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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12 (B) OR 12 (G) OF
THE SECURITIES ACT OF 1934
NATIONAL INSTITUTE COMPANIES OF AMERICA, INCORPORATED
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
NEW YORK 25-1796950
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
55 South Main Street, Second Floor
Washington, Pennsylvania 15301
(Address of Principal Executive Office) (Zip Code)
(724) 222-6656
(Issuer's Telephone Number)
Securities to be Registered under Section 12 (b) of the Act:
NONE
Securities to be Registered under Section 12 (g) of the Act:
Common Stock, $0.0001 par value
(Title of Class)
This Registration Statement contains forward-looking statements which involve
risks and uncertainties. When used in this Registration Statement, the words
"believe", "anticipate", "expects" and similar expressions are intended to
identify such forward-looking statements. The Company's actual results may
differ significantly from the results discussed in the forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The Company
undertakes no obligation to publicly release the results of any revisions to
these forward-looking statements which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
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PART I
ITEM 1 - DESCRIPTION OF BUSINESS
THE COMPANY
Regatta Group, Ltd. ("RGL") was incorporated in the State of New York on March
15, 1995. On July 31, 1996, RGL purchased via an exchange of stock (preferred
for common) Mortgage Bankers Holding Corporation ("MBHC"), an unrelated
Pennsylvania business corporation and subsequent to the acquisition, changed its
name to MBHC (the "registrant"). On July 31, 1996, the stockholders of the
registrant also approved the authorization of an additional 45 million shares of
common stock.
The former shareholders of MBHC received 2,000,000 shares of the registrant's
convertible preferred in exchange for all the outstanding capital stock of MBHC.
The registrant also executed stand still agreements with several common
stockholders (all who held in excess of 250,000 shares) whereby said common
shareholders could not sell, trade or transfer their common stock through
December 31, 1997.
The acquisition of MBHC was accounted for as a purchase and, accordingly, the
results of operations of MBHC for the period subsequent to July 31, 1996 were
included in the registrant's financial statements. The excess of liabilities
assumed over the fair value of assets acquired approximated $173,000 and has
been accounted for as goodwill.
On February 21, 1997, the registrant acquired all of the outstanding common
stock of Commonwealth Capital Investment Corporation ("CCIC") for the issuance
of 300,000 shares of preferred stock Series A. The acquisition of CCIC was
accounted for as a purchase and, accordingly, the results of operations of CCIC
for the period subsequent to July 31, 1996 were included in the registrant's
financial statements. The excess of liabilities assumed over the net fair value
of assets acquired was minimal.
During 1997 the registrant's licensed insurance agency subsidiary Pinnacle
Insurance and Investment Group, Inc. ("PIIG") began operation.
On May 1, 1998, the registrant acquired National Settlements, Inc. ("NSI") for
25,000 shares of common stock. NSI was a settlement company that closes
residential mortgage loans and issues title policies for several title insurance
companies.
On July 1, 1998, the registrant's sub-prime auto financing subsidiary
International Auto Funding Corp. ("IAF") began operation.
During 1998, there were changes in management, and the registrant redirected its
operating focus from mortgage banking activities to expanding its insurance and
estate planning services through cooperation and agreements with community
banks. Therefore, in 1998 CCIC, PIIG, IAF and IAF ceased operations and out of
existence documents were filed with the appropriate state authorities.
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On March 14, 1999, the registrant acquired all of the outstanding stock of
National Institute Companies of America, Inc. ("NICA"), including all of its
wholly owned subsidiaries, The acquisition of NICA was accounted for as a
purchase and, accordingly, the results of operations of NICA for the period
subsequent to March 14, 1999 were included in the registrant's financial
statements. The purchase price for NICA was approximately $780,000 to be paid in
the registrant's common stock in addition to the assumption of NICA's
liabilities. The registrant has yet to issue the stock as the seller has yet to
remit approximately $800,000 of gross revenues that the registrant believes is
due them.
