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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
for the transaction period from to
Commission File Number 0-27987
Premier Mortgage Resources, Inc.
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(Name of Small Business Issuer in its charter)
Nevada 88-0343833
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(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
280 Windsor Highway New Windsor, NY 12553
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (914) 561-7770
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Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which
Securities are registered
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- ------------------------------------- -------------------------------------
Securities registered under Section 12(g) of the Exchange Act:
Common Stock
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(Title of class)
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(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes No X
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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. (X)
State issuer's revenues for its most recent fiscal year. $197,040.
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days. At the average bid and asked prices of stock as of (Date) of $1xx the
aggregate market value of voting stock held by non-affiliates is $xxxxxxx
TABLE OF CONTENTS
PART I PAGE
Item 1 Description of Business 3
Item 2 Description of Property 10
Item 3 Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters 12
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operation 12
Item 7. Financial Statements 16
Item 8. Changes and Disagreements with Accountants on Accounting and
Financial Disclosure 17
PART III
Item 9. Directors and Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act 17
Item 10. Executive Compensation 19
Item 11. Security Ownership of Certain Beneficial Owners and Management 19
Item 12. Certain Relationships and Related Transactions 21
Item 13. Exhibits and Reports on Form 8-K 23
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Office
Premier Mortgage Resources Inc. ("we", "us" or "the Company") currently
maintains its principal office at 280 Windsor Highway, New Windsor, New York
12553 where its telephone number is (914) 561-7770 and its facsimile number is
(914) 561-7748.
Organization/Historical Background
The Company was originally incorporated in Nevada on August 17, 1995 as
"Mortgage Resources, Inc." The Company was inactive following its organization
and its charter was revoked on April 26, 1997 by the State of Nevada for failure
to file its 1996-1997 Annual List of Officers and Directors. Its charter was
reinstated on August 20, 1997; however, during the period that its charter was
revoked another corporation had taken the name "Mortgage Resources, Inc." and,
therefore, the Company changed its name to "Premier Mortgage Resources, Inc." in
order to secure reinstatement.
On April 22, 1998 (formalized on June 9, 1998) the Company entered into an
Agreement and Plan of Reorganization with Donald S. Wilen, the sole stockholder
of United National, Inc., the manager and holder of a 2% interest in United
National Mortgage, LLC, a mortgage banker. On July 2, 1998, under that Plan,
which was structured as a tax-free, stock-for-stock exchange pursuant to Section
358(a)(1)(B) of the Internal Revenue Code, the Company acquired all of the
issued and outstanding shares of United National, Inc. in exchange for the
issuance of 377,778 shares (after giving effect to the 1 for 6 reverse stock
split effective on April 12, 1999) of the Company's Common Stock.
United National, Inc. was incorporated in the State of Nevada on November 21,
1997, and is a wholly owned subsidiary of the Company. It performs all of the
loan processing and telemarketing services for United National Mortgage, LLC
("UNM"). It owns a 2% ownership in interest in UNM. United National,
Inc. has entered into an agreement with UNM to acquire all of the ownership
interest of UNM for nominal consideration immediately upon approval of the New
York Banking Department of the change in control.
United National Mortgage, LLC is a New York limited liability company engaged in
the mortgage banking business. As such, it is licensed by the New York State
Department of Banking which requires that the owner of 9% or more of a mortgage
banker be pre-approved by it. Pending approval by the New York State Department
of Banking of the change in control, Donald Wilen, continues to own the 98%
interest, and United National Inc. owns 2%. Donald Wilen will transfer his
interest to United National, Inc. upon regulatory approval of the ownership
change, without the payment of any further consideration.
Business- Corporate Structure
We are a holding company providing services and financing to our subsidiary,
United National, Inc. United National, Inc. provides marketing and processing
services to United National Mortgage, LLC that offers mortgage banking.
Business Operations
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Premier Mortgage Resources, Inc. - Parent
Premier Mortgage Resources, Inc is organized to act as a holding company
responsible inter alia for raising funds for United National, Inc. and UNM. As a
holding company, Premier Mortgage Resources, Inc. provides certain staff
functions to its subsidiaries, but has no business operations. All business
operations are conducted by UNM, which performs all line functions. The staff
functions which the Company supplies to its subsidiaries includes overall
management, strategic direction, financing, legal services, accounting and
related services including cash management and budgeting, marketing, and public
relations/advertising.
United National, Inc. - First Tier Subsidiary
United National, Inc., is engaged in mortgage processing services on behalf of
UNM. As such, it is wholly dependent on UNM and the level of its core business
activity for its own revenues. United National, Inc. derives its revenues from
fees associated with mortgage and contract processing. This processing includes,
but is not limited to the following: (i) gathering of gathering of credit
history(ies) and related documentation, (iii) collecting of borrower's income
documentation (iii) gathering of credit report appraisal, as well as other
related documentation.
United National, Inc. absorbs all the cost of the mortgage processing operation,
including, but not limited to, payroll, payroll benefit costs, rent and general
and administrative costs. It then bills UNM for loans processed at a
contractually agreed upon rate. It also derives revenues by billing UNM at a
contractually agreed upon rate for mortgage loan processing. Our expenses
include the payroll cost, leased space, and general and administrative costs of
mortgage personnel engaged in these activities. We are actively recruiting
mortgage sales personnel and loan officers, and as of 3/14/00, the Company
employs 15 such employees. UNM is also engaged in building a network of offices
around the country. Presently we have six (6) branches all located on the East
Coast.
United National Mortgage, LLC, Second Tier Subsidiary To-Be-Acquired
Although the legal transfer of ownership is pending approval by the New York
State Department of Banking, United National Mortgage, LLC is managed as a
wholly owned subsidiary of United National, Inc., and operates as the mortgage
banking division of Premier Mortgage Resources, Inc. UNM is also engaged in
building a network of sales offices around the country. by seeking existing
mortgage brokers or bankers interested in becoming representative offices of
UNM, called "Net Branches." Presently, UNM has six (6) Branches, two of which
are net branches.
Upon becoming a Net Branch, the broker or banker is provided with: (i) the right
to use the name United National Mortgage, LLC, which provides national exposure
for the broker or banker (through UNM's advertising and marketing efforts); (ii)
the use of the UNM's central computer system and other technology; (iii)
staffing and hiring of the staff of each Net Branch by UNM; and (iv) employee
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benefits. The establishment of a Net Branch in no way represents a real estate
acquisition by UNM, United National Mortgage, Inc. or Premier Mortgage
Resources, Inc.
General Business Plan of UNM
United National Mortgage, LLC is in the residential and wholesale mortgage
banking business. Its primary focus has been the retail and wholesale
origination and the sale of mortgage loans for one-to-four family properties.
UNM is an approved loan correspondent with approximately twenty lenders such as
Countrywide Credit, Flagstar Bank, Provident Bank, Interfirst, IndyMac, Alliance
Mortgage, and other national prime and subprime 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
run 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.
The Retail Origination Division
Retail loan origination involves the direct solicitation of realtors, builders
and other end borrowers for the origination of mortgage loans. UNM derives
revenues from the premium that it receives when the loan is sold. Additionally,
UNM derives revenues from fees charged directly to customers. Generally, that
premium is shared on a negotiated basis with loan officers who procure the loan
and assist in the loan origination process. UNM achieves this from wholly owned
retail sales branches, and through the "Net Branch" concept. We intend to pursue
the opening of wholly owned retail branches as our primary method of expansion.
We believe that we have greater control over employees, products and profit
margins than we would if we employed only the Net Branch method. The Net Branch
concept, as discussed earlier, entails partnering with established mortgage
brokers who join the company as UNM employees and conduct their retail
origination activities under the UNM name. In turn, UNM provides them with
access to processing, underwriting and closing support functions as well as
access to expanded product offerings in all states where UNM is licensed to
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transact mortgage business. Net Branch managers agree contractually to absorb
the costs of their local branch operating costs such as payroll, use and
occupancy and general and administrative costs associated with the operations of
their local branch. Revenues from closed loan transactions are then
contractually split with the Net Branch operator and the Company using
predetermined formulas. UNM believes that its strategy of expanding its retail
presence through the "Net Branch" concept will allow it to expand more quickly
in designated markets without the commitment to absorb local branch operating
costs. This allows UNM greater flexibility to expand or contact retail
operations as business volumes rise and fall due to business conditions or the
rise or fall in interest rate levels. UNM sells substantially all of the
mortgage loans that it produces. It sells these loans to investors (which may
include broker/dealers, banks, thrifts, insurance companies, and state and local
housing finance agencies), either as individual loans or pursuant to certain
bulk purchase commitments.
UNM also nominally engages in the origination and brokerage of loans on
commercial real estate assets, including shopping centers, office properties and
other commercial loans. It typically brokers (e.g. arranges for the loan from
third-party lenders) these transactions. Transactions to date have not been
material to UNM's results of operations. UNM's loan origination activities are
conducted trough its corporate headquarter offices in New Windsor, New York.
Current branch operations are located in New York, Connecticut, Massachusetts
and Illinois.
The Wholesale Origination Division
Wholesale loan origination involves the purchase of loans from mortgage brokers.
UNM realizes revenue from the sale of such loans to investors for a price
greater than the amount paid to the mortgage broker. UNM generally sells the
loans to investors at pre-approved purchase prices which serves to reduce the
risk of a loss on such sale(s). Wholesale loan origination tends to generate
less revenues on a per transaction basis than retail origination, but expansion
into the wholesale sector is less costly than retail origination because
wholesale origination does not require the establishment of costly office space
and the related overhead expense. The operation structure enables UNM to quickly
enter new markets.
Loan Servicing
UNM's current plans do not include the servicing of loans that it originates
since it plans to sell the servicing rights on loans it originates in order to
generate additional cash flow on a current basis. Loan servicing consists of
collecting principal and interest payments from borrowers, remitting aggregate
principal and interest payments to investors, making cash advances when
required, accounting for principal and interest, collecting funds for payment of
mortgage-related expenses, such as taxes and delinquent mortgagors, conducting
foreclosures and property dispositions in the event of unremedied defaults and
generally administering the mortgage loans.
