<PAGE> 1
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 6/30/00
[ ] Transitional report under Section 13 or 15(d) of Exchange A
For the quarter period ended: (n/a)
Commission File number 0-27987
Premier Mortgage Resources, Inc.
(Name of Small Business Issuer in its charter)
Nevada 88-0343833
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
280 Windsor Highway New Windsor, NY 12553
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (914) 561-7770
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date: 4,306,294 as of 6/30/00
Transitional Small Business Disclosure Format (Check one) Yes[ ] No [x]
1
<PAGE> 2
TABLE OF CONTENTS
PART I FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Item 1 Financial Statements 3
Item 2 Management's Discussion and Analysis or Plan of Operation 12
PART II OTHER INFORMATION
Item 1 Legal Proceedings 16
Item 2 Changes in Securities 17
Item 3 Default upon Senior Securities 17
Item 4 Submission of Matters to a Vote of Security Holders 17
Item 5 Other Information 17
Item 6 Exhibits and Reports on Form 8-K 17
</TABLE>
2
<PAGE> 3
ITEM I FINANCIAL STATEMENTS
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
3
<PAGE> 4
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
Page
number
-------------------
<S> <C>
Consolidated balance sheets at June 30, 2000
(unaudited) and December 31, 1999 F-1
Consolidated statements of operations for the three months
ended June 30, 2000 and 1999 (unaudited) F-2
Consolidated statements of operations for the six months
ended June 30, 2000 and 1999 (unaudited) F-3
Consolidated statement of stockholders' equity for the six
months ended June 30, 2000 (unaudited) F-4
Consolidated statements of cash flows for the six months
ended June 30, 2000 and 1999 (unaudited) F-5
Notes to consolidated financial statements (unaudited) F-6 - F-12
</TABLE>
4
<PAGE> 5
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30,
2000 December 31,
(unaudited) 1999
------------------- ------------------
<S> <C> <C>
Current assets:
Cash $ 1,344 $ 250
------------------- ------------------
Total current assets 1,344 250
------------------- ------------------
Investment in affiliate, at cost 2,246,032 1,796,032
------------------- ------------------
Total assets $ 2,247,376 $ 1,796,282
=================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accrued expenses $ 187,852 $ 159,852
Due to related parties 139,007 70,554
Note payable 50,000 50,000
------------------- ------------------
Total current liabilities 376,859 280,406
------------------- ------------------
Redeemable, cumulative preferred stock 850,000 380,000
------------------- ------------------
Commitments and contingencies (Note 5) - -
Stockholders' equity:
Preferred stock - $.001 par value, 10,000,000
shares authorized, -0- shares issued and
outstanding Common stock - $.001 par value,
50,000,000 shares authorized, 3,628,960 and
3,628,794 shares issued and outstanding,
respectively 3,629 3,629
Additional paid-in capital 1,566,034 1,564,284
Accumulated deficit (549,146) (432,037)
------------------- ------------------
Total stockholders' equity 1,020,517 1,135,876
------------------- ------------------
Total liabilities and stockholders' equity $ 2,247,376 $ 1,796,282
=================== ==================
</TABLE>
See accompanying notes to consolidated financial statements (unaudited)
F-1
<PAGE> 6
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
June 30, June 30,
2000 1999
------------------- --------------------
<S> <C> <C>
Income- Related Party $ 9,000 $ 78,375
------------------- --------------------
Expenses:
Selling, general, and administrative expenses 14,670 19,664
Selling, general, and administrative expenses - related party 38,875 79,251
------------------- --------------------
Total expenses 53,545 98,915
------------------- --------------------
Loss from operations before interest expense and
provision for income taxes (44,545) (20,540)
Interest expense - 4,757
------------------- --------------------
Loss before provision for income taxes (44,545) (25,297)
Provision for income taxes - -
------------------- --------------------
Net (loss) (44,545) (25,297)
Other items of comprehensive income - -
------------------- --------------------
Comprehensive net (loss) $ (44,545) $ (25,297)
=================== ====================
Basic:
Net (loss) $ (.01) $ (.02)
=================== ====================
Weighted average number of
common shares outstanding 3,630,544 1,535,533
=================== ====================
</TABLE>
See accompanying notes to consolidated financial statements (unaudited)
F-2
<PAGE> 7
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the six For the six
months ended months ended