In March 2000, the registrant instituted suit against James L. Burmeister, the
chairman of NICA prior to its acquisition by the registrant. The suit seeks
injunctive relief, damages and attorneys fees. On March 30, 2000, the Court
granted the registrant's request for a Temporary Restraining Order ("TRO"). On
April 10, 2000 the TRO was extended by the Court. A mediation between the
parties to the suit was unproductive and the case is on a standard course of
discovery and, ultimately, trial of the issues. The TRO has expired and the
registrant elected to forego its right to seek a Temporary Injunction since it
believes that any further damage which could be inflicted by the Defendant would
be offset by aggressive marketing and expansion of the registrant's business
plan.
It is the registrant's position that the acquisition is complete and that it
does not owe the seller any further consideration as called for in the Stock
Purchase Agreement ("Agreement") as the evidence in the aforementioned case will
substantiate the registrant's claims of fraud and fraudulent inducement by the
defendant. Specifically, the defendant grossly overstated the revenue stream
generated by NICA in order to induce the registrant into paying excessive
consideration for the acquisition.
The registrant's legal counsel on this matter is of the opinion that a high
degree of probability exists that the verdict will deny the Defendant any
further payments under the Agreement and that the Court will rule as a matter of
law that the stock of NICA was transferred to the registrant under the
Agreement. Additionally, the registrant's legal counsel is of the opinion that
the verdict will award the registrant damages against the Defendant for the
commissions that the Defendant wrongfully converted to his own use. (Refer to
Exhibit 99.2 for Opinion of Counsel Re; Mortgage Bankers Holding Corporation
Stock Purchase Agreement dated June 16, 2000.)
On January 5, 2000 the registrant changed its name to NICA from MBHC to better
reflect its on-going operations.
BUSINESS STRATEGY
The registrant directly and through its subsidiary, National Institute for
Estate Planning, Inc.("NIEP") provides life insurance and financial planning
services and products to banks and other financial institutions to address the
needs of their customers. The registrant has concentrated on regional and
community banks and markets its services through its own sales force and
independent insurance brokers and estate planners who are leaders in their
communities. In addition to insurance products, the registrant will also provide
investment products, such as mutual funds and variable annuities. The registrant
works with the bank's financial services department to customize programs to
suit the bank and the markets they serve.
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The registrant generates revenues from the sale of financial products and is
compensated by commissions paid by insurance companies, sales commissions paid
by the investment managers, fees paid by banks for the registrant's advice and
implementation of insurance programs, and fees paid by the consumer for
estate/financial planning.
The primary focus is on community banks with assets ranging from $50 million to
$1 billion and regional banks with assets in excess of $1 billion. Typically,
the target bank or financial institution will not have an insurance marketing
program or its existing program has not produced satisfactory results.
The registrant offers their services as a "value added" benefit to the customers
of the bank. The registrant's programs enhance the bank's exiting customer
relationships and do not compete with other services or products of the bank.
Management of the registrant has established successful records in insurance and
finance, including the creation and development of successful businesses with
remunerative outcomes.
The registrant is revolutionary in that it is a sole source "turn-key" solution
to Community Banks, as well as for professional and financial institutions for
Estate & Financial planning products and services.
The registrant devotes its professional talents to serve an industry sector
(community banks) which has historically, been neglected and under served and
which desire:
o Multiple carriers and products, a nonpartisan environment.
o Maximum available compensation without individual carrier production
requirements.
o Centralized data information and management system for: sales &
marketing, commissions payable and receivable, cross selling and
referrals, revenue splits, client tracking, product records and
information data management system, for proper release and disclosure
documents.
o A system for ongoing promotion, support and continuing education.
o Professional, cost effective distribution system; implemented by
CPA's, CFP's, CLU's, ChFC's, JD's.
The registrant's focus is on High Net Worth individuals while servicing the
future generation of wealth transfer within the bank and the community.