Quality Control
In order to ensure that UNM originates high quality mortgage loans, it has
retained the services of a quality control company with an industry wide
reputation to conduct evaluations of UNM's loan origination activities on a
monthly basis.
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Competition
The mortgage banking industry is highly competitive. UNM competes with other
financial providers who have greater technical expertise, financial resources
and marketing capabilities than United National, Inc. and UNM. We are uncertain
that UNM will be able to overcome competitive disadvantages it will face as a
small start up company with limited capital. Our competitors include
institutions, such as mortgage banks, state and national banks, savings and loan
associations, savings banks, credit unions and insurance companies and mortgage
bankers. Some of UNM's competitors have financial resources that are
substantially greater than those of UNM, including some competitors which have a
significant number of offices in areas where UNM conducts its business. UNM
competes principally by offering loans with competitive features, by emphasizing
the quality of its services and by pricing its range of products at competitive
rates.
Although the mortgage business is competitive, it is also fragmented in that no
single lender has a significant market share of total origination volume.
Overall mortgage origination volume is shared in varying percentages among
commercial banks, savings and loan and mortgage banking companies. Historically,
mortgage banks have had an estimated twenty to thirty percent share of total
origination volume. Commercial banks, savings banks, savings and loan
associations and mortgage banking companies service the bulk of residential
mortgages. Management of UNM does not anticipate any significant changes in the
market share described above in the near term.
Number of Employees
Premier Mortgage Resources, Inc. is a holding company and has no employees.
United National, Inc. also has no employees, but it utilizes telemarketing and
support personnel from UNM. Presently, UNM has 23 employees working in the
departments listed below. Three members of the telemarketing staff are part
time, and the remaining employees in all departments are full time employees.
These numbers include Net Branch personnel.
<TABLE>
<CAPTION>
Department/Job Function Number of Employees
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<S> <C>
Executives 2
Loan Officers 15
Support Staff 6
----
Total 23
</TABLE>
Cautionary Factors That May Affect Future Results
This registration statement contains some forward-looking statements.
"Forward-looking statements" describe our current expectations or forecasts of
future events. These statements do not relate strictly to historical or current
facts. In particular, these include statements relating to future actions,
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prospective products, future performance or results of current and anticipated
products, sales, efforts, the outcome of contingencies and financial results.
Any or all of the forward-looking statements we make may turn out to be wrong.
They can be affected by inaccurate assumptions we might make or by known or
unknown risks and uncertainties. Many factors, such as product acceptance,
competition and marketing capabilities, will be important in determining future
results. Consequently, no forward-looking statements can be guaranteed. Actual
future results may vary materially.
We undertake no obligation to publicly update any forward-looking statements,
whether as a result of new information, future events or otherwise. You are
advised, however, to consult any future disclosures we make on related subjects
in our 10-QSB and 8 KSB.
We provide the following cautionary discussion of risks, uncertainties and
possible inaccurate assumptions relevant to our business and our products. These
are factors that we think could cause our actual results to differ materially
from expected results. Other factors besides those listed here could adversely
affect us.
Limited Operating History. Although we were organized in August 1995, we had no
business operations until the acquisition of United National, Inc. on July 2,
1998. United National, Inc.'s operating "subsidiary," United National Mortgage,
LLC has been in business since October 1996. That limited liability company is
the entity which produces the revenues for the Company group and it has not yet
been profitable. Accordingly, investors should consider us to be essentially a
new, developing company. As a new, developing company, our operations are
subject to all of the risks inherent in the establishment of a new business
enterprise, including the lack of significant operating history. There can be no
assurance that our future operations will be profitable. Revenues and profits,
if any, will depend upon various factors, including our ability to finance
mortgage loans, secure mortgage loan applications, process mortgages, and
generally do business in a sufficient volume to provide sufficient cash margins
to cover our operating costs. Our securing of sufficient capital is crucial.
Without sufficient capital we cannot meet our projected goals or accomplish our
business plans; and such failure could have a material adverse affect on us and
the value and price of our publicly traded securities.
Liquidity and Working Capital Risks; Need for Additional Capital to Finance
Growth and Capital Requirements. We will seek additional funds and seek to raise
additional capital from public or private equity or debt sources to: (i) provide
working capital to meet our general and administrative costs until net revenues
make the business self-sustaining; (ii) make acquisitions of existing mortgage
brokers, mortgage processors, and mortgage bankers; and (iii) exploit and expand
such acquisitions. We cannot give assurance that we will be able to raise any
such capital on terms acceptable to us or at all. Such financing may be upon
terms that are dilutive or potentially dilutive to our stockholders. If
alternative sources of financing are required, but are insufficient or
unavailable, we will be required to modify our growth and operating plans in
accordance with the extent of available funding.
Effect of our future Issuance of Preferred Stock. Our authorized capital
consists of 50,000,000 shares of Common Stock and 10,000,000 shares of Preferred
Stock. Our Board of Directors, without any action by our shareholders, is
authorized to designate and issue shares of Preferred Stock in such series as it
deems appropriate and to establish the rights, preferences and privileges of
such shares, including dividends, liquidation and voting rights. The rights of
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holders of shares of Preferred Stock that may be issued in the future may be
superior to the rights granted to the holders of the then existing shares of
Common Stock. Also, the ability of the Board of Directors to designate and issue
such undesignated shares could impede or deter an unsolicited tender offer or
takeover proposal regarding us and the issuance of additional shares having
preferential rights could adversely affect the voting power and other rights of
holders of our Common Stock.
Limitation of Liability and Indemnification of Officers and Directors. Our
officers and directors are required to exercise good faith and high integrity in
the management of Company affairs. Our Articles of Incorporation provide,
however, that the officers and directors shall have no liability to the
shareholders for losses sustained or liabilities incurred which arise from any
transaction in their respective managerial capacities unless they violated it in
good faith, engaged in intentional misconduct or knowingly violated the law,
approved an improper dividend or stock repurchase, or derived an improper
benefit from the transaction. As a result, a purchaser of the shares may have a
more limited right to action than he would have had if such provision were not
present. Our Articles and By-Laws also provide for the indemnification by the
Company of the officers and directors against any losses or liabilities they may
incur as a result of the manner in which they operate the Company's business or
conduct the internal affairs, provided that in connection with these activities
they act in good faith and in a manner which they reasonably believe to be in,
or not opposed to, the best interests of the Company, and their conduct does not
constitute gross negligence, misconduct or breach of fiduciary obligations. To
further implement the permitted indemnification, we have entered into Indemnity
Agreements with our current officers and directors and we will provide similar
agreements for future officers and directors.
Dependence on Key Personnel. Our future success will depend largely on the
efforts and abilities of our management, including especially Messrs. Wilen and
Cilento. The loss of any of them or the inability to attract additional,
experienced management personnel could have a substantial adverse affect on the
Company; we have not obtained "key man" insurance policies on any of our
management and do not expect to obtain it on any of our future management
personnel, as employed. Our ability to implement our strategies depends upon our
ability to attract highly talented managerial personnel. There can be no
assurance that we will attract and retain such employees in the future. The
inability to hire and/or loss of key management or technical personnel could
materially and adversely affect our business, results of operations and
financial condition.
Government Regulation. Our mortgage banking business is subject to substantial
government regulation. We are required to secure and maintain various licenses
from each state in which we conduct business. In addition, our business
operations will be subject to all government regulations normally incident to
conducting business (e.g., occupational safety and health acts, workmen's
compensation statutes, unemployment insurance legislation, income tax and social
security laws and regulations, environmental laws and regulations, consumer
safety laws and regulations, etc.) as well as to governmental laws and
regulations applicable to small public companies and their capital formation
efforts. Although we will make every effort to comply with applicable laws and
regulations, we can provide no assurance of our ability to do so, nor can we
predict the effect of those regulations on our proposed business activities.
Anticipated Operating Losses. Assuming that we can obtain the financing to make
acquisitions and exploit them, we most likely will continue to suffer operating
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losses until we can achieve a sufficient volume of mortgage loans to cover our
operating costs.
Competition. The mortgage banking market is extremely competitive. UNM competes
with other financial providers who have greater technical expertise, financial
resources and marketing capabilities than United National, Inc. and UNM. UNM
will be able to overcome competitive disadvantages it will face as a small start
up company with limited capital.
ITEM 2. PROPERTY
Offices
We maintain our principal office at 280 Windsor Highway, New Windsor, New York
12553, where our telephone number is (914) 561-7770 and our facsimile number is
(914) 561-7747.
Our home office is a freestanding building situated on approximately .5 acres,
owned by UNM. This building was purchased for $370,000 from a non-related party
in February of 1998. There is a $300,000 mortgage on this property held by
Michael T. Tighe, also a non-related party. We have made substantial
improvements to this building in 1998, spending approximately $35,000 for such
improvements.
The building, formerly a restaurant, contains 5,000 square feet on the first
floor with 3,000 square feet of storage in the basement. The first floor area is
divided into one large work area with two smaller offices. The occupancy rate is
25. There are 40 parking spaces. We believe that these premises are adequate for
our home office operations for the foreseeable future.
Additionally, UNM owns a building located at 48 Mill Street, Newburgh, New York
12550. This property was purchased for $105,000 from Donald Wilen in 1998. For
this property, there is a $90,000 mortgage held by Kingston-Newburgh Enterprise
Corporation. This building has three floors, and approximately 1500 square feet.
The work area is concentrated on the first floor, containing approximately 600
square feet. There are eight workstations set up for telemarketing. The
occupancy rate is 22. There is no parking provided.