June 30, June 30,
2000 1999
------------------- --------------------
<S> <C> <C>
Income- Related Party $ 18,000 $ 152,040
------------------- --------------------
Expenses:
Selling, general, and administrative expenses 33,359 33,805
Selling, general, and administrative expenses - related party 77,750 153,858
------------------- --------------------
Total expenses 111,109 187,663
------------------- --------------------
Loss from operations before interest expense and
provision for income taxes (93,109) (35,623)
Interest expense 2,000 6,257
------------------- --------------------
Loss before provision for income taxes (95,109) (41,880)
Provision for income taxes - -
------------------- --------------------
Net (loss) (95,109) (41,880)
Other items of comprehensive income - -
------------------- --------------------
Comprehensive net (loss) $ (95,109) $ (41,880)
=================== ====================
Basic:
Net (loss) $ (.03) $ (.03)
=================== ====================
Weighted average number of
common shares outstanding 3,630,544 1,340,722
=================== ====================
</TABLE>
See accompanying notes to consolidated financial statement (unaudited)
F-3
<PAGE> 8
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 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 - - 20,000 - 20,000
Accrued dividends on convertible
redeemable preferred stock - - - (22,000) (22,000)
Cancelled shares (3,334) (3) (19,997) - (20,000)
Net loss for the six months
ended June 30, 2000 - - - (95,109) (95,109)
------------- ------------ ------------ ------------- -------------
Balances at June 30, 2000 3,628,960 $ 3,629 $ 1,566,034 $ (549,146) $ 1,020,517
============= ============ ============ ============= =============
</TABLE>
See accompanying notes to consolidated financial statement (unaudited)
F-4
<PAGE> 9
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the six For the six
months ended months ended
June 30, June 30,
2000 1999
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $ (95,109) $ (41,880)
Adjustments to reconcile net (loss) to net
cash used for operating activities:
Amortization - 145
Officers' contribution 20,000 -
Issuance of common stock for services 1,750 -
Increase (decrease) in:
Accrued expenses 6,000 6,256
-------------- --------------
Net cash used for operating activities (67,359) (35,479)
--------------- ---------------
Cash flows from investing activities:
Investment in affiliate (450,000) (405,110)
--------------- ---------------
Net cash used for investing activities (450,000) (405,110)
--------------- ---------------
Cash flows from financing activities:
Proceeds from sale of preferred stock 470,000 -
Repayments of convertible notes payable - (100,000)
Sale of common stock in connection with
private placement, net of costs - 537,777
Redemption of common stock (20,000) -
Advances from (to) related parties 68,453 1,617
-------------- --------------
Net cash provided by financing activities 518,453 439,394
-------------- --------------
Net increase (decrease) in cash 1,094 (1,195)
Cash, beginning of period 250 2,053
-------------- --------------
Cash, end of period $ 1,344 $ 858
============== ==============
Supplemental disclosure of non-cash flow information:
Cash paid during the year for:
Interest
Income taxes $ - $ -
============== ===============
</TABLE>
See accompanying notes to consolidated financial statements (unaudited)
F-5
<PAGE> 10
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - NATURE OF BUSINESS
The Company
Premier Mortgage Resources, Inc. (the "Company") was incorporated in
the State of Nevada on August 17, 1995 under the name "Mortgage
Resources, Inc." The name of the Company was changed on August 20,
1997 to its current name. Until the acquisition of United National,
Inc. ("United") in June 1998, the Company had no operations. The
Company acquired United during June 1998 in order to commence
operations in the mortgage banking industry.
Reorganization
During June 1998, pursuant to an Agreement and Plan of
Reorganization (the "Reorganization Agreement"), an officer and
shareholder received 377,778 then representing 48.6% of the common
stock outstanding after the cancellation of 433,333 shares of the
former officers as discussed in the next paragraph, in consideration
for 100% of the shares of common stock of United. Such transaction
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 former officers of the Company, the former
sole shareholder of United was elected as President of the Company.
Accordingly, after such capital transaction, United became a wholly
owned subsidiary of the Company.
United
United was incorporated in the State of Nevada on November 21, 1997.