PRINCIPAL MARKETS AND PRODUCTS OR SERVICE:
The registrant has structured the business to assist banks, bank holding
companies and other financial institutions (brokers/dealers, S&L's, accounting
firms etc.) in the planning, design and implementation of an insurance marketing
program and financial planning profit center within the bank or entity. The
registrant provides to bank and institutional management, evaluation of the
insurance industry climate and consults on the alternatives and
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opportunities for banks and institutions to more fully utilize and expand their
customer base. The registrant has brought together a carefully chosen group of
professionals in the fields of accounting, estate planning, insurance,
investment banking and law, in order to fully capitalize on the opportunities
before the registrant.
The registrant has focused its efforts to serve an industry sector (community
banks) which has historically, been neglected and under served and which desire:
o Multiple carriers and products, a nonpartisan environment
o Maximum available compensation without individual carrier production
requirements
o Centralized data information and management system for: sales &
marketing, commissions payable and receivable, cross selling and
referrals, revenue splits, client tracking, product records and
information data management system, for proper release and disclosure
documents.
o A system for ongoing promotion, support and continuing education
o Professional, cost effective distribution system; implemented by
CPA's, CFP's, CLU's, ChFC's, JD's
The registrant actively promotes but is not limited to, the following products
and carriers in the financial institution marketplace:
o Bank Owned Life Insurance
o Corporate Owned Life Insurance
o Fixed Annuity
o Group and Individual Health Insurance
o Group and Individual Disability Insurance
o Group Term Insurance
o Guaranteed Premium Whole Life
o Immediate Annuity
o Level Term Insurance
o Level Group Term
o Long Term Care
o Mutual Funds
o Second & First to Die
o Single Premium Universal Life
o Single Premium Variable Universal Life
o Universal Life Insurance
o Variable Whole Life
o Variable Universal Life
o Whole Life
DISTRIBUTION METHODS:
The seminar approach has proven to be a more effective means of securing
qualified prospects than other programs and distinguishes the registrant
from others. The registrant's seminar systems use a stringent plan of
implementation and procedures. Financial institutions are selected based on
their willingness to offer life insurance programs to their clients. The
following is a brief outline of the step-by-step process of analyzing and
conducting the registrant seminar.
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o An officer information meeting (OIM) is conducted, for the officers of
the institution. This informs the officers of what their clients are going
to see and hear. The OIM creates a comfort level between the registrant and
the bank, which has resulted in higher than industry average results.
o The registrant requests that the institution gather a list of
potential prospects to invite to the "bank sponsored" seminar. Marketing is
done with the help of the registrant's turnkey program to assure good
attendance (targeting 12-15 planning units per seminar).
o The institution is asked to provide the registrant with a suitable
location within the institution.
o Those who attend and are interested in going forward are provided with
a free two-hour consultation.
DISTRIBUTION CHANNELS
AGENCY DEVELOPMENT
To enable the registrant to further distribution, it recruits qualified,
independent insurance agents and will require those wanting to participate
in the registrant program, to attend the mandatory training course. This
will insure program uniformity across the United States. This process is
crucial in that, our agents are recognized as true professionals, able to
operate effectively in the bank and institutional environment.
Listed below are the criteria for participation in the program, training
issues, and costs associated with becoming involved with the registrant and
guidelines.
ESTATE PLANNER / AGENT "SEMINAR" TRAINING CERTIFICATION
o The registrant will require that each planner who wants to
participate in the registrant's seminar program will be required to
take the registrant training course. The course is designed to provide
each planner with specific outlines of what is expected and what is to
be presented to member financial institutions and their customers. No
planner is permitted to present their own seminar or format to a
registrant member financial institution or their customer. Course
cost: $1,600 per person.
o Planners participating in the seminar program must be certified
as a CLU, ChFC or CFP. All others will be based on the decision of
management.
o Planners must have a minimum of five (5) increasingly productive
years in the insurance/brokerage business.
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o Provide their own Errors and Omissions, insurance coverage.
o Must have a minimum of at least a NASD Series 6 and Series 63,
and appropriate state life and health licenses.
o Must be "Non-captive"
o Must be willing to utilize the registrant's insurance carriers,
products and services while participating in the program.