Licenses
United National Mortgage, LLC, as a mortgage banker, holds various licenses in
twenty-one states, which are as follows:
<TABLE>
<CAPTION>
STATE LICENSE TYPE LICENSE # EXPIRATION
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Connecticut First Mortgage 0003767 9/30/00
Connecticut Second Mortgage 0006294 06/30/00
Georgia Mortgage Lender 12659 12/31/00
Illinois Mortgage Lender 5157 08/6/01
Maryland Mortgage Lender 4454 12/31/00
Mass. Mortgage Broker Mb1341 5/31/00
Mortgage Lender Ml0890 5/31/00
Michigan Broker/lender Fl-1043 None
New Hampshire Mortgage Lender Pending
New Mexico Broker/lender None None
</TABLE>
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<TABLE>
<S> <C> <C> <C>
New York Mortgage Banker 05390 None
No. Carolina Mortgage Banker A 1521 None
Pennsylvania Mortgage Banker 1406 06/30/00
Rhode Island Mortgage Banker Pending
So. Carolina Mortgage Lender S-4, 213 None
</TABLE>
Real Estate Investments
At the present time, we have no intention or any interest in making investments
in real estate (except for our own offices). Therefore, we have no policy with
respect to any investments in real estate or interests in real estate,
investments in real estate mortgages, and securities of or interests in persons
primarily engaged in real estate activities.
ITEM 3. 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, and Mr. Stillman has now
acknowledged that. The Company seeks to cancel the 583,334 shares. We believe
that this case will be settled sometime in the second 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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No matters were submitted to a vote of shareholders in the fourth quarter of
1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is traded on the NASDAQ Bulletin Board under the
symbol "PMTE."
J. Alexander Securities, Inc., our initial market maker, was authorized to
commence the trading of our stock on the OTC Bulletin Board on February 20, 1998
but actual trading began on approximately July 7, 1998. The range of our prices
since then is:
<TABLE>
<CAPTION>
Quarter High Ask Low Bid
- ------- -------- -------
1998
<S> <C> <C>
3rd Qtr, '98 $ 2.125 $ 1.44
4th Qtr '98 1.56 .21
</TABLE>
<TABLE>
<CAPTION>
Quarter High Ask Low Bid
- ------- -------- -------
1999
<S> <C> <C>
1st Qtr '99 .4375 .10
2nd Qtr '99 .1875 .1875
3rd Qtr '99 .4375 .4375
4th Qtr '99 .75 .2500
</TABLE>
The forgoing quotations reflect inter-dealer prices, without retail mark-up,
mark-down, or commission and may not represent actual transactions.
Dividend Policy
We have not had any earnings or profits and have not paid any dividends. Our
proposed operations are capital intensive and we need working capital. Therefore
we will be required to reinvest any future earnings in the Company's operations.
Our Board of Directors has no present intention of declaring any cash dividends,
as we expect to re-invest all profits in the business for additional working
capital for continuity and growth. The declaration and payment of dividends in
the future will be determined by our Board of Directors considering the
conditions then existing, including the Company's earnings, financial condition,
capital requirements, and other factors.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The following discussion and analysis should be read in conjunction with the
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financial statements of the Company and summary of selected financial data for
United National Mortgage, LLC ("UNM") 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 - Sources of Revenue
We are a holding company that has no business activities and generates no
revenues. We do, however, provide support and staff functions to our
subsidiaries, which do generate revenues.
Analysis of Premier Mortgage Resources, Inc.
The revenues of Premier Mortgage Resources, Inc. were $121,210 for calendar
1998, and $197,040 for calendar 1999, and there were no significant revenues in
1997. The increase in 1999 over 1998 due in part to higher revenue billings to
UNM by us for telemarketing and also processing services, and also due to
increased payroll costs for processing services that can be billed to UNM for
reimbursement.
Total expenses for Premier were $216,742 for calendar 1998. There were no
significant expenses in calendar 1997. For the twelve months ending December 31,
1999, total expenses were $534,387. Selling, general and administrative expenses
for 1999 increased over 1998 due to a higher number of employees on payroll who
perform telemarketing and mortgage banking services on behalf of UNM.
On December 31, 1999 through issuance of a convertible preferred stock issuance,
the Company raised $380,000 in capital. The Company raised an additional
$100,000 in capital on February 28, 2000 through an 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 can be 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. derives 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.
The transactions between United National, Inc 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
13
<PAGE> 14
of UNM and thereby give the reader a more complete understanding of UNM's core
business.
Analysis of United National Mortgage, LLC ("UNM")
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 intends to expand its mortgage origination business through its retail
branch network, direct marketing and wholesale mortgage banking. It is in the
process of developing an Internet based direct origination capability.
UNM sells the loans it originates as well as the related servicing rights to
institutional buyers. There are no plans, at present, to hold onto loans for
investment purposes. We are dependent on the sale of these loans into the
secondary market in order to generate cash to support operating costs.
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. Also, UNM attracts successful
mortgage brokerage operations into the Company in key markets through the "Net
Branch" concept. The Company continues to build a network of mortgage brokers
all working under the United National Mortgage corporate name. That network will
provide marketing, technology and business systems to United's broker partners;
and further, to rapidly grow into a mortgage institution national in scope by
attracting the best available mortgage personnel.
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.
Other traditional loan origination channels that we use include:
- - Open new retail branch offices in selected markets
- - Hire additional loan officers to solicit loans
- - Increase consumer awareness of United 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
ITEM 6. SELECTED FINANCIAL DATA
Selected Summary Financial Data of United National Mortgage, LLC
Year Ended:
14
<PAGE> 15
<TABLE>
<CAPTION>
Dec. 31, 1999 Dec. 31, 1998
<S> <C> <C>
Income Statement Data:
Mortgage Fee Income $ 513,316 $ 628,930
Selling, General and
Admin. Expenses $ 1,509,959 1,269,653
(Loss) Before Income (984,102) (640,723)
Taxes
Net Loss (984,102) (640,723)
Unrealized (Loss) (124,338)
On Securities (174)
Comprehensive Loss $ (987,802) $ (765,061)
Balance Sheet Data:
Cash & Cash $ 327,051 $ 161,438
Equivalents
Mortgage Loans 597,105 1,681,132
Held for Sale, Net
Total Assets $ 1,532,202 $ 2,571,604
Warehouse Line of $ 1,703,926
Credit Payable 607,140
Other Liabilities 266,435 568,557
Total Stockholder Equity $ 391,266 $ 299,121
Operating Data:
Total Mortgage Originations
(in thousands) $ 15,000 $ 24,000
</TABLE>
Revenue from the sale of mortgages and brokerage and ancillary income for the
calendar year ended December 31, 1998 and December 31, 1999 was $579,944 and
$421,686, respectively. These revenues are derived from origination fees,
discount points, service released premium and ancillary fee income from
residential mortgage transactions. Interest income was $48,986 and $91,630 for
the periods ending December 31, 1998 and December 31, 1999, respectively,
representing interest income from holding residential mortgage loans from the
date of closing to purchase by permanent investors.
15
<PAGE> 16
Operating expense including warehouse line of credit interest expense was
$1,269,653 for the year ending December 31, 1998 and $1,509,959 for the year
ending December 31, 1999.. Operating expenses primarily include commission
expense to sales people, payroll and related payroll taxes as well as general
and administrative expenses.
We have not generated any profits since inception and we are not expected to
generate profits for the first fiscal quarter ending March 31, 2000. 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
We have been highly dependent on capital raised through stock investors to fund
operations. On December 31, 1999, we had $350,000 cash on hand which is not
expected to be sufficient to cover net operating expenses through the first
quarter of 2000. Further, the Company is entirely reliant on warehouse lines of
credit to fund mortgage loans. Currently, there are open warehouse lines of
credit in the amount of $12,000,000 available. 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.
ITEM 7. FINANCIAL STATEMENTS
16
<PAGE> 17
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<PAGE> 18
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
number
------
<S> <C>
Independent auditors' report F-1
Consolidated balance sheet at December 31, 1999 F-2
Consolidated statements of operations for the years ended
December 31, 1999 and 1998 F-3
Consolidated statement of stockholders' equity for the years ended
December 31, 1999 and 1998 F-4 - F-5
Consolidated statements of cash flows for the years ended
December 31, 1999 and 1998 F-6
Notes to consolidated financial statements F-7 - F-16
</TABLE>
<PAGE> 19
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Premier Mortgage Resources, Inc.
We have audited the accompanying consolidated balance sheet of Premier Mortgage
Resources, Inc. and subsidiary (the "Company") as of December 31, 1999 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years ended December 31, 1999 and 1998. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company as of December 31, 1999 and the consolidated results of its operations
and cash flows for the years ended December 31, 1999 and 1998 in conformity with
generally accepted accounting principles.