Since the date of incorporation and through August 1998, United had
limited operations. Since August 1998, United has performed loan
processing and telemarketing services for United National Mortgage,
LLC (the "LLC"). As of June 30, 2000, United owns approximately a 2%
interest in the LLC which is accounted for under the cost method.
LLC
The LLC is a limited liability company whereby an officer of the
Company owns approximately 98% as of June 30, 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 loans to investors with servicing rights released.
The intent of the Company is to execute its options and have the LLC
become a wholly owned subsidiary in order to enter the mortgage
banking industry.
Page 6 of 23
<PAGE> 11
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 - INTERIM RESULTS AND BASIS OF PRESENTATION
The unaudited financial statements as of June 30, 2000 and for the
three and six month periods ended June 30, 2000 and 1999 have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with instructions to Form
10-QSB and Items 303 and 301(B) of Regulation S-B. In 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 June 30,
2000 and the results of our operations and cash flows for the three
and six month periods ended June 30, 2000 and 1999. The financial
data and other information disclosed in these notes to the interim
financial statements related to these periods are unaudited. The
results for the three and six month periods ended June 30, 2000 are
not necessarily indicative of the results to be expected for any
subsequent quarter or the entire fiscal year ending December 31,
2000. The balance sheet at December 31, 1999 has been derived from
the audited financial statements at that date.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the
Securities and Exchange Commission's rules and regulations. It is
suggested that these unaudited financial statements be read in
conjunction with our audited financial statements and notes thereto
for the year ended December 31, 1999 as included in our report on
Form 10-KSB.
NOTE 3 - INVESTMENT IN AFFILIATE AT COST
On July 29, 1998, United entered into a LLC Interest Acquisition
Agreement (the "LLC Acquisition Agreement") with the Company's
former President whereby for an initial $508,000 it acquired a 1%
interest in the LLC and the option to acquire the remaining 99%
interest in the LLC as follows; 1% based on required capital by the
LLC in order to remain in compliance with its net capital
requirements with various state banking laws until it reaches its
expected level of revenues sufficient to maintain its capital
requirements and the remaining 98% (which is contingent upon
obtaining approval from the New York Banking Department) for nominal
consideration. As of June 30, 2000, United has a 2% interest in the
LLC and has invested an aggregate of $2,246,032 into the LLC based
on the above agreement.
NOTE 4 - LOAN PAYABLE
During March 1998, an outside third party loaned United $50,000
bearing interest at 12% per annum. The loan is due on demand and no
formal terms have been established. As of June 30, 2000, the loan
remains unpaid. Accrued interest on the loan amounted to $13,500 as
of June 30, 2000.
Page 7 of 23
<PAGE> 12
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5 - 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 5(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 5(c) below for pending
litigation).
c) Pending litigation
i) During 1998, the Company's previous transfer agent issued an
aggregate of approximately 677,000 shares of common stock to
parties discussed in notes 5(a) and 5(b). During August 1999,
the Company filed a formal complaint in the state of Florida
whereby the courts granted a temporary restraining order against
the individuals and/or entities which received such stock to
prohibit the transfer thereof. The Company contends that such
shares held by these individuals and/or entities were wrongfully
issued. As of June 30, 2000 such shares are not included as
outstanding in the Company's financial statements since
management contends that the related services discussed in notes
5(a) were not fulfilled and no funds were received related to
note 5(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 which was included in accrued expenses as of December
31, 1999 and as a charge to operations during 1999 is still one
of the alternatives being considered.
Page 8 of 23
<PAGE> 13
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5 - COMMITMENTS AND CONTINGENCIES (cont'd)
c) Pending litigation (cont'd)
ii) The LLC, which the Company currently owns 2%, is presently
seeking recovery in the amount of approximately $757,000 plus daily
interest and other costs from a law firm for which it had retained
to perform closings on its behalf. The LLC has retained legal
counsel to represent it in various legal remedies for the purpose of
obtaining recovery of these monies.
In the opinion of management, the LLC has not yet determined the
probability of the recovery of the monies, and accordingly, no
provision for the potential loss has been recorded in the
financial statements of LLC or the Company.
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 that it reaches its
expected revenue level thereby becoming self funding. As of June 30,
2000, the Company has invested $2,246,032 in the LLC.