On 29 September 1999 the registrant announced that it would be expanding
into Registered Investment Advisory ("RIA") services in the future. To date
the registrant has not officially arranged for direct Broker/Dealer
license'(s) and/or arranged with others to service this new market. Though,
such RIA services are available via our Carriers/Providers.
COMPETITIVE POSITION AND COMPETITIVE BUSINESS CONDITIONS:
It is the opinion of the registrant's management that the registrant has
developed a unique system for the sale of financial services and products.
Management believes that our 14 years of proven history in the marketing of
insurance and financial/estate planning products and services in the
community bank market place provides the registrant a substantial advantage
ahead of any competitor in estate and financial planning for bank
depositors.
The registrant has created a specialized niche, which includes a targeted,
per-qualified and accepting audience. Further the registrant has
established relationships with the industry's "Best in Class" - "Top of the
Table" in insurance premium production professionals for estate and
financial planning as well as legal and financial professionals.
The registrant only works with and writes through the highest rated
carriers as rated by industry standards to include but not limited to:
Moody's, Standard & Poors and AM Best Rated
TRADEMARKS, LICENSES, CONCESSIONS AND ROYALTY AGREEMENTS
o Trademarks: Federal Trade Mark and Copyright applications have
been submitted for:
National Institute Companies of America ("NICA"),
National Institute for Estate Planning ("NIEP"),
NIEP Agency Inc.
National Institute for Financial Services ("NIFS")
National Institute for Retirement Planning ("NIRP") and;
National Institute for Employee Benefits ("NIEB")
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o Licenses: NICA, NIEP, NIEP Agency, NIRP, NIEB.
o Concessions and royalty agreements: The registrant receives a
renewal stream from insurance product sales (when applicable). Average
royalty is three to four (3 to 4%) percent per year, typical duration
is nine (9) years. All such concessions/royalties are made part of
each carrier contract wherein applicable.
GOVERNMENT APPROVALS AND EFFECT OF GOVERNMENT REGULATIONS ON BUSINESS:
Because the registrant is operating in the finance and insurance area, the
registrant is under the regulation of the Office of the Comptroller of the
Currency as well as the each regulatory department within each state the
registrant does business. The registrant must be properly registered in
each state in which the registrant does business, to the state bar
association, state banking commission and state insurance commission for
approval and to inform them of the registrant's practice in their state, in
order to comply with the state's practice. All carrier product'(s) must be
approved by the appropriate Government agency as well as the appropriate
insurance commission in each state in which a product may be sold.
The recent repeal of the Glass Stegall Act has created an opportunity for
the registrant to capitalize on additional market share while utilizing the
registrant's niche market access in conjunction with direct and in-direct
providers wishing to access the registrant's market area.
BACKLOG
On a cash accounting basis it is believed that the Underwriting "backlog orders"
are currently $200,000 as compared to $108,000 for the prior year.
EMPLOYEES:
The registrant currently has seven part time and five full time employees.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS
GENERAL
Since commencement of operations in 1996, the registrant has been engaged in the
financial services industry in various capacities.
RESULTS OF OPERATION:
MARCH 31, 2000 VS 1999
In the three months ended March 31, 2000 revenue increased to $13,000 from
$16,000 in the three months ended March 31, 1999. This variance was due to the
NICA's business being included in the current quarter compared to the MBHC
business being included in the prior year's quarter. A significant amount of the
NICA business in the current quarter was delayed due to HR 634 (Elimination of
split-dollar insurance with legacy plans) which to date has not been passed by
Congress. The majority of the registrant's revenue is in split-dollar insurance.
Operating expenses increased to $1.17 million in the current year quarter from
$0.01 million in the prior year fiscal quarter. The current year quarter had
$0.85 million in operating expense resulting from the issuance of 3.25 million
shares for compensation and $0.2 million in operating expense resulting from the
issuance of 1.95 million shares for services rendered. This compares to $0.01
million of depreciation and amortization in the prior year quarter as the
Company was essentially inactive until it acquired the business of NICA in
March, 1999.
The Company did not have a federal or state income tax provision in either
quarter due to the loss recorded in each quarter. An allowance was recognized to
offset the tax benefit until such time that the Company generates taxable
income.