Massella, Tomaro & Co., LLP
Jericho, New York
February 18, 2000
F-3
<PAGE> 20
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASSETS
Current assets:
<S> <C>
Cash $ 250
-----------
Total current assets 250
Investment in affiliate, at cost 1,796,032
-----------
Total assets $ 1,796,282
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses $ 159,852
Due to related parties 70,554
Note payable 50,000
-----------
Total current liabilities 280,406
-----------
Redeemable, cumulative preferred stock 380,000
-----------
Commitments and contingencies (Note 8) --
-----------
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,
3,628,794 shares issued and outstanding 3,629
Additional paid-in capital 1,564,284
Accumulated deficit (432,037)
-----------
Total stockholders' equity 1,135,876
-----------
Total liabilities and stockholders' equity $ 1,796,282
===========
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE> 21
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Income - Related Party $ 197,040 $ 121,210
----------- -----------
Expenses:
Selling, general, and administrative expenses 269,506 60,762
Selling, general, and administrative expenses - related party 250,857 121,747
----------- -----------
Total expenses 520,363 182,509
----------- -----------
Loss from operations before interest expense and provision
for income taxes (323,323) (61,299)
Interest expense 14,024 34,233
----------- -----------
Loss before provision for income taxes (337,347) (95,532)
Provision for income taxes -- --
----------- -----------
Net (loss) (337,347) (95,532)
Other items of comprehensive income -- --
----------- -----------
Comprehensive net (loss) $ (337,347) $ (95,532)
=========== ===========
Basic:
Net (loss) $ (.16) $ (.12)
=========== ===========
Weighted average number of
common shares outstanding 2,162,392 822,878
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE> 22
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity(Deficit)
------ ------ ------- ------- ---------------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1997 833,347 $ 833 $ 4,167 $ (5,936) $ (936)
Cancellation of common stock in
connection with reorganization (433,333) (433) (2,167) -- (2,600)
Issuance of common stock in
connection with recapitalization 377,778 378 (9,243) 6,778 (2,087)
Issuance of common stock in
connection with conversion
of notes payable 59,667 60 357,940 -- 358,000
Issuance of common stock in connection
with limited offering memorandum,
net of costs 18,334 18 101,999 -- 102,017
Issuance of common stock in
connection with amended
limited offering memorandum,
net of costs 199,062 199 -- 100,726 - 100,925
Issuance of common stock in lieu of
consideration for services rendered
to the Company 8,333 8 33,492 -- 33,500
Net loss for the year ended
December 31, 1998 -- -- -- (95,532) (95,532)
--------- ----- ------- ------- -------
Balances at December 31, 1998 1,063,188 1,063 586,914 (94,690) 493,287
--------- ----- ------- ------- -------
</TABLE>
See accompanying notes to consolidated financial statements
F-6
<PAGE> 23
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONT'D)
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity(Deficit)
------ ------ ------- ------- ---------------
Balances at December 31, 1998
<S> <C> <C> <C> <C> <C>
from previous page 1,063,188 $1,063 $ 586,914 $ (94,690) $ 493,287
Sale of common stock in
connection with private offering
memorandums and sale of unregistered
securities, net of costs 2,345,606 2,346 839,690 -- 842,036
Issuance of common stock in lieu of
consideration for services rendered
to the Company 220,000 220 109,780 -- 110,000
Officer's contribution -- -- 27,900 -- 27,900
Net loss for the year ended
December 31, 1999 -- -- -- (337,347) (337,347)
--------- ------ ---------- ---------- ----------
Balances at December 31, 1999 3,628,794 $3,629 $1,564,284 $ (432,037) $1,135,876
--------- ------ ---------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements
F-7
<PAGE> 24
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $ (337,347) $ (95,532)
Adjustments to reconcile net (loss) to net
cash used for operating activities:
Amortization -- 287
Issuance of common stock for services 137,900 33,500
Increase (decrease) in:
Accrued expenses 110,619 49,233
----------- -----------
Net cash used for operating activities (88,828) (12,512)
----------- -----------
Cash flows from investing activities:
Investment in affiliate (1,105,032) (691,000)
----------- -----------
Net cash used for investing activities (1,105,032) (691,000)
----------- -----------
Cash flows from financing activities:
Repayments of convertible notes payable (100,000) --
Proceeds from sale of preferred stock 380,000 --
Sale of common stock in connection with
private placement, net of costs 842,036 193,462
Proceeds from issuance of convertible notes payable -- 458,000
Proceeds from issuance of note payable -- 50,000
Advances from related parties 70,021 4,103
----------- -----------
Net cash provided by financing activities 1,192,057 705,565
----------- -----------
Net (decrease) increase in cash (1,803) 2,053
Cash, beginning of period 2,053 --
----------- -----------
Cash, end of period $ 250 $ 2,053
=========== ===========
Supplemental disclosure of non-cash flow information: Cash paid during the year
for:
Interest $ -- $ --
=========== ===========
Income taxes $ -- $ --
Schedule of non-cash investing activities:
Issuance of 59,667 shares of common stock in connection
with conversion of note payable $ -- $ 358,000
=========== ===========
Contribution of real property directly by the Company's
President in lieu of stock received in connection
with acquisition of subsidiary $ -- 85,000
=========== ===========
Issuance of 377,778 shares of Common Stock in
connection with recapitalization $ -- $ (2,087)
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE> 25
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 1 - ORGANIZATION
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
and shareholder received 377,778 representing 48.6% of the
common stock outstanding after the cancellation of 433,333
shares of the previous officers as discussed in the next
paragraph, in consideration for 100% of the shares of common
stock of United. Such transaction is 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 previous
officers of the Company, the previous 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. Since August 1998, United has
performed loan processing and telemarketing services for
United National Mortgage, LLC. ("LLC"). As of December 31,
1999 United owns approximately 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 December 31, 1999.
The Company currently has an option to purchase the remaining
98% interest from this director subject to the approval by New
York State Banking Department. The LLC is a licensed mortgage
banker in approximately sixteen states which primarily
originates conforming conventional loans, and sells those
loans to investors, with servicing released. The intent of the
Company is to
F-9
<PAGE> 26
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 1 - ORGANIZATION (cont'd)
LLC cont'd
execute its option and have the LLC become a wholly owned
subsidiary in order to enter the mortgage banking industry.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its wholly owned subsidiary,
United (the "Companies") after elimination of all significant
intercompany transactions and accounts.
b) Cash and cash equivalents
The Company considers highly liquid investments with
maturities of three months or less at the time of purchase to
be cash equivalents.
c) Revenue Recognition
Upon the Company acquiring the remaining 98% interest in the
LLC as discussed in Note 1, it will adopt all the accounting
policies of the LLC. Accordingly, its revenue recognition
policies are expected to be as follows:
i) Revenue recognition - revenue from both "The Retail
Origination Division" and "The Wholesale Division" will be
recognized upon loan sale to the investor.
ii) Branch office operations - All branch managers
including net branch managers will be employees of the
Company. For net branches, in states where permissible, net
branch managers will be contractually obligated to pay the
expenses of the branch. In states where not permissible, the
Company will pay these expenses directly. All revenue earned
and related expenses by the branches of the Company will be
reflected in the statement of operations of the Company.
d) Income taxes
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 109
"Accounting for Income Taxes" which requires the use of the
"liability method" of accounting for income taxes.
Accordingly, deferred tax liabilities and assets are
determined based on the difference between the financial
statement and tax bases of assets and liabilities, using
enacted tax rates in effect for the year in which
F-10
<PAGE> 27
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
the differences are expected to reverse. Current income taxes
are based on the respective periods' taxable income for
federal and state income tax reporting purposes.
e) Earnings per share
During 1997, the Financial Accounting Standards Board issued
SFAS No. 128, "Earnings Per Share." SFAS No. 128 replaced the
previously required reporting of primary and fully diluted
earnings per share with basic and diluted earnings per share,
respectively. Unlike the previously reported primary earnings
per share, basic earnings per shares exclude the dilutive
effects of stock options. Diluted earnings per share is
similar to the previously reported fully diluted earnings per
share. Earnings per share amounts for all periods presented
have been calculated in accordance with the requirements of
SFAS No. 128.
f) Use of estimates
In preparing financial statements in conformity with generally
accepted accounting principles, management is required to make
estimates and assumptions which affect the reported amounts of
assets and liabilities, revenues and expenses during the
reporting period and the disclosure of contingent assets and
liabilities at the date of the financial statements. Actual
results could differ from those estimates.
g) Fair value disclosure at December 31, 1999
The carrying value of cash, accrued expenses, and notes
payable are a reasonable estimate of their fair value.
h) Effect of New Accounting Standards
The Company does not believe that any recently issued
accounting standards, not yet adopted by the Company, will
have a material impact on its financial position and results
of operations when adopted.
i) Cost Method of Accounting
United accounts for the investment in the LLC under the cost
method of accounting as a result of its 2% ownership interest.
Upon approval from the New York Banking Department, the
Company's former President, now a director, will transfer the
remaining 98% interest in the LLC to United for a nominal
consideration in accordance with the agreement discussed in
Note 3. Upon such transfer, the LLC will become a wholly owned
subsidiary and will be consolidated by the Company.
F-11
<PAGE> 28
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
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 December 31, 1999, United has a 2%
interest in the LLC and has invested an aggregate of
$1,796,032 into the LLC based on the above agreement.
NOTE 4 - ACCRUED EXPENSES
Accrued expenses consist of the following at December 31, 1999:
<TABLE>
<S> <C>
Professional fees $ 41,900
Interest 48,257
Other 1,695
Litigation settlement-pending
(See Note 8(c)) 68,000
--------
$159,852
========
</TABLE>
NOTE 5 - 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
December 31, 1999, the loan remains unpaid. Accrued
interest on the loan amounted to $11,712 as of December 31,
1999.
NOTE 6 - CONVERTIBLE NOTES PAYABLE
Prior to the Reorganization Agreement, United issued
convertible promissory notes amounting to $458,000 that bear
interest at 12% per annum. The maturity date of the notes (if
not converted prior to their due date) were as follows;
$100,000 due May 31, 1998 and the remaining $358,000 due in
six monthly installments commencing September 15, 1998.
Pursuant to the Reorganization Agreement, the Company assumed
$358,000 of such convertible promissory notes which were
subsequently converted into approximately 59,667 shares of the
Company's common stock as of December 31, 1998. The remaining
$100,000 notes were repaid during April 1999 by United. As of
December 31, 1999, United is in default of the accrued
interest related to all the notes which has been accrued.
Pursuant to the notes, United may be liable for de minimis
legal cost if there is any litigation in connection with the
default of the unpaid interest. Accrued interest on the notes
amounted to $36,545 as of December 31, 1999.
F-12
<PAGE> 29
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 7 - PROVISION FOR INCOME TAX
Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes
currently due plus deferred taxes related to differences
between the financial statement and tax bases of assets and
liabilities for financial statement and income tax reporting
purposes. Deferred tax assets and liabilities represent the
future tax return consequences of these temporary differences,
which will either be taxable or deductible in the year when
the assets or liabilities are recovered or settled.
Accordingly, measurement of the deferred tax assets and
liabilities attributable to the book-tax basis
differentials are computed at a rate of 34%
federal and 9% state pursuant to SFAS No. 109. The only
material tax effect of significant items comprising the
Company's current deferred tax assets as of December 31, 1999
is the Company's net operating losses "NOL"s" which amounted
to approximately $430,000 as of December 31, 1999. The
deferred tax asset associated with the Company's NOL's
amounted to approximately $170,000 as of December 31, 1999.
