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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
1934 For the quarter period ended 3/31/00
[ ] Transitional report under Section 13 or 15(d) of Exchange A
For the quarter period ended: (n/a)
Commission File number 0-27987
Premier Mortgage Resources, Inc.
(Name of Small Business Issuer in its charter)
Nevada 88-0343833
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
280 Windsor Highway New Windsor, NY 12553
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (914) 561-7770
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: 4,309,628
Transitional Small Business Disclosure Format (Check one) Yes[ ] No [x]
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TABLE OF CONTENTS
PART I FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
Item 1 Financial Statements 3
Item 2 Management's Discussion and Analysis or Plan of Operation 7
PART II OTHER INFORMATION
Item 1 Legal Proceedings 9
Item 2 Changes in Securities 10
Item 3 Default upon Senior Securities 10
Item 4 Submission of Matters to a Vote of Security Holders 10
Item 5 Other Information 10
Item 6 Exhibits and Reports on Form 8-K 11
</TABLE>
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ITEM I FINANCIAL STATEMENTS
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
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PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
Page
number
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<S> <C>
Consolidated balance sheets at March 31, 2000
(unaudited) and December 31, 1999 F-1
Consolidated statements of operations for the three months
ended March 31, 2000 and 1999 (unaudited) F-2
Consolidated statement of stockholders' equity for the three
months ended March 31, 2000 (unaudited) F-3
Consolidated statements of cash flows for the three months
ended March 31, 2000 and 1999 (unaudited) F-4
Notes to consolidated financial statements (unaudited) F-5 - F-11
</TABLE>
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PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
2000 December 31,
(unaudited) 1999
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 2,147 $ 250
----------- -----------
Total current assets 2,147 250
----------- -----------
Investment in affiliate, at cost 2,046,032 1,796,032
----------- -----------
Total assets $ 2,048,179 $ 1,796,282
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses $ 170,852 $ 159,852
Due to related parties 108,266 70,554
Note payable 50,000 50,000
----------- -----------
Total current liabilities 329,118 280,406
----------- -----------
Redeemable, cumulative preferred stock 630,000 380,000
----------- -----------
Commitments and contingencies (Note 6) -- --
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,
3,632,294 and 3,628,794 shares issued and outstanding, respectively 3,632 3,629
Additional paid-in capital 1,576,031 1,564,284
Accumulated deficit (490,602) (432,037)
----------- -----------
Total stockholders' equity 1,089,061 1,135,876
----------- -----------
Total liabilities and stockholders' equity $ 2,048,179 $ 1,796,282
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited)
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PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
March 31, March 31,
2000 1999
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<S> <C> <C>
Income- Related Party $ 9,000 $ 73,665
----------- -----------
Expenses:
Selling, general, and administrative expenses 18,690 49,241
Selling, general, and administrative expenses - related party 38,875 39,507
----------- -----------
Total expenses 57,565 88,748
----------- -----------
Loss from operations before interest expense and
provision for income taxes (48,565) (15,083)
Interest expense 2,000 1,500
----------- -----------
Loss before provision for income taxes (50,565) (16,583)
Provision for income taxes -- --
----------- -----------
Net (loss) (50,565) (16,583)
Other items of comprehensive income -- --
----------- -----------
Comprehensive net (loss) $ (50,565) $ (16,583)
=========== ===========
Basic:
Net (loss) $ (.01) $ (.01)
=========== ===========
Weighted average number of
common shares outstanding 3,630,544 1,428,188
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statement
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PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Additional Total
Common Stock paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1999 3,628,794 $3,629 $1,564,284 $(432,037) $1,135,876
Issuance of common stock in
lieu of consideration for
services rendered to the
company 3,500 3 1,747 -- 1,750
Officers' contribution -- -- 10,000 -- 10,000
Accrued dividends on convertible
redeemable preferred stock -- -- -- (8,000) (8,000)
Net loss for the three months
ended March 31, 2000 -- -- -- (50,565) (50,565)
--------- -------- ---------- ---------- ----------
Balances at March 31, 2000 3,632,294 $ 3,632 $1,576,031 $(490,602) $1,089,061
========= ======== ========== ========= ==========
</TABLE>
See accompanying notes to consolidated financial statement
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PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
March 31, March 31,