NOTE 6 - STOCKHOLDER'S EQUITY
a) Issuance of common stock for services
During the six months ended June 30, 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 June 30, 2000, the Company has outstanding a total of 102,667
warrants which allow the holders to purchase 102,667 shares of the
Company's commons tock at $1 per share through June 2000.
Page 9 of 23
<PAGE> 14
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 7 - REDEEMABLE CONVERTIBLE PREFERRED STOCK
a) The 1999 Convertible Preferred Stock
On December 27, 1999, the Company sold 38,000 shares of preferred
stock to an investor at $10 per share or $380,000. The holder of
such preferred stock shall be entitled to receive a dividend of 8%
or $.80 per share per annum. 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 any part of, the preferred
stock by paying $14.70 per share in cash in addition to all accrued
and unpaid dividends.
Lastly, such preferred shares shall be convertible 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.
In connection with the Company's 1999 and 2000 convertible preferred
stock issuance, as of June 30, 2000, the Company accrued
approximately $22,000 in dividends pursuant to the terms of the
convertible preferred stock agreements.
b) 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 any part of, the preferred
stock by paying $14.70 per share in cash in addition to all accrued
and unpaid dividends.
Lastly, such preferred shares shall be convertible 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.
During the quarter ended June 30, 2000, the Company sold 22,000
shares of its preferred stock for total proceeds of $220,000. Such
preferred stock was sold under the same terms and conditions as the
March 20, 2000 issuance discussed above.
Page 10 of 23
<PAGE> 15
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 8 - RELATED PARTY TRANSACTIONS
a) Exclusive Telemarketing Agreement
On August 12, 1998, United entered into an Exclusive Telemarketing
Agreement ("Telemarketing Agreement") with the LLC whereby United is
the exclusive telemarketing agent for the LLC until it acquires the
remaining interest in the LLC. As 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 June 30, 2000 and 1999, United generated telemarketing income
amounting to $ - 0 - and $33,575, respectively and $ -0 - and
$96,240 for the six months ended June 30, 2000 and 1999,
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
June 30, 2000 and 1999, United generated loan processing fee income
amounting to $9,000 and $44,800, respectively, and $18,000 and
$55,800 for the six months ended June 30, 2000 and 1999,
respectively.
c) Occupancy and Support Expenses
For the three months ended June 30, 2000 and 1999, pursuant to the
Telemarketing and Processing Agreement, United incurred expenses of
$38,875 and $79,251, respectively which it pays to the LLC for rent
and other support services in connection with the space utilized in
performing telemarketing and processing services. For the six months
ended June 30, 2000 and 1999 those costs amounted to $77,750 and
$153,858, respectively.
d) Due to related parties
The amount due to related parties as of June 30, 2000 amounting to
$139,007 represents funds owed to the LLC in connection with the
agreements and arrangements discussed in Note 8(a), through 8(c).
Page 11 of 23
<PAGE> 16
PREMIER MORTGAGE RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 9 - PRO FORMA BALANCE SHEET
The following pro forma balance sheet presents in a condensed format
as of June 30, 2000, as if the acquisition of the LLC by United was
consummated and considered in effect as of January 1, 2000:
<TABLE>
<CAPTION>
Pro forma
balance sheet at
June 30, 2000
-------------
<S> <C>
Total assets $ 3,877,635
=======================
Total liabilities $ 4,827,030
=======================
Total stockholders' (deficiency) $ (949,395)
=======================
</TABLE>
This pro forma information regarding the Company's balance sheet has been
presented for disclosure purposes and does not purport to be indicative of the
Company's financial position which would have actually resulted had the
acquisition of the LLC occurred as of January 1, 2000.
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.
Page 12 of 23
<PAGE> 17
Analysis of Premier Mortgage Resources, Inc.
The revenues of Premier Mortgage Resources, Inc. were $9,000 for the second
quarter 2000, and $78,375 for second 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 $53,545 for second
quarter 2000. For the three months ending June 1999, total expenses were
$98,915. Selling, general and administrative expenses for 2000 decreased over
1999 due to a reduction of expenses associated with curtailed telemarketing
efforts.