In accordance with SFAS 109, the Company has recorded a 100%
valuation allowance for such deferred tax asset since
management could not determine that it was "more likely than
not" that the deferred tax asset would be realized in the
future. The Company's NOL's will expire between 2013 and 2014
if not utilized prior.
The Company and its subsidiary file separate tax returns for
federal and state tax purposes. As such, income tax is based
on the separate taxable income or loss of each entity.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
a) Advertising and Corporate Relations Agreements
On March 13, 1998, United entered into agreements for public
relations and advertising services with Gulf Atlantic
Publishing, Inc ("Gulf Atlantic") and Corporate Relations
Group, Inc. ("Corporate Relations"). The agreements were for a
period of twelve months and included certain marketing
products such as mailings, press releases and posting to
websites, along with distributing due diligence packages to
all inquiring brokers and setting up shows for advertising
purposes. As consideration for such services, the Company
agreed to sell 109,560 free trading shares of common stock for
a total of $30,000. (See Note 8(c) below for pending
litigation).
b) Introduction Agreement
On March 17, 1998, United entered into an Introduction
Agreement with Select Media Ltd. Corp. ("Select Media") in
connection with its efforts to obtain loans to fund United's
operations. The agreement stipulated that Select Media would
provide United with names and introductions for the purpose of
allowing United to solicit such individuals for loans.
F-13
<PAGE> 30
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 8 - COMMITMENTS AND CONTINGENCIES (Cont'd)
As consideration for such introductions, United agreed to pay
Select Media 15% of the amounts borrowed by United and one
warrant to purchase stock of the Company for each $1 of funds
loaned to United. (See Note 8(c) below for pending
litigation).
c) Pending litigation
During 1998, the Company's previous transfer agent issued
approximately an aggregate of 677,000 shares of common stock
to the parties discussed in notes 8(a) and 8(b). The Company,
during August 1999, 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 of stock. The Company
contended that the shares held by these individuals/entities
were wrongfully issued. As of December 31, 1999, the shares
are not included as outstanding in the Company's financial
statements since management contends that the related
services discussed in notes 8(a) were not fulfilled and no
funds were received related to note 8(b). Subsequent to year
end, the Company reached a potential settlement whereby the
Company agreed to pay approximately $68,000 to such parties.
Upon such payment, the Company will cancel the shares of
common stock currently being held by the parties.
Accordingly, the Company has recorded an accrued expense of
$68,000 and a charge to operations which is included in
selling, general and administrative expense.
d) Investment in affiliate at Cost
The Company has 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 as reaches an expected revenue level that will provide it
with self funding. As of December 31, 1999, the Company and
United have invested $1,796,032 in the LLC.
NOTE 9 - STOCKHOLDER'S EQUITY
a) Reorganization
The Company, pursuant to the Reorganization Agreement i)
cancelled 433,333 shares of common stock representing a
portion of shares held by its former officers, ii) accepted
resignations from its former officers, iii) issued 377,778
shares to United's sole stockholder which represented 48.6% of
the common stock outstanding after the cancellation of the
433,333 shares, and, iv) elected United's previous sole
stockholder as an officer. Accordingly, United became a wholly
owned subsidiary in connection with such capital transaction
whereby United contributed its common stock for the net assets
of the Company followed by immediately a recapitalization of
the Company.
F-14
<PAGE> 31
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 9 - STOCKHOLDER'S EQUITY (Cont'd)
Reorganization (cont'd)
In June 1998, prior to the Reorganization Agreement, United
issued convertible promissory notes amounting to $458,000 that
bear interest at 12% per annum. The maturity date of the notes
(if not converted prior to their due date) were as follows;
$100,000 due May 31, 1998 and the remaining $358,000 due in
six monthly installments commencing September 15, 1998.
Pursuant to the Reorganization Agreement, the Company assumed
$358,000 of such convertible promissory notes which were
subsequently converted into approximately 59,667 shares of
the Company's common stock. The remaining $100,000 notes were
repaid during April 1999 by United. As of December 31, 1999,
the Company is in default for the accrued interest related to
all the notes which amounted to $36,545.
Pursuant to the notes, the Company may be liable for de
minimis legal cost if there is any litigation in connection
with the default of the unpaid interest.
Lastly, in connection with such convertible promissory notes,
the Company issued a total of 102,667 warrants which allow the
holders to purchase 102,667 shares of the Company's common
stock at $1 per share through June 2000.
b) Limited Offering Memorandum
During August 1998, the Company commenced a Limited Offering
Memorandum (the "Offering") pursuant to Rule 504 of Regulation
D promulgated under the Securities Act of 1933. The Company
offered up to 166,667 shares of its common stock at $6 per
share. The minimum purchase amount per investor was $10,000.
As of December 31, 1998 the Company sold 18,334 shares of
common stock yielding net proceeds after certain offering
costs of $102,017. In addition, as discussed in Note 9(a), the
Company issued 59,667 shares of its common stock pursuant the
Offering upon the assumption and conversion of United's
convertible note payables amounting to $358,000.
Pursuant to an addendum to the offering, during December 1998,
the Company sold an additional 566,667 shares of its common
stock to certain investors for an aggregate consideration of
$287,300.
c) Issuance of common stock for services
During October 1998, the Company issued 8,333 shares to a
consultant of the Company in lieu of consideration for
consulting services. Accordingly, in connection with the
issuance of such shares, the Company recorded consulting
expense amounting to $33,500.
F-15
<PAGE> 32
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 9 - STOCKHOLDER'S EQUITY (Cont'd)
Issuance of common stock for services (cont'd)
During the year ended December 31, 1999, the Company issued an
aggregate of 220,000 shares of its common stock in
consideration of legal fees and marketing services.
Accordingly, in connection with such issuances, the Company
recorded legal fees and marketing expenses of $100,000 and
$10,000, respectively.
d) Sale of Unregistered Common Stock
During August 1999, the Company sold 1,100,000 restricted
shares of its common stock for $550,000. Commissions related
to this sale were as follows: the Company issued an additional
550,000 common shares and paid $44,000, accordingly, the
Company netted $506,000.
e) Warrants
As of December 31, 1999, the Company has outstanding a total
of 102,667 warrants which allow the holders to purchase
102,667 shares of the Company's common stock at $1 per share
through June 2000.
NOTE 10 - REDEEMABLE 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. 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.
At any time after December 31, 2001, the Company, at its
option, may redeem the whole of, or from time to time may
redeem any part of the preferred stock by paying in cash
$14.70 per share in addition to all accrued and unpaid
dividends.
Lastly, such preferred shares shall be convertible 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.
F-16
<PAGE> 33
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 11 - 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 for consideration for performing telemarketing services for
the LLC, the LLC will pay United an hourly rate for its
telemarketing services. For the years ended December 31, 1999
and 1998, United generated telemarketing income amounting to
$132,240 and $61,210, respectively.
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 years ended December 31,1999 and 1998,
United generated loan processing fee income amounting to
$64,800 and $60,000, respectively.
c) Rent Expense
For the years ended December 31, 1999 and 1998, pursuant to
the Telemarketing and Processing Agreement, United paid
$130,000 and $65,000, respectively to the LLC for rent in
connection with the space utilized in performing telemarketing
and processing services.
d) Due to related parties
The amount due to related parties as of December 31, 1999
amounting to $70,554 is an over advance from the LLC in
connection with the reimbursement to United for telemarketing
and processing services.
F-17
<PAGE> 34
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 12 - PRO FORMA FINANCIAL STATEMENTS
The following pro forma information presents in a condensed
format the Company's balance sheet as of December 31, 1999 and
statement of operations for the years ended December 31, 1999
and 1998 as if the acquisition of the LLC by United was
consummated and considered in effect as of January 1, 1998:
<TABLE>
<CAPTION>
Pro forma
balance sheet at
December 31, 1999
-----------------
<S> <C>
Total assets $1,461,898
==========
Total liabilities $1,350,788
==========
Total stockholders' equity $ 111,110
==========
Pro forma Pro forma
Statement of operations Statement of operations
for the year ended for the year ended
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
Total income $ 531,778 $ 515,903
----------- ----------
Total expenses $ 1,745,386 $1,250,057
----------- ----------
Net loss $(1,213,608) (734,154)
----------- --------
</TABLE>
This pro forma information regarding the Company's balance
sheet and statements of operations is been presented for
disclosure purposes and does not purport to be indicative of
the Company's financial position and results of operations
which would have actually resulted had the acquisition of the
LLC occurred as of January 1, 1998.
F-18
<PAGE> 35
UNITED NATIONAL MORTGAGE LLC
(A LIMITED LIABILITY COMPANY)
FINANCIAL STATEMENTS
DECEMBER 31, 1999
F-19
<PAGE> 36
UNITED NATIONAL MORTGAGE LLC
(A LIMITED LIABILITY COMPANY)
FINANCIAL STATEMENTS
DECEMBER 31, 1999
CONTENTS
REFERENCE
Independent Auditors' Report
Balance Sheet EXHIBIT "A"
Statement of Income and Comprehensive Income EXHIBIT "B"
Statement of Members' Equity EXHIBIT "C"
Statement of Cash Flows EXHIBIT "D"
Notes to Financial Statements
F-20
<PAGE> 37
INDEPENDENT AUDITORS' REPORT
The Members
United National Mortgage LLC
HUD TITLE II - LOAN CORRESPONDENT - ID#12378-0000-1
We have audited the accompanying balance sheet of United National Mortgage
LLC as of December 31, 1999, and the related statements of income, members'
equity and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards and Government Auditing Standards, issued by the Comptroller General
of the United States. These standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of United National Mortgage LLC
as of December 31, 1999, and the results of its operations and cash flows for
the year then ended in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the financial
statements taken as a whole. The computation of adjusted net worth included in
this report is presented for the purpose of additional analysis and is not a
required part of the financial statements of United National Mortgage LLC. Such
information has been subjected to the auditing procedures applied in the audit
of the financial statements and, in our opinion, is fairly stated in all
material respects in relation to the financial statements taken as a whole.