2000 1999
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $ (50,565) $ (16,583)
Adjustments to reconcile net (loss) to net
cash used for operating activities:
Amortization -- 72
Officers' contribution 10,000 --
Issuance of common stock for services 1,750 --
Increase (decrease) in:
Accrued expenses 3,000 2
--------------- ---------------
Net cash used for operating activities (35,815) (16,509)
--------------- ---------------
Cash flows from investing activities:
Investment in affiliate (250,000) (174,514)
--------------- ---------------
Net cash used for investing activities (250,000) (174,514)
--------------- ---------------
Cash flows from financing activities:
Proceeds from sale of preferred stock 250,000 --
Sale of common stock in connection with
private placement, net of costs -- 262,918
Advances from (to) related parties 37,712 (52,707)
--------------- ---------------
Net cash provided by financing activities 287,712 210,271
--------------- ---------------
Net increase in cash 1,897 19,248
Cash, beginning of period 250 2,053
--------------- ---------------
Cash, end of period $ 2,147 $ 21,301
=============== ===============
Supplemental disclosure of non-cash flow information:
Cash paid during the year for:
Interest $ -- $ --
=============== ===============
Income taxes $ -- $ --
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
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PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 1 - NATURE OF BUSINESS
The Company
Premier Mortgage Resources, Inc. (the "Company") was
incorporated in the State of Nevada on August 17, 1995 under
the name "Mortgage Resources, Inc." The name of the Company
was changed on August 20, 1997 to its current name. Until the
acquisition of United National, Inc. ("United") in June 1998,
the Company had no operations. The Company acquired United
during June 1998 in order to commence operations in the
mortgage banking industry.
Reorganization
During June 1998, pursuant to an Agreement and Plan of
Reorganization (the "Reorganization Agreement"), an officer
and shareholder received 377,778 then 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 March 31, 2000
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 March 31, 2000. The
Company currently has an option to purchase the remaining 98%
interest from this officer subject to the approval by New York
State Banking Department. The LLC is a licensed mortgage
banker in approximately 13 states which primarily originates
conforming conventional loans, and sells those
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PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 1 - NATURE OF BUSINESS (cont'd)
LLC (cont'd)
loans to investors, with servicing rights released. The intent
of the Company is to execute its option and have the LLC
become a wholly owned subsidiary in order to enter the
mortgage banking industry.
NOTE 2 - INTERIM RESULTS AND BASIS OF PRESENTATION
The unaudited financial statements as of March 31, 2000 and
for the three month periods ended March 31, 2000 and 1999 have
been prepared by us and are unaudited. In our opinion, the
unaudited financial statements have been prepared on the same
basis as the annual financial statements and reflect all
adjustments, which include only normal recurring adjustments,
necessary to present fairly the financial position as of March
31, 2000 and the results of our operations and cash flows for
the three month periods ended March 31, 2000 and 1999. The
financial data and other information disclosed in these notes
to the interim financial statements related to these periods
are unaudited. The results for the three month period ended
March 31, 2000 are not necessarily indicative of the results
to be expected for any subsequent quarter or the entire fiscal
year ending December 31, 2000. The balance sheet at December
31, 1999 has been derived from the audited financial
statements at that date.
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with a
generally accepted accounting principals have been condensed
or omitted pursuant to the Securities and Exchange
Commission's rules and regulations. It is suggested that these
unaudited financial statements be read in conjunction with our
audited financial statements and notes thereto for the year
ended December 31, 1999 as included in our report on Form
10-KSB.
NOTE 3 - INVESTMENT IN AFFILIATE, AT COST
On July 29, 1998, United entered into a LLC Interest
Acquisition Agreement (the "LLC Acquisition Agreement") with
the Company's former President whereby for an initial $508,000
it acquired a 1% interest in the LLC and the option to acquire
the remaining 99% interest in the LLC as follows; 1% based on
required capital by the LLC in order to remain in compliance
with its net capital requirements with various state banking
laws until it reaches its expected level of revenues
sufficient to maintain its capital requirements and the
remaining 98% (which is contingent upon obtaining approval
from the New York Banking Department) for nominal
consideration. As of March 31, 2000, United has a 2% interest
in the LLC and has invested an aggregate of $2,046,032 into
the LLC based on the above agreement.