The current year quarter included an extraordinary item for the extinguishment
of interest on the investment notes sold by the registrant's CCIC subsidiary.
Current management of the registrant negotiated a settlement with the holders of
the notes resulting in the note holders receiving their principal, in cash, and
foregoing the payment of the accrued interest on the notes. The payment of the
principal was made to the note holders in the first quarter of the current year.
The amounts described above resulted in a net loss of $0.8 million in the
current year quarter compared with a loss of $0.04 million in the prior year
quarter.
DECEMBER 31, 1999 VS 1998
In the year ended December 31, 1999 revenue, primarily consisting of insurance
revenues and fees decreased to $319,000 from $457,000 in the prior year. Revenue
in 1999 included revenue from the NICA acquisition completed in March 1999.
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Revenues in 1998 included $227,000 of interest income from the registrant's CCIC
subsidiary which ceased operations in 1998.
Operating expenses increased to $2.55 million in the current year from $1.3
million. The increase was due to the refocusing of the registrant and operating
expenses generated by the NICA acquisition concluded in March 1999.
Other income and expense increased to $1.9 million in the current year from $0.7
million in 1998. Interest expense remained relatively constant at $183,000 for
the current year vs. $171,000 in the prior year. The $0.3 million of
amortization in 1998 included the write down of goodwill and organizational
costs and deferred origination fee related to the registrant's subsidiaries that
ceased operations during 1998.
Current year other expense also included $1.7 million of legal settlements vs.
$0.1 million in the prior year. The majority of the legal settlements in 1999
resulted in the issuance of common stock of the registrant and related to
matters originating when the registrant was under the control of the prior
management. The largest legal settlement related to the sale of the registrant's
stock in November 1998 under a Regulation D 504 B Offering. The registrant
resolved the claim agreeing to issue 2.5 million shares of common stock (valued
at the current market price of $0.55 per share or $1.375 million). The shares
were issued in the first quarter of 2000.
The Company did not have a federal or state income tax provision in either 1999
or 1998 due to the loss recorded in each year. An allowance was recognized to
offset the tax benefit until such time that the Company generates taxable
income.
The amounts described above resulted in a net loss of $4.1 million in the
current year compared with a loss of $1.5 million in the prior year.
LIQUIDITY AND CAPITAL RESOURCES
THREE MONTHS ENDED MARCH 31, 2000
During the three months ended March 31, 2000, the registrant's cash increased by
$64,000. Net cash provided by financing of $0.57 million was partially offset by
$0.07 million of net cash utilized by operating activities and $0.43 million of
net cash utilized by investing activities.
Cash from financing activities was generated from the sale of the registrant's
stock ($2.07 million) which was partially offset by a $1.5 million decrease in
debt. The decrease in debt was primarily the settlement with the investment note
holders wherein they forgave their accrued interest and received their initial
principal.
Cash utilized in operating activities was caused by the net loss of $0.8 million
and the $0.356 million of debt forgiveness on the investment notes. These items
were partially offset by $0.02 million of depreciation and amortization and $1.1
million of stock issued for expenses of the registrant.
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Cash utilized in investing activities included a $0.4 million purchase of an
interest-bearing note of an unaffiliated company and $0.03 million for the
purchase of office equipment. The registrant, at its option has the ability to
convert the note into a minority ownership interest.
YEAR ENDED DECEMBER 31, 1999
During the year ended December 31, 1999, the registrant's cash increased by
$54,000 due to net cash provided by operating activities.
Cash provided by operating activities was caused by $0.1 million of depreciation
and amortization and $2.6 million of stock issued for expenses of the
registrant, a $0.2 million increase in accrued interest and an increase of $1.5
million in accrued legal settlements, the majority of which were settled via the
issuance of the registrant's common stock in the first quarter of 2000. This was
partially offset by the net loss of $4.1 million and a $0.1 million decrease in
accounts payable.
YEAR ENDED DECEMBER 31, 1998
During the year ended December 31, 1998, the registrant's cash increased by
$186,000. Net cash provided by financing of $0.3 million was partially offset by
$0.11 million of net cash utilized by operating activities.