HIRSHFIELD AND KANTOR
Melville, New York
March 22, 2000
F-21
<PAGE> 38
The Members
United National Mortgage LLC
We have audited the accompanying balance sheet of United National Mortgage
LLC as of December 31, 1999, and the related statements of income, members'
equity and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of United National Mortgage LLC
as of December 31, 1999, and results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.
HIRSHFIELD AND KANTOR
Melville, New York
March 22, 2000
F-22
<PAGE> 39
UNITED NATIONAL MORTGAGE LLC
(A LIMITED LIABILITY COMPANY)
BALANCE SHEET
DECEMBER 31, 1999
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS
Cash and cash equivalents $ 327,051
Investment in marketable securities 833
Mortgages receivable -- net of unearned discount of $11,345 597,105
Other receivables 8,759
Due from affiliates 70,554
Prepaid expenses 20,607
----------
Total current assets 1,024,909
Property, plant and equipment -- at cost 489,004
Investment in rental real estate -- net 14,459
Security deposits 3,830
----------
$1,532,202
==========
</TABLE>
EXHIBIT "A"
Page 1 of 2
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE> 40
UNITED NATIONAL MORTGAGE LLC
(A LIMITED LIABILITY COMPANY)
BALANCE SHEET
DECEMBER 31, 1999
LIABILITIES AND MEMBERS' EQUITY
<TABLE>
<S> <C> <C>
CURRENT LIABILITIES
Warehouse note payable -- secured by mortgage receivable $ 607,140
Current maturities on long-term debt 72,799
Payroll taxes payable 1,969
Customers' deposits in excess of advances 7,464
Accrued expenses -- salaries and commissions 6,866
-- salaries and commissions - branch managers 500
-- interest 4,146
-- other 172,691
----------
Total current liabilities 873,575
Long-term debt -- net of current maturities
Capitalized leases payable -- secured by telephone
system and office equipment 5,495
Mortgage payable -- secured by land and building 261,866
MEMBERS' EQUITY
Members' equity $ 395,645
Accumulated other comprehensive loss (4,379) 391,266
---------- ----------
$1,532,202
==========
</TABLE>
EXHIBIT "A"
Page 2 of 2
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE> 41
UNITED NATIONAL MORTGAGE LLC
(A LIMITED LIABILITY COMPANY)
STATEMENT OF INCOME AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
Gain on sales of mortgages and brokerage income -- corporate operations $ 237,841
Gain on sales of mortgages and brokerage income -- branch operations 183,845
Interest income 91,630
-----------
513,316
Operating expenses
Warehouse interest $ 109,955
Operating expenses 1,400,004 1,509,959
----------- -----------
LOSS FROM OPERATIONS (996,643)
Other income (expense)
Realized gain on marketable securities 1,354
Interest and dividend income 8,378
Interest expense -- other (5,921)
Income from rental operations 8,730 12,541
----------- -----------
NET LOSS (984,102)
Other comprehensive loss:
Unrealized loss on securities:
Unrealized holding loss arising during the year (174)
Less: reclassification adjustment for gains included
in net loss (3,526)
-----------
COMPREHENSIVE LOSS $ (987,802)
===========
</TABLE>
EXHIBIT "B"
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE> 42
UNITED NATIONAL MORTGAGE LLC
(A LIMITED LIABILITY COMPANY)
STATEMENT OF MEMBERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
MEMBERS' COMPREHENSIVE COMPREHENSIVE
EQUITY INCOME(LOSS) TOTAL INCOME (LOSS)
<S> <C> <C> <C> <C>
Balance -- January 1, 1999 $ 299,800 $ (679) $ 299,121 $ -0-
Contribution by member 1,105,032 1,105,032
Net loss (984,102) (984,102)
Other comprehensive income (loss)
Unrealized loss on securities, net
of reclassification adjustment (3,700) (3,700)
-----------
Comprehensive loss $ (3,700)
===========
Distribution to member (25,085) (25,085)
----------- ----------- -----------
Balance -- December 31, 1999 $ 395,645 $ (4,379) $ 391,266
=========== =========== ===========
</TABLE>
EXHIBIT "C"
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE> 43
UNITED NATIONAL MORTGAGE LLC
(A LIMITED LIABILITY COMPANY)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (984,102)
Adjustments to reconcile net loss to net
cash provided by operating activities
Depreciation and amortization on property, plant
and equipment $ 34,736
Depreciation on rental property 2,363
Realized gain on marketable securities (1,354)
Changes in operating assets and liabilities
Decrease in mortgage receivable 1,084,027
Decrease in other receivables 8,217
Decrease in accrued interest receivable 2,995
Decrease in prepaid expenses 10,780
Increase in customers' deposits 5,493
Increase in payroll taxes 1,969
Increase in accrued expenses 32,656 1,181,882
----------- -----------
Net cash provided by operating activities
(Forwarded) 197,780
INVESTING ACTIVITIES
Purchase of marketable securities $ (37,807)
Proceeds from the sale and redemption of
marketable securities 190,059
Purchase of property, plant and equipment (16,532)
Increase in amount due from affiliates (69,051)
-----------
Net cash provided by investing activities
(Forwarded) 66,669
</TABLE>
EXHIBIT "D"
Page 1 of 2
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE> 44
UNITED NATIONAL MORTGAGE LLC
(A LIMITED LIABILITY COMPANY)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C>
Net cash provided by operating activities
(Brought forward) $ 197,780
Net cash provided by investing activities
(Brought forward) 66,669
FINANCING ACTIVITIES
Decrease in note payable secured
by mortgage receivable $(1,096,786)
Repayment of long-term debt (68,141)
Repayment of mortgage on rental property (7,118)
Repayment of loans payable -- other (6,738)
Contribution by member 1,105,032
Distribution to member (25,085)
-----------
Net cash used for financing activities (98,836)
-----------
Net increase in cash 165,613
Cash and cash equivalents at beginning of year 161,438
-----------
Cash and cash equivalents at end of year $ 327,051
===========
</TABLE>
SUPPLEMENTARY INFORMATION
CUSTOMERS' DEPOSITS -- Customers' deposits are assumed to be debts that are
settled within 90 days.
WAREHOUSE NOTES PAYABLE -- These borrowings are considered to be individual
loans that are secured by individual mortgages, and are expected to be repaid
within three months.
FILING FEES AND INTEREST PAID -- During the year, the Company paid a total of
$4,202 for filing fees. Interest paid during the year was $170,171, which
consisted of warehouse interest expense and interest on borrowings.
EXHIBIT "D"
Page 2 of 2
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE> 45
UNITED NATIONAL MORTGAGE LLC
(A LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
BACKGROUND INFORMATION
United National Mortgage LLC is a licensed mortgage banker in thirteen states
with the predominant portion of business conducted in the southern New York
area. In addition, the Company is a HUD-Approved Title II Nonsupervised Loan
Correspondent. The Company primarily originates conforming conventional loans,
and sells those loans to investors, servicing released.
BUSINESS TRENDS
Since inception, United National Mortgage LLC has incurred substantial losses
and has continued to be dependent upon additional capital contributions. At the
end of 1999 management has embarked on an extensive restructuring program, which
began with the hiring of a new CEO with many years of experience in mortgage
banking. In order to increase revenues the Company has added experienced loan
officers and expanded the loan products available. This has led to an increase
in volume of applications taken. The Company has also closely examined costs
across the board in an effort to reduce unnecessary operating expenditures.
United has closed unprofitable or marginally profitable branch offices and has
reevaluated job functions and staffing levels to increase employee efficiency.
Management believes that this restructuring will reverse the trend of losses the
Company has sustained.
SUMMARY OF ACCOUNTING POLICIES
MORTGAGES RECEIVABLE - Mortgages receivable (net of the unearned discounts) are
carried at the lower of cost or market on the aggregate basis.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are carried at
cost. Depreciation and amortization is computed using the straight-line method
over the useful life of the assets. The useful life of the furniture,
capitalized leased equipment, office equipment and computers is five to seven
years. The rental property, building and building improvements are depreciated
over thirty-nine years.
INCOME TAXES - The members have elected to be taxed as a partnership whereby the
Company's federal tax burden or benefits are passed on to the members. This
election has also been made for New York State purposes.
F-29
<PAGE> 46
UNITED NATIONAL MORTGAGE LLC
(A LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
COMPREHENSIVE INCOME - Comprehensive income includes net income and all other
changes in equity during the year except those resulting from contributions
and/or distributions to and from the shareholder. Other comprehensive income
includes revenues, expenses, gains and losses that are excluded from net
earnings under generally accepted accounting principles. Accumulated other
comprehensive income for the corporation consists solely of unrealized holding
gains or losses on available-for-sale securities.
COMMITMENT FEES - Commitment fees paid to various lending institutions are
applied against discounts in the ratio of the commitments used to the total
commitment. When the commitment expires or is deemed to be unusable, any
remaining unexpensed portion of the fee is written off.
USE OF ACCOUNTING ESTIMATES - Management uses estimates and assumptions in
preparing these financial statements in accordance with generally accepted
accounting principles. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses. Actual results could vary
from the estimates that were used.
REVENUE RECOGNITION - Revenue from both "The Retail Origination Division" and
"The Wholesale Division" will be recognized upon loan sale to the investor.
BRANCH OFFICE OPERATIONS - All branch managers including net branch managers
will be employees of the Company. For net branches, in states where permissible,
net branch managers will be contractually obligated to pay the expenses of the
branch. In states where not permissible, the Company will pay these expenses
directly. All revenue earned and related expenses by the branches of the Company
will be reflected in the statement of operations of the Company.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include time deposits, certificates of deposit, money
market funds and all highly liquid debt instruments with original maturities of
three months or less.
The Company maintains cash balances in several banks. Accounts at each of these
institutions are insured by the Federal Deposit Insurance Corporation up to
$100,000. The Company's accounts at these institutions may, at times, exceed the
federally insured limits. $968 of funds are deposited into mutual fund money
market accounts that are not FDIC insured.