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PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 4 - LOAN PAYABLE
During March 1998, an outside third party loaned United
$50,000 bearing interest at 12% per annum. The loan is due on
demand and no formal terms have been established. As of March
31, 2000, the loan remains unpaid. Accrued interest on the
loan amounted to $12,000 as of March 31, 2000.
NOTE 5 - CONVERTIBLE NOTES PAYABLE
Prior to the Reorganization Agreement, United issued
convertible promissory notes amounting to $458,000 that bears
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.
NOTE 6 - 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 6(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. 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 6(c) below for pending
litigation).
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PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 6 - COMMITMENTS AND CONTINGENCIES (cont'd)
c) Pending litigation
During 1998, the Company's previous transfer agent issued
approximately an aggregate of 677,000 shares of common stock
to parties discussed in notes 6(a) and 6(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 thereof. The Company
contended that such shares held by these individuals/entities
were wrongfully issued. As of March 31, 2000 such shares are
not included as outstanding in the Company's financial
statements since management contends that the related services
discussed in notes 6(a) were not fulfilled and no funds were
received related to note 6(b). During the first quarter, the
Company, based on various discussions with the various
individuals and entities, reached a potential settlement
whereby the Company agreed to pay approximately $69,000 for
estimated services provided by such entities. However,
subsequent matters came to the attention of the Company which
indicated a possible different course of action. Based upon
this, the Company withdrew its offer of settlement but
continues to consider alternate settlement possibilities. The
possibility of settling this matter for the $69,000 as accrued
as of December 31, 1999 which was included in accrued expenses
and as a charge to operations during 1999 is still one of the
alternatives being considered.
d) Investment in affiliate at cost
The Company has committed in 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 it reaches its expected revenue level thereby becoming
self funding. As of March 31, 2000, the Company has invested
$2,046,032 in the LLC.
NOTE 7 - STOCKHOLDER'S EQUITY
a) Issuance of common stock for services
During the three months ended March 31, 2000, the Company
issued an aggregate of 3,500 shares of its common stock in
consideration of professional fees. Accordingly, in connection
with such issuances, the Company recorded professional fees of
$1,750.
b) Warrants
As of March 31, 2000, 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.
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PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 8 - REDEEMABLE CONVERTIBLE PREFERRED STOCK
a) The 2000 Convertible Preferred Stock
On March 20, 2000, the Company sold 25,000 shares of preferred
stock to an investor at $10 per share or $250,000. 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, 2000 at the option of the holder at the lower of
$.33 per common share or the average of the bid and asked
closing prices for 20 consecutive trading days ending on the
day prior to conversion. Accrued and accumulated dividends
shall be convertible in the same manner.
b) The 1999 Convertible Preferred Stock
On December 27, 1999, the Company sold 38,000 shares of
preferred stock to an investor at $10 per share or $380,000.
The holder of such preferred stock shall be entitled to
receive a dividend of 8% or $.80 per share per annum. 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.
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PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 8 - REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONT'D)
b) The 1999 Convertible Preferred Stock (cont'd)
In connection with the Company's 1999 and 2000 convertible
preferred stock issuance, as of March 31, 2000 the Company
accrued approximately $8,000 in dividends pursuant to the
terms of the convertible preferred stock agreements.
NOTE 9 - 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 three months ended March 31,
2000 and 1999, United generated telemarketing income amounting
to $- 0 - and $62,665, 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 three months ended March 31, 2000 and 1999,
United generated loan processing fee income amounting to
$9,000 and $11,000, respectively.
c) Occupancy and Support Expenses
For the three months ended March 31, 2000 and 1999, pursuant
to the Telemarketing and Processing Agreement, United incurred
expenses of $38,875 and $39,507, respectively which it pays to
the LLC for rent and other support services in connection with
the space utilized in performing telemarketing and processing
services.
d) Due to related parties
The amount due to related parties as of March 31, 2000
amounting to $108,266 is an over advance from the LLC in
connection with the reimbursement to United for telemarketing
and processing services.