Cash from financing activities was generated by $0.3 million from the sale of
investment notes.
Cash utilized in operating activities was caused by the net loss of $1.52
million and a $0.45 million decrease in accrued payroll This was partially
offset by $0.3 million of depreciation and amortization and $0.9 million of
stock issued for expenses of the registrant, a $0.1 million increase in accrued
interest, a $0.2 million increase in accounts payable and a $0.2 million
increase in payroll taxes.
PROSPECTIVE INFORMATION
On March 3, 2000 the registrant entered into a Buy-Sell Agreement with Oxford
International, Inc. ("Oxford") for the sale of its entire holdings in Growth
Fund Partners, Inc. for $2,500,000 in cash. The registrant expects that this
agreement will be concluded by the end of the second quarter of 2000 and the
fund received from Oxford.
The registrant has entered into an agreement to purchase 100% of the outstanding
common stock of Continuing Education Associates, Inc. ("CEA"). The total
purchase price is estimated to be $225,000 payable in cash of $100,000 and
350,000 common shares of the registrant's restricted stock. The transaction is
expected to close by the end of the second quarter of 2000.
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The registrant has also entered into an agreement to purchase 100% of the
outstanding shares of Oxford which is engaged in investment banking activities.
The total purchase price is estimated to be $4.75 million payable in 5,000,000
common shares of the registrant's restricted stock and 50% of Oxford's earnings
for the year 2000. The transaction is expected to close by the end of the second
quarter of 2000.
ITEM 3 - DESCRIPTION OF PROPERTY
The registrant's two primary locations are Dallas, Texas and Washington,
Pennsylvania. These offices are located in modern facilities located within
commercial buildings. The registrant rents the office space and owns their
furniture and business equipment. The headquarters location in Washington
consists of 1,600 square feet at a rental of $1,600 per month expiring December
2002 and the branch office in Dallas consists of 828 square feet at a rental of
$1,500 per month expiring April 2003.
The registrant believes that these facilities are adequate for its current
needs.
ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 30, 2000, the ownership of the
registrant's Common Stock by (i) each director of the registrant, (ii) all
executive officers and directors of the registrant as a group, and (iii) all
persons known by the registrant to own more that 5% of the registrant's Common
and Convertible Preferred Stock.
<TABLE>
<CAPTION>
Beneficial Ownership
--------------------------------------------------
Title of Number of
Name and Address Class Shares (1) % (1)
---------------- -------- ---------- -----
<S> <C> <C> <C>
Kevin P. Maloney (2) Common 9,015,500 11.22%
55 South Main Street
Second Floor
Washington, PA 15301
Timothy E. Smail (3) Common 1,100,000 1.50%
55 South Main Street
Second Floor
Washington, PA 15301
All Directors and Officers Common 10,115,500 12.43%
as a group (2 persons)
</TABLE>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities & Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of Common Stock subject to options or
warrants currently exercisable or convertible, or exercisable or convertible
within 60 days of April 30, 2000, are deemed outstanding for computing the
percentage of the person holding such option or warrant but are not deemed
outstanding for computing the percentage of any other person. Except as
indicated in the footnotes to this table and pursuant to applicable community
property laws, the persons named in the table have sole voting and investment
power with respect to all shares of Common Stock beneficially owned.
(2) Includes 5,000,000 shares of Common Stock currently issuable in accordance
with Mr. Maloney's employment agreement, 2,500,000 shares of Common Stock
currently issuable based upon Mr. Maloney's term of service with the registrant
and 660,000 Common Shares issuable upon the exercise of options that are
currently exercisable.
(3) Includes 1,000,000 shares of Common Stock which is owned by Temmco Venture
Capital in which Mr. Smail and his spouse hold a 37.5% interest.