F-30
<PAGE> 47
UNITED NATIONAL MORTGAGE LLC
(A LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of the Company's mortgage receivable held for sale is
$601,600. The carrying amount for all other financial instruments approximates
fair value.
OTHER RECEIVABLES
Other receivables include $8,359 of loan closing proceeds.
INVESTMENT IN MARKETABLE SECURITIES
The Company has investments in various publicly traded stocks and well-known
mutual funds that are readily salable and are available for sale. During the
current year, the Company realized interest and dividend income of $8,378 and a
gain on the sale of securities of $1,354. As required under FASB #115, United
National wrote down the value of these securities to its market value.
PROPERTY, PLANT AND EQUIPMENT
The property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
OWNED LEASED TOTAL
<S> <C> <C> <C>
Office furniture and equipment $ 51,239 $ 96,307 $147,546
Land 55,500 55,500
Building and improvements 347,551 347,551
-------- -------- --------
454,290 96,307 550,597
Less accumulated depreciation and amortization 32,701 28,892 61,593
-------- -------- --------
$421,589 $ 67,415 $489,004
======== ======== ========
</TABLE>
During the current year the total charges to income for depreciation and
amortization of this property, plant and equipment were $34,736.
INVESTMENT IN RENTAL REAL ESTATE
The company owns a parcel of rental real estate in Newburgh, New York that has a
fair value of $105,000. This property is currently subject to a $87,394 mortgage
that is secured by the property and all of the Company's furniture, fixtures and
equipment. The mortgage has 98 remaining monthly installments of $1,240
inclusive of interest at 10% per annum.
F-31
<PAGE> 48
UNITED NATIONAL MORTGAGE LLC
(A LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
INVESTMENT IN RENTAL REAL ESTATE (CONTINUED)
This real estate was rented to a party deemed to be related (see note "RELATED
PARTY"). During the current year, $2,363 of depreciation was taken on the rental
real estate.
WAREHOUSE LINES-OF-CREDIT
United National maintains warehouse lines-of-credit with two financial
institutions. Up to $12,000,000 of funds, secured by owned mortgages held for
sale, are available to be advanced to the Company. These borrowing lines are
subject to interest rates at a slight premium over the prime rate.
LONG-TERM DEBT
The Company has a mortgage with 38 remaining monthly installments of $3,707,
inclusive of interest at 10% per annum that is secured by the land and building.
The note matures February 2003. Any principal balance owed on that date is due
in full.
The leases payable represent amounts due on capitalized leases of a telephone
system and office equipment.
<TABLE>
<S> <C>
Total due for year ending December, 2000 $35,571
Total due for year ending December, 2001 5,618
-------
Total minimum lease payments 41,189
Less amounts representing interest 2,373
-------
Present value of net minimum lease payments 38,816
Current portion 33,321
-------
Long-term portion $ 5,495
=======
</TABLE>
ESCROW
Approximately $3,989 is being held in trust in regard to escrows on unsold
loans. This cash and its related liability are not reflected on the balance
sheet.
F-32
<PAGE> 49
UNITED NATIONAL MORTGAGE LLC
(A LIMITED LIABILITY COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
BUILDING CARRYING COSTS AND LEASES
The Company utilizes the building disclosed in "Property, Plant and Equipment"
as its main office. In lieu of rent, the Company incurred carrying costs that
included real estate taxes and interest from the mortgage on the property.
The Company leases various space on a month to month basis that is utilized for
branch offices. The current charge in regard to these offices is $9,881 per
month.
Building carrying costs and rent expense for the period was $71,998.
The Company is liable under the terms of various operating leases with payments
totaling approximately $1,100 per month for remaining periods varying from 7 to
24 months.
RELATED PARTY
United National recognized net rental income of $8,730 for rental of a portion
of the investment real estate property and the main office building by an entity
which is a member of the Company. The Company incurred allocable costs of
$121,270, which has been offset against the gross rental income of $130,000.
The Company was charged $132,000 for telemarketing and $65,000 for processing
fees performed by this entity.
The Company was reimbursed $120,857 of payroll costs paid on behalf of this
entity.
COMMITMENTS
The Company has issued to applicants approximately $950,000 of commitments at
prevailing rates and approximately $110,000 at locked-in rates to originate
mortgage loans. These locked-in rate commitments, for which the Company receives
a fee (that is recognized when the loan closes or the commitment expires), are
usually issued for up to a three month period.
United National, in order to assure itself of a market place to sell its loans,
has agreements with investors who will accept all loans meeting certain investor
criteria, to deliver the loans at the rate prevailing at the time of delivery.
In order to insulate itself from the impact of interest rate fluctuations
regarding the locked-in commitments, the Company has obtained mandatory and best
efforts commitments from investors to accept delivery at predetermined interest
rates.
F-33
<PAGE> 50
UNITED NATIONAL MORTGAGE LLC
(A LIMITED LIABILITY COMPANY)
COMPUTATION OF ADJUSTED NET WORTH FOR APPROVAL AND
RECERTIFICATION OF NONSUPERVISED LOAN CORRESPONDENTS
DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
Home Office (no branch offices with approval) $ 50,000
NET WORTH REQUIRED $ 50,000
========
Members' Equity per Balance Sheet $391,266
Less: unacceptable asset
Due from affiliates 70,554
--------
ADJUSTED NET WORTH FOR HUD REQUIREMENT PURPOSES $320,712
========
Adjusted Net Worth ABOVE Amount Required $270,712
========
</TABLE>
F-34
<PAGE> 51
UNITED NATIONAL MORTGAGE LLC
(A LIMITED LIABILITY COMPANY)
COMPUTATION OF ADJUSTED NET WORTH TO DETERMINE COMPLIANCE
WITH NEW YORK STATE BANKING DEPARTMENT REGULATIONS
DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
NET WORTH REQUIRED $250,000
========
Members' Equity per Balance Sheet $391,266
Less: unacceptable asset
Due from affiliates 70,554
--------
ADJUSTED NET WORTH FOR NEW YORK STATE BANKING
DEPARTMENT REQUIREMENT PURPOSES $320,712
========
Adjusted Net Worth ABOVE Amount Required $ 70,712
========
</TABLE>
F-35
<PAGE> 52
UNITED NATIONAL MORTGAGE LLC
(A LIMITED LIABILITY COMPANY)
SCHEDULE OF OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C>
Officers' salaries $ 85,176
Office salaries 374,679
Payroll tax expense 57,491
Employee benefits 5,489
Commission expense 30,673
Processing fees 71,715
Automobile expense 22,929
Advertising 101,628
Property carrying costs and rent 71,998
Utilities 8,560
Office expense 66,518
Telephone 53,502
Computer costs 13,148
Postage and messenger fees 14,027
Insurance 26,525
Legal and professional fees 115,733
Depreciation and amortization 37,099
Filing fees and licenses 34,054
Equipment rental 14,571
Repairs and maintenance 15,238
Consulting fees 38,475
Marketing expense 132,279
New York State filing fees 4,527
Warehouse fees 3,970
----------
$1,400,004
==========
</TABLE>
F-36
<PAGE> 53
ITEM 8. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Massella, Tomaro & Co., LLP audited our financial statements for the calendar
years ended December 31, 1999 and December 31, 1998. There has been no change in
our accountants and there have been no disagreements with respect to any matter
of accounting principles or practices, financial statements disclosure or
auditing scope of procedure.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a)9 OF THE EXCHANGE ACT
Premier Mortgage Resources, Inc. consists of three separate entities, as
outlined below, and three levels of management.
1. Premier Mortgage Resources, Inc.; Donald Wilen, the sole shareholder of
United National, Inc., acquired operational control of Premier Mortgage
Resources, Inc. in July 1998, by exchanging his shares of United
National Inc for controlling shares of Premier Mortgage Resources, Inc.
2. United National, Inc. is now a wholly owned subsidiary of Premier
Mortgage Resources, Inc. It functions as a telemarketing resource,
soliciting new business for United National Mortgage, LLC. United
National, Inc. also processes customer files and contracts for United
National Mortgage, LLC.
3. United National Mortgage, LLC is managed as subsidiary of United
National, Inc., and operates as the mortgage banking division of
Premier Mortgage Resources, Inc. It is with this entity that we are
focusing our business expansion, although the legal transfer of
ownership is pending approval by the New York State Department of
Banking.
Directors and Executive Officers of Premier Mortgage Resources, Inc.
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Donald S. Wilen* 63 Executive Vice President, Director
Joseph A. Cilento 46 President, Chief Executive Officer,
Director
</TABLE>
Directors and Executive Officers of United National, Inc.
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Donald S. Wilen* 63 Executive Vice President, Director
Joseph A. Cilento 46 President, Chief Executive Officer
Director
</TABLE>
17
<PAGE> 54
Directors and Executive Officers of United National Mortgage, LLC.
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Donald S. Wilen* 63 Executive Vice President, Director
Joseph A. Cilento 46 President, Chief Executive Officer
Director
</TABLE>
*For the last fiscal year ended December 31, 1999, Donald S. Wilen served as CEO
and President through June, 1999. Joseph A. Cilento joined the Company in July
of 1999 and has since held the officer's positions of CEO and President.
DONALD S. WILEN is an Executive Vice President and Director of Premier Mortgage
Resources, Inc., an Executive Vice President and Director of United National,
Inc. and Managing Member and Director of United National.
Mortgage, LLC. He is an attorney and Certified Public Accountant, receiving his
B.S. in Accounting from Brooklyn College in 1958 and his C.P.A. certification in
1964. He is licensed as a C.P.A. in New York. In 1968, Mr. Wilen received an MBA
from Baruch College, and in 1978, he received a J.D. from Brooklyn Law School.
Since 1979, Mr. Wilen has been a member of the Bar of the State of New York.
Mr. Wilen oversees the operations of UNM. He coordinates and structures
strategic business alliances with brokerage firms, banks and mortgage companies
in conjunction with Mr. Cilento.