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PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 10 - PRO FORMA FINANCIAL STATEMENTS
The following pro forma information presents in a condensed
format the Company's balance sheet as of March 31, 2000 and
the statements of operations for the three months ended March
31, 2000 and 1999 as if the acquisition of the LLC by United
was consummated and considered in effect as of January 1,
1999:
<TABLE>
<CAPTION>
Pro forma
balance sheet at
March 31, 2000
<S> <C>
Total assets $ 1,053,652
===========
Total liabilities $ 1,647,805
===========
Total stockholders' (Deficiency) $ (594,153)
===========
</TABLE>
<TABLE>
<CAPTION>
Pro forma Pro forma
Statement of operations Statement of operations
for the three months for the three months
ended March 31, 2000 ended March 31, 1999
----------------------- -----------------------
<S> <C> <C>
Total income $ 84,799 $ 320,281
------------ -----------
Total expenses $ 415,809 $ 405,244
------------ -----------
Net loss $ (331,010) $ (84,963)
------------ -----------
</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, 1999.
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ITEM II MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
financial statements of 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
Premier Mortgage Resources, Inc. is organized to act as a holding company
responsible for raising funds for United National, Inc. and UNM. As a holding
company, Premier Mortgage Resources, Inc. through its wholly owned subsidiary
United National, Inc. provides certain staff functions to UNM, but has no
significant business operations of its own. All business operations are
conducted by UNM, which performs all line functions. We provide staff functions
to our subsidiaries, such as overall management, strategic direction,
financing, legal services, accounting and related services including cash
management and budgeting, marketing, and public relations/advertising.
We provide services and financing to our subsidiary, United National, Inc.,
which in turn, provides marketing and processing services to our other
currently 2% owned subsidiary, UNM. The functions of UNM is to offer mortgage
banking business operations.
Analysis of Premier Mortgage Resources, Inc.
The revenues of Premier Mortgage Resources, Inc. were $9,000 for the first
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quarter 2000, and $73,665 for first quarter 1999. The decrease in 2000 over 1999
is due in part to lower revenue billings to UNM by us for telemarketing and
processing services, and also due to lower payroll costs for processing services
that can be billed to UNM for reimbursement.
Total expenses for Premier Mortgage Resources, Inc. were $57,565 for first
quarter 2000. For the three months ending March 1999, total expenses were
$88,748. Selling, general and administrative expenses for 2000 decreased over
1999 due to a reduction of expenses associated with curtailed telemarketing
efforts.
In the first quarter 2000, through issuance of a convertible preferred stock,
the Company raised $250,000 in capital.
We believe that our marketing plan will have a positive impact on capital
resources and liquidity. As such, our reliance on capital contributions to fund
operating losses should dissipate in favor of positive cash flow, self-funding
operations. While there is no guarantee that these marketing plans, revenue
enhancement goals and acquisition strategies will be successful, we believe that
we have identified specific short term objectives that should impact cash flow
on a positive basis and restore profitability.
Analysis of United National, Inc.
Our first tier subsidiary, United National, Inc. 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
of UNM and thereby give the reader a more complete understanding of UNM's core
business.
Analysis of United National Mortgage, LLC ("UNM")
In the fourth quarter of 1999 the Company entered into a management
reorganization involving the appointment of Joseph A. Cilento, CPA, CMB, as new
President and Chief Executive Officer. The plan included the closing of marginal
and unprofitable branch offices, involuntary headcount reductions and
significantly curtailed discretionary expenditures. The Company focused on
recruitment and retention of qualified, commission based loan officers. The
Company believes that these efforts have produced increased sales and
origination activity, reduced overhead, improved gross pricing margins, and
enabled more efficient operations. The pipeline of mortgage loans in process has
increased since December 1999 and is expected to generate increased cash flow
for operations in the second quarter of 2000.
As discussed elsewhere in this document, our operations and potential for
success are largely based upon the outcome of operations for the core mortgage
banking business of UNM.
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UNM is engaged in the business of mortgage banking and is focused on expanding
its origination of residential mortgage loans.
UNM is in the residential and wholesale mortgage banking business. Its primary
focus 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 sub prime mortgage lenders. UNM originates loans and closes them in
UNM's name using funds from a warehouse line of credit. UNM does not close
loans unless one of our mortgage purchasers has given UNM an approval for the
loan and has agreed to purchase the loan. After the closing of the loan, a
package of documents is sent to the mortgage purchaser, the investor reviews
the documents and purchases the loan by wiring the funds to our warehouse bank.