<PAGE> 13
ITEM 5 - DIRECTORS, EXECUTIVE OFFICERS PROMOTERS AND CONTROL PERSONS
DIRECTORS AND OFFICERS
The registrant's executive officers and directors are as follows:
<TABLE>
<CAPTION>
Term as
Name Age Position Director Expires
---- --- -------- ----------------
<S> <C> <C> <C>
Kevin P. Maloney 41 Chairman of the Board of 2000
Directors and President, CEO
And Secretary
Timothy E. Smail 42 Treasurer and Director 2000
</TABLE>
Directors (Elect) subject to election at next annual meeting of stockholders,
but not limited to:
Stephen Bradley
Royce Flippin
Christophere Illick
Dennis Rushovich
Hilliard Zola
Upon election to the Board of Directors, each director will receive 250,000
shares of the registrant's common stock and expenses for attendance at meetings.
KEVIN P. MALONEY, PRESIDENT, CEO, SECRETARY AND BOARD OF DIRECTOR
Mr. Maloney is formerly the Senior Managing Director/Founder of Asset Protection
Trust Company, Inc. one of the leading marketing company in the United States of
foreign situs trust and founder of Insurance Marketing Group, LLC. Previously,
Mr. Maloney was an Investment Banker for Spencer Trask Securities, Inc. While at
Spencer Trask his responsibilities included leverage buyouts, mergers and
acquisitions and restructuring of both
<PAGE> 14
public and private companies. Prior to that, he was a registered Merchant Banker
under the General Obligation Law of Switzerland and the United Kingdom. He
worked throughout the European community and the Middle East and through
significant contacts in the European banking community he developed offers to
his clients in excess of one billion dollars. In addition, Mr. Maloney
structured one of eight licensed currency exchange houses in the United Arab
Emirates. He was chosen by the Federal Islamic Republic of Comoros among others,
to develop their credit worthiness in the Western Capital Markets, as well as,
lead the efforts to restore the infrastructure to the country with regards to
utilities, Medicare, education, public housing, fishing industry and tourism.
Prior to that, Mr. Maloney was an Investment Banker with Balis and Zorn
Securities, Inc. and Asset Management Company where he marketed asset management
services and products, as well as analyzed and formed strategies for the
acquisitions of public and private companies for high net worth, high profile
clients. Prior to that, Mr. Maloney was with Nutmeg Securities, Inc., where he
trained and specialized in initial public offerings. Mr. Maloney was Senior
Advisor and Negotiator in the purchase/sale of an existing National Football
League and Major League Baseball franchise. Mr. Maloney began his career in his
family's business for which he remains a financial advisor. Mr. Maloney received
his Bachelors degree from the University of Pittsburgh with Advance Studies from
the Wharton School of the University of Pennsylvania, Aresty Institute of
Executive Education and The London School of Economics.
TIMOTHY E. SMAIL, TREASURER AND BOARD OF DIRECTOR
Mr. Smail is currently Controller, Secretary and Treasurer of Fieldstone Inc. a
privately held death care business in Pennsylvania and the U.S. Virgin Islands.
Prior to Fieldstone, Mr. Smail was a staff accountant for Management Problem
Solvers a full service accounting, financial and business consulting firm with
clients nation wide. Mr. Smail is a Certified Public Accountant offering
accounting, tax and financial consulting services to individuals, small
businesses, estate and trusts as a sole practitioner. Mr. Smail has been a
member of the Board of Directors for several privately held corporations
including Fieldstone Inc., Metro Medical Equipment Co. and Sickroom Services
Inc. as well as a member of the Board of Directors of National Institute
Companies of America (formerly Mortgage Bankers Holding Corp.) since 1996. Mr.
Smail holds a BS degree from Indiana University of Pennsylvania and Professional
Certification by the Commonwealth of Pennsylvania as a Certified Public
Accountant.
