,
against any of our officers and directors, respectively, in their capacities as
such.
On August 19, 1999, the Company filed a suit captioned "Premier Mortgage
Resources, Inc. v. Corporate Relations Group, Inc., Gulf Atlantic Publishing,
Inc., James M. Hall, Robert D. Hall, Select Media, Inc., Roberto Veitia, L. Van
Stillman and Olde Monmouth Stock Transfer Co., Inc." docketed to No. C199-7019,
Division 35 in the Circuit Court of the Ninth Judicial Circuit in and for Orange
County, Florida.
As against Olde Monmouth Stock Transfer Co., Inc., the Company's stock transfer
agent, the suit is solely to enjoin the transfer of the shares, and Olde
Monmouth is a nominal defendant only. The Court has enjoined the transfer of the
shares and the Company has timely filed an injunction bond.
The case involves two separate causes of action: one cause of action for the
cancellation of shares issued without authorization and a second for return of
shares issued when contract services were not performed.
In the first cause of action, the Company's former attorney, L. Van Stillman, on
or about March 31, 1999, authorized and directed the Company's then transfer
agent to issue 583,334 (post-reverse split) free-trading shares of the Company's
Common Stock to the other defendants. The Company claims that it did not
authorize or direct the issuance of the shares. The Company seeks to cancel the
583,334 shares. We believe that this case will be settled sometime in the fourth
quarter of 2000.
In the second cause of action, the Company seeks the return of 94,000 shares
issued to Corporate Relations Group, Inc. (62,667 shares) and Gulf Atlantic
Publishing, Inc. (31,333 shares) issued to those companies for services which
the Company alleges were not performed. It appears that the defendants already
disposed of 10,333 shares, leaving a balance of 83,667 shares in dispute. We are
presently negotiating a settlement in this case as well.
ITEM 2 CHANGES IN SECURITIES
During the third quarter of 2000, there were no changes in securities.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
There have been no defaults upon senior securities.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders in the third quarter of
2000.
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ITEM 5 OTHER INFORMATION
Our subsidiary UNM, of which we own 2%, is presently seeking recovery in the
amount of approximately $757,000 plus daily interest and other costs from a law
firm that UNM retained to perform closings on its behalf. UNM has retained legal
counsel to represent it in various legal remedies for the purpose of obtaining
recovery of these monies.
In the opinion of management, UNM has not yet determined the probability of the
recovery of the monies, and accordingly, no provision for the potential loss has
been recorded in the financial statements of UNM or the Company.
On October 5, 2000, the Company filed a Form S-8 Registration Statement in
connection with a newly established Consultants Compensation Plan (the "Plan").
Pursuant to the Plan, the Company registered a total of 500,000 shares of its
common stock. The Company issued 448,000 shares pursuant to the plan to
consultants for the purpose of settling certain accounts payables and accrued
expenses and a portion of the debts of the LLC which totaled $112,000. This
issuance as properly filed with the Securities and Exchange Commission on Form
S-8 in accordance with the Securities Act of 1933.
Also during October 2000, the Company sold 700,000 shares of its Common Stock
pursuant to a private placement yielding net proceeds of $175,000 whereby a
substantial portion of the proceeds was invested in the LLC. This issuance was
considered exempt by reason of Section 4(2) of the Securities Act.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8K
(a) EXHIBIT INDEX
No. Description of Exhibit
--- ----------------------
*3.1 Articles of Incorporation of Mortgage Resources, Inc., dated
August 17, 1995
*3.2 Articles of Amendment, dated October 16, 1995
*3.3 Annual List, changing corporate name to Premier Mortgage Resources,
Inc., dated August 20, 1997
*3.4 Certificate of Reinstatement, dated August 20, 1997
*3.5 Bylaws of Mortgage Resources, Inc.
*3.6 Articles of Incorporation of United National, Inc., dated
November 21, 1997
*3.7 Articles of Organization of United National Mortgage, LLC, dated
October 2, 1996
*3.8 Certificate Of Amendment to Articles of Organization of United
National Mortgage, LLC, dated February 3, 1998
*3.9 Operating Agreement of United National Mortgage, LLC, dated
July 1, 1996
*3.10 LLC Interest Acquisition Agreement
**3.11 Preferred Stock Designation, Series 1999
**3.12 Preferred Stock Designation, Series 2000
*10.1 Reorganization Agreement, dated July 2, 1998
*10.2 Agreement to Sell Stock, dated April 22, 1998
*10.3 Indemnification Agreement with Donald Wilen
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*10.4 Indemnification Agreement with Joseph Cilento
*10.5 Sample Net Branch Agreement
*21.1 Subsidiaries of Registrant
*23.1 Consent of Auditors
27 Financial Data Schedule
* Previously filed with Form 10-SB
** Previously filed with Form 10-KSB
SIGNATURES
In accordance with requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Premier Mortgage Resources, Inc.
--------------------------------
(Registrant)
Date November 7, 2000 /s/ Joseph Cilento
-------------------- -------------------------------
Joseph Cilento, President, CEO