The difference between the amounts we close the loan for and the amount the
investor pays the warehouse line constitutes part of the profit on that
particular transaction.
UNM's strategy is to expand its retail and wholesale loan origination business.
Increased loan origination will expand its revenue base. UNM intends to continue
to sell loans after closing to permanent investors and does not foresee our
maintenance of the mortgage's servicing rights. Servicing is a process whereby a
mortgage company collects the mortgage payment and any escrows for taxes and
insurance from borrowers. Companies that service loans make a small fee on each
transaction. UNM does not plan to enter the servicing business. UNM sells its
right to collect the payments to the permanent investor to whom the loans have
been sold. As a result, the company realizes immediate cash from the sale of
these mortgage-servicing rights. By selling the servicing rights, UNM does not
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.
UNM sells the mortgage loans it originates as well as their related servicing
rights to institutional buyers. There are no plans, at present, to hold onto
loans for investment purposes. UNM is dependent on the sale of these loans into
the secondary market in order to generate cash to support operations.
UNM's primary focus is to expand the network of regional sales offices that
employ commission based loan officers. These loan officers will solicit loan
applications by calling on established referral sources. The cost of the
regional sales offices will be borne by UNM. UNM attracts successful loan
officers into the Company in key markets through this retail branch situation,
all-working under the United National Mortgage corporate name. That network will
provide marketing, technology and business systems to United's sales office and
will enable UNM 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.
The traditional loan origination channels that UNM currently employs includes
18
<PAGE> 19
the following current objectives:
- - 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
SELECTED FINANCIAL DATA
Selected Summary Financial Data of United National Mortgage, LLC
<TABLE>
<CAPTION>
FIRST QUARTER ENDED:
March 31, 2000 March 31, 1999
<S> <C> <C>
Income Statement Data:
Mortgage Fee Income $ 83,617 $ 42,515
Selling, General and
Admin. Expenses $ 348,254 $ 121,945
(Loss) Before Income
Taxes $ (258,446) $ (69,945)
Net Loss
Comprehensive LOSS $ (258,446) $ (69,945)
Balance Sheet Data:
Cash & Cash Equivalents $ 139,596 $ 223,629
Mortgage Loans
Held for Sale, Net $ 189,000 $ 2,807,589
Total Assets $1,151,771 $ 3,882,464
Warehouse line of
Credit Payable $ 188,996 $ 2,644,336
Other Liabilities $ 607,956 $ 855,536
Total Stockholder Equity $ 362,818 $ 382,592
Operating Data:
Total Mortgage Originations $5,000,000 $ 2,500,000
</TABLE>
Revenue from the sale of mortgages and brokerage and ancillary income for the
first quarter ended March 31, 2000 and March 31, 1999 was $83,617 and $42,515,
respectively. These revenues are derived from origination fees, discount points;
service released premium and ancillary fee income from residential mortgage
transactions. Interest income was $14,181 and $10,490 for the periods ending
March 31, 2000 and March 31, 1999, respectively, representing interest income
from holding residential mortgage loans from the date of
19
<PAGE> 20
closing to purchase by permanent investors.
Operating expense including warehouse line of credit interest expense was
$356,244 for the quarter ending March 31, 2000, and $137,046 for the quarter
ending March 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. This is due to non-recurring
start up costs, limited operating history as well as certain reorganization
costs associated with discontinued branch offices, headcount reductions and
other expenses in the fourth quarter of 1999 designed to restore the Company to
profitability. Revenues from mortgage closings do not cover operating expenses
due to an insufficient number of mortgage closings to cover operating costs and
start up costs. There can be no guarantee that expected revenues for fiscal year
2000 will increase enough to cover operating costs or that the Company will add
enough closing volume to reach profitability.
Capital Resources and Liquidity
We have been highly dependent on capital raised through stock investors to fund
operations. On March 31, 2000, we had $139,596 cash on hand, which is not
expected to be sufficient to cover net operating expenses through the second
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.
It is expected that cash generated from operations during the second quarter of
2000 will increase significantly. This is due to a higher volume of loan
applications taken during the first quarter, which are expected to close in the
second quarter 2000. Cash generated from operations is expected to reduce the
Company's reliance on capital raised through stock offerings as the Company
becomes self-sufficient.