In the second quarter 2000, through issuance of a convertible preferred stock,
the Company raised $220,000 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 fiscal year 2000.
As discussed elsewhere in this document, our operations and potential for
success are largely based upon the outcome of operations for the core mortgage
banking business of UNM.
Page 13 of 23
<PAGE> 18
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. In April 2000, UNM opened a new wholesale
mortgage sales branch in Schenectady, New York. This office originates
primarily FHA mortgages loan transactions which it attracts through its network
of wholesale mortgage brokers
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<PAGE> 19
The traditional loan origination channels that UNM currently employs includes
the following current objectives:
- Open new retail branch offices in selected markets
- Hire additional loan officers to solicit loans
- Increase consumer awareness through direct advertising and marketing
- Selectively consider and pursue strategic alliances with national-based
referral sources such as affinity groups, trade associations, etc.
- Strategic acquisitions of mortgage companies in the industry
SELECTED FINANCIAL DATA
Selected Summary Financial Data of United National Mortgage, LLC
<TABLE>
<CAPTION>
SECOND QUARTER ENDED: SIX MONTHS ENDED:
6/30/00 6/30/99 6/30/00 6/30/99
<S> <C> <C> <C> <C>
Income Statement Data:
Revenues $ 259,328 $ 468,089 $ 342,945 $ 520,089
Selling, General and
Admin. Expenses $ 518,491 $ 700,044 $ 866,745 $ 821,989
(Loss) Before Income
Taxes $ (259,163) $ (231,955) $ (523,800) $ (301,900)
Net Loss
Comprehensive LOSS $ (259,163) $ (231,955) $ (523,800) $ (301,900)
Balance Sheet Data:
Cash & Cash Equivalents $ 25,196 $ 73,024 $ 25,196 $ 73,024
Mortgage Loans
Held for Sale, Net $ 2,924,998 $1,056,616 $ 3,424,998 $1,056,616
Total Assets $ 3,877,634 $1,798,606 $ 3,877,634 $1,798,606
Warehouse line of
Credit Payable $ 2,884,425 $ 880,892 $ 2,884,425 $ 880,892
Other Liabilities $ 745,745 $ 527,522 $ 745,745 $ 527,522
Total Stockholder
Equity $ 247,464 $ 390,192 $ 247,464 $ 390,192
Operating Data:
Total Mortgage
Originations $10,338,000 $6,500,000 $15,338,000 $9,000,000
</TABLE>
Page 15 of 23
<PAGE> 20
Revenue from the sale of mortgages and brokerage and other income for the first
quarter ended June 30, 2000 and June 30, 1999 was $259,328 and $468,089,
respectively. These revenues are derived from origination fees, discount
points; service released premium and ancillary fee income from residential
mortgage transactions as well as interest income and rental income.
Operating expense including warehouse line of credit interest expense was
$518,491 for the quarter ending June 30, 2000, and $700,044 the quarter ending
June 30, 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 June 30, 2000, we had $25,196 cash on hand, which is not
expected to be sufficient to cover net operating expenses through the third
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 $4,000,200 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 third quarter of
2000 will increase significantly. This is due to a higher volume of loan
applications taken during the second quarter, which are expected to close in
the third 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 ounty, 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
Page 16 of 23
<PAGE> 21
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 2 CHANGES IN SECURITIES
During the second quarter of 2000, there were no changes in securities.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
There have been no defaults upon senior securities.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders in the second quarter of
2000.
ITEM 5 OTHER INFORMATION
Our subsidiary UNM, of which we own 2%, is presently seeking recovery in the
amount of approximately $757,000 plus daily interest and other costs from a law
firm that UNM retained to perform closings on its behalf. UNM has retained legal
counsel to represent it in various legal remedies for the purpose of obtaining
recovery of these monies.
In the opinion of management, UNM has not yet determined the probability of the
recovery of the monies, and accordingly, no provision for the potential loss
has been recorded in the financial statements of UNM or the Company.
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>
Page 17 of 23
<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
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)
Page 18 of 23
<PAGE> 23
Date August 18, 2000 /s/ Joseph Cilento
-------------------- -------------------------------
Joseph Cilento, President, CEO
/s/ Donald Wilen
--------------------------------
Donald Wilen, Director
Page 19 of 23