From 1983 to 1997, Mr. Wilen was a senior partner in the CPA firm Wilen, Klapper
& Glassman, and President of Tara Mortgage Inc. He has been a columnist for
NATIONAL MORTGAGE PRESS since 1997.
JOSEPH A. CILENTO is President, Chief Executive Officer and a Director of
Premier Mortgage Resources, Inc.; President, Chief Executive Officer and
Director of United National, Inc.; and President, Chief Executive Officer and
Director of United National Mortgage, Inc. He has served in these capacities
since November of 1999. Mr. Cilento is a Certified Public Accountant, receiving
a B.B.A. degree from Baruch College in 1975, and his C.P.A. certification in
1978. He is licensed as a C.P.A. in the state of New York.
Mr. Cilento was awarded the Certified Mortgage Banker designation by The
Mortgage Bankers Association in 1996. Mr. Cilento was an officer of Emigrant
Mortgage Corporation from 1997 to July of 1999. From 1987 to 1997, he was
President of his mortgage banking company, Home Funding, which he sold. Mr.
Cilento was Vice President of Finance for Merrill Lynch Realty from 1984 to
1987.
Mr. Cilento is responsible for overseeing all sales and marketing operations,
secondary markets and finance areas of the company.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT. During 1999, we were not
subject to these requirements, therefore there were no officers, directors or
ten percent beneficial owners that failed to timely file any Forms 3, 4 or 5.
18
<PAGE> 55
ITEM 10. EXECUTIVE COMPENSATION
Currently, our Directors are not compensated for their services, although their
expenses in attending meetings are reimbursed.
Compensation of Directors
We do not currently compensate our Directors for their services.
Compensation of Management
<TABLE>
<CAPTION>
Title 1999 1998 1997
----- ------ ---- ----
<S> <C> <C> <C> <C>
Donald Wilen* Director $ 6,500 -0- -0-
Joseph Cilento President, CEO $ 21,400 N/A N/A
</TABLE>
Mr. Cilento receives an annual salary of $107,000 from UNM.
Mr. Wilen receives an annual salary of $32,500 from UNM.
*For the last fiscal year ended December 31, 1999, Donald S. Wilen served as CEO
and President through June, 1999. Joseph A. Cilento joined the Company in July
of 1999 and has since held the officer's positions of CEO and President.
Stock Option Plan
We are completing an Incentive Stock Option Plan for employees and management,
and in that plan will allocate up to 2,000,000 shares of Common Stock for
issuances to employees and management. None of the named persons has received
stock options or other such non-cash compensation.
Employment Agreements
At this time, we do not have any employment agreements with our officers or
directors. Each Net Branch, however, signs a "Branch Agreement" which provides a
structure, salary and benefits much like an employment agreement. As of this
date, we have six Net Branches.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of March 24, 2000, information regarding the
beneficial ownership of shares of our Common Stock by each person known by us to
own five percent or more of the outstanding shares of Common Stock, by each of
our Officers, by each of our Directors, and by our Officers and Directors as a
group. On March 24, 2000 there were 4,786,128 shares issued and outstanding of
record, including the shares which are the subject of the litigation attempting
to cancel them.
19
<PAGE> 56
<TABLE>
<CAPTION>
SHARES OF
NAME & ADDRESS OF COMMON PERCENTAGE
BENEFICIAL OWNERS STOCK AS OF 3/24/00(1)
- ----------------- -------- ---------------
<S> <C> <C>
Donald S. Wilen 377,778 7.9%
208 Windsor Highway
New Windsor, NY 12553
Nicko Fillas 225,000 4.7%
c/o Glenn Michael Financial, Inc.
534 Broadhollow Road
Melville, New York 11747
Gulf Atlantic Publishing, Inc. 396,834(2) 8.3%
1947 Lee Road
Winter Park, FL 32789
Select Media, Inc. 166,667(2) 3.5%
4772 E. Michigan St., #7
Orlando, FL 32812
Seas Capital Management
Group, Inc.(3) 143,000 3.0%
c/o Ephraim Sobol
164 Madison Ave., 3rd Fl.
New York, NY 10016
Ephraim Sobol 293,000 6.1%
164 Madison Ave., 3rd Fl.
New York, NY 10016
Richard Rozzi 480,000(4) 10.0%
86 Pancake Hollow Road
Highland, NY 12528
All Executive Officers and Directors
as a group (1 person) 377,778 7.9%
</TABLE>
- ---------------------------------------------
(1) Based upon 4,786,128 shares issued and outstanding on March 24, 2000,
which total includes the shares subject to the litigation in which the
Company seeks to cancel such shares as well as 480,000 shares issuable
on conversion of Series 1999 and Series 2000 Preferred Convertible
Stock. This does not include Series 1999 Convertible Preferred
Stockholder's Warrants exercisable to purchase 380,000 shares of Common
Stock at an exercise price of $.50 per share (expiration date
12/31/04); nor does it include Series 2000 Convertible Preferred
Stockholder's Warrants exercisable to purchase 100,000 shares of Common
Stock at an exercise price of $.50 per share (expiration date February
28, 2005)(Both Series 1999 and Series 2000 Preferred Stockholder's
Warrants being issued to Richard Rozzi at the time of his purchases of
Convertible Preferred Stock on December 28, 1999 and February 27, 2000
respectively). This total also does not include 27,668 Common Stock
Purchase Warrants exercisable to purchase 27,668 shares of our Common
Stock
20
<PAGE> 57
at an exercise price of 6.00 per share exercisable according to the
following schedule:
<TABLE>
<CAPTION>
Name Warrants Expiration Date
---- -------- ---------------
<S> <C> <C>
Visual Company 8,334 6/5/00
Azucar Ltd. 11,000 6/3/00
Total Warrants 27,668
</TABLE>
(2) These shares are the subject of the litigation seeking to cancel them.
(3) Seas Capital Management Group, Inc. is owned by Ephraim Sobol and the
143,000 shares are also included in the 293,000 shares owned
beneficially by him.
(4) This represents shares issuable in the event of conversion of 380,000
shares of Series 1999 Convertible Preferred Stock and 100,000 shares of
Series 2000 Convertible Preferred Stock. This does not include Series
1999 Convertible Preferred Stockholder's Warrants exercisable to
purchase 380,000 shares of Common Stock at an exercise price of $.50
per share (expiration date 12/31/04); nor does it include Series 2000
Convertible Preferred Stockholder's Warrants exercisable to purchase
100,000 shares of Common Stock at an exercise price of $.50 per share
(expiration date February 28, 2005).
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 22, 1998, Donald S. Wilen, now the Company's President and Director,
agreed to exchange his ownership of United National, Inc. for 377,778
(post-split) shares of the Company's Common Stock, giving him operational
control. A written Plan of Reorganization was entered into on June 9, 1998,
providing for the exchange by Mr. Wilen of his 100 shares of capital stock of
United National, Inc. for the 377,338 (post-split) shares of the Company's
Common Stock in a tax-free stock-for-stock exchange under Section 358(a)(1)(B)
of the Internal Revenue Code. United National, Inc. is the owner of a 2%
interest in United National Mortgage, LLC, a mortgage banker. The other 98%
interest is owned by Donald S. Wilen who has agreed that, upon approval by the
New York State Department of Banking of the required licenses, he will transfer
such 98% interest without further payment.
On August 5, 1998, the Company commenced an offering of its Common Stock under
Rule 504 of Regulation D. The offering was of 1,000,000 shares. A total of
877,640 shares were issued (post 6:1 reverse stock split) in the offering for
total proceeds of $953,418.
On February 22, 1999, the Company declared a 6 to 1 reverse stock split
effective on April 12, 1999.
In August 1999 the Company commenced a private placement offering of its Common
Stock under Rule 505 of Regulation D. The offering was of 1,100,000 shares at a
price of $ .50 per share. The offering was fully subscribed.
In December, 1998 we amended the Rule 504 offering to change the offering price
to $.0845 per share. As a result of that offering, during December, 1998 and the
first quarter of 1999, we issued 787,807 shares (post-split) for total proceeds
of $399,418. This issuance was considered exempt under Section 3(b) of the
Securities Act and Rule 504 of Regulation D promulgated thereunder.
On or about March 31, 1999 the Company's then counsel authorized and directed
the issuance of 3,500,000 shares of the Company's Common Stock at an offering
price of $.001 per share, allegedly under Rule 504 of Regulation D. The
counsel's actions were not authorized or directed by the Company and the Company
has filed suit to cancel such issuances. On February 22, 1999 we authorized a 1
21
<PAGE> 58
for 6 reverse stock split for stockholders of record on April 12, 1999 and all
of the foregoing issuances have been stated on a pre-split basis.
On February 22, 1999 we authorized a 1 for 6 reverse stock split for
stockholders of record on April 12, 1999 and all of the foregoing issuances have
been stated on a pre-split basis.
In August 1999 we made an offering of 1,100,000 shares of our Common Stock to
approximately 15 accredited investors under Rule 505 of Regulation D at an
offering price of $0.50 per which was fully subscribed. This issuance was
considered exempt under Section 4(2) of the Securities Act, Section 3(b) of the
Securities Act and Rule 505 of Regulation D promulgated thereunder
As of September 30, 1999, we issued a total of 536,000 shares of our Common
Stock to various persons in payment for services in private placements. Of the
total, 50,000 shares were issued to an attorney in payment for legal services
valued at $25,000, and 486,000 shares of Common Stock were issued to 15
individuals for services as finders in the forgoing private placement. These
issuances were considered exempt under Section 4(2) of the Securities Act.
At various times between December 31, 1999 and February 28, 2000, an accredited
investor advanced funds to the Company totaling $480,000 and was issued 380,000
shares of Series 1999 Convertible Preferred Stock, and 100,000 shares of Series
2000 Convertible Preferred Stock for that principal sum. This issuance was
considered exempt from registration by reason of Section 4(2) of the Securities
Act.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
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
22