PART II
ITEM I LEGAL PROCEEDINGS
Except as described below we are not engaged in any pending legal proceedings.
We are not aware of any legal proceedings pending, threatened or contemplated,
against any of our officers and directors, respectively, in their capacities as
such.
On August 19, 1999, the Company filed a suit captioned "Premier Mortgage
Resources, Inc. v. Corporate Relations Group, Inc., Gulf Atlantic Publishing,
Inc., James M. Hall, Robert D. Hall, Select Media, Inc., Roberto Veitia, L. Van
Stillman and Olde Monmouth Stock Transfer Co., Inc." docketed to No. C199-7019,
Division 35 in the Circuit Court of the Ninth Judicial Circuit in and for Orange
County, Florida.
As against Olde Monmouth Stock Transfer Co., Inc., the Company's stock transfer
agent, the suit is solely to enjoin the transfer of the shares, and Olde
Monmouth is a nominal defendant only. The Court has enjoined the transfer
20
<PAGE> 21
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 2 CHANGES IN SECURITIES
On March 29, 2000, there were 3500 shares of Common Stock issued to two
individuals for accounting services. These issuances were considered exempt from
registration by reason of Section 4(2) of the Securities Act. The total number
of issued and outstanding shares of Common Stock as of March 31, 2000 was
4,309,628.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
There have been no defaults upon senior securities.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders in the first quarter of
2000.
ITEM 5 OTHER INFORMATION
None.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8K
(a)1. EXHIBIT INDEX
<TABLE>
<CAPTION>
No. Description of Exhibit
- --- ----------------------
<S> <C>
*3.1 Articles of Incorporation of Mortgage Resources, Inc., dated
August 17, 1995
</TABLE>
21
<PAGE> 22
<TABLE>
<S> <C>
*3.2 Articles of Amendment, dated October 16, 1995
*3.3 Annual List, changing corporate name to Premier Mortgage Resources,
Inc., dated August 20, 1997
*3.4 Certificate of Reinstatement, dated August 20, 1997
*3.5 Bylaws of Mortgage Resources, Inc.
*3.6 Articles of Incorporation of United National, Inc., dated
November 21, 1997
*3.7 Articles of Organization of United National Mortgage, LLC, dated
October 2, 1996
*3.8 Certificate Of Amendment to Articles of Organization of United
National Mortgage, LLC, dated February 3, 1998
*3.9 Operating Agreement of United National Mortgage, LLC, dated
July 1, 1996
*3.10 LLC Interest Acquisition Agreement
**3.11 Preferred Stock Designation, Series 1999
**3.12 Preferred Stock Designation, Series 2000
*10.1 Reorganization Agreement, dated July 2, 1998
*10.2 Agreement to Sell Stock, dated April 22, 1998
*10.3 Indemnification Agreement with Donald Wilen
*10.4 Indemnification Agreement with Joseph Cilento
*10.5 Sample Net Branch Agreement
*21.1 Subsidiaries of Registrant
*23.1 Consent of Auditors
27 Financial Data Schedule
</TABLE>
* Previously filed with Form 10-SB
** Previously filed with Form 10-KSB
22
<PAGE> 23
SIGNATURES
In accordance with requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Premier Mortgage Resources, Inc.
--------------------------------
(Registrant)
Date May 11, 2000 /s/ Joseph Cilento
- ----------------- -------------------------------
Joseph Cilento, President
/s/ Donald Wilen
--------------------------------
Donald Wilen, Director
23
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Balance
Sheet, Statement of operations, Statement of Cash Flows and Notes thereto
incorporated in Part I, Item 1 of this Form 10-QSB and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,147
<SECURITIES> 2,046,032
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,147
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,048,179
<CURRENT-LIABILITIES> 329,118
<BONDS> 0
3,632
630,000
<COMMON> 0
<OTHER-SE> 1,085,429
<TOTAL-LIABILITY-AND-EQUITY> 2,048,179
<SALES> 9,000
<TOTAL-REVENUES> 9,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 57,565
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,000
<INCOME-PRETAX> (50,565)
<INCOME-TAX> 0
<INCOME-CONTINUING> (50,565)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (50,565)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