NOMINATED BOARD OF DIRECTORS, BUT NOT LIMITED TO
STEPHEN W. BRADLEY
Mr. Bradley is currently a Managing Director of Fortrend International LLC, an
Investment Bank in New York. Mr. Bradley is also the founder and principal of
Salem Partners, Inc. New York a consulting firm for global business development
in North America, South Africa, Spain, Austria, Greece, Croatia, Mexico and
Brazil. In 1991-93 Mr. Bradley was Executive Vice President of Daiwa America
Securities, Ltd. Responsible for all trading, structured finance, new product
development, derivatives and securitization, in both the debt and equity
disciplines. From 1982 to 1991 Mr. Bradley was Managing Director - Merrill Lynch
Capital Markets, while at Merrill Mr. Bradley conceived, developed and managed
the Capital Equities Division for Merrill creating the organizational
infrastructure, responsible for all direction over negotiations, pricing,
structure and risk management. From 1968 to
<PAGE> 15
1982 Mr. Bradley was Vice President of Paine Webber-Capital Commitment,
responsible for the pricing, trading and marketing of all primary market
products. Mr. Bradley managed all sales and marketing departments for the entire
branch office system of Paine Webber for primary debt and equity securities. Mr.
Bradley holds a BS Finance degree - University of Arizona and his MBA in
International Finance Program - American Graduate School of International
Management.
ROYCE N. FLIPPIN, JR. CHAIRMAN-NOMINATED
Royce N. Flippin, Jr. is the director of program advancement for the
Massachusetts Institute of Technology and president of Flippin Associates, which
provides strategic and implementation services for both the public and private
sectors. He is a consulting managing director for the full-service commercial
real estate firm of Keoppel, Tener, Riguardi, Inc., a certified associate for
Drake, Beam, Morin, Inc. and is a member of the board of governors of the
Princeton Club of New York. Mr. Flippin served for several years as a member of
the finance committee of the Eastern College Athletic Conference (ECAC) and was
the organization's president in 1988-89. He also served a five-year term on the
14-member executive committee of the National Collegiate Athletic Association
(NCAA), responsible for the financial affairs and all championships of the NCAA.
Mr. Flippin has held positions with Exxon and General Foods Corporation and he
was President of First Spectrum, Inc., one of the first socially responsible
mutual funds. Mr. Flippin is currently a Board of Director of The Sullivan
Group, a division of the Travelers Group, Smith Barney, Inc., Ariel Capital
Management Mutual Fund, Radkowsky Thorium Power Corporation, Kinematix, Inc.,
and Asphalt Green.
CHRISTOPHER D. ILLICK
Mr. Illick is currently a Senior Officer of Brean Murry & Company Inc., an
Investment Bank in New York. Mr. Illick is also a general partner of Illick
Brothers, which he organized in 1965 to continue a family real estate ownership
and management business. Mr. Illick was a founder in 1968 and the President of
the US subsidiary of Robert Fleming Holdings Limited, London. For approximately
fifteen years, Mr. Illick effected corporate finance transactions and identified
investment opportunities for Fleming's clients in the UK, Europe, the Far East
and the US, in addition to managing the over-all US business. In 1986, Mr.
Illick subsequently became a Director, and Chief Administrative Officer and
General Counsel of CG America Corporation, a privately held specialty
reinsurance holding company. He was responsible for administration, legal
affairs and its substantial portfolio of diversified domestic and international
investments. After the sale of CG America in 1991, Mr. Illick remained through
1992 to assist in the transition. Thereafter Mr. Illick undertook selected
successive entrepreneurial management positions. Mr. Illick began his career as
a lawyer at Brown & Wood on Wall Street. He became a member of the Bar of the
State of New York and a registered principal with the National Association of
Securities Dealers. Mr. Illick has been a member of the Board of Directors for
several privately held corporations and many public corporations, including
Aliginis, Intersil, Loehmann's, National Transaction Network, Bio-Technology
General, Biomune Systems and The Mercantile & General Reinsurance Company of
America. Mr. Illick holds a BA degree from Trinity College and a LLB degree from
the University of Virginia Law School.
<PAGE> 16
DENNIS C. RUSHOVICH
Mr. Rushovich is formerly the CFO and COO of Independent Financial Marketing
Group ("IFMG"). IFMG is one of the largest third party marketers ("TPM's") of
annuities and mutual funds through financial institutions, with sales of
proceeds in excess of $2.2 billion in 1997. Prior to Independent Financial Mr.
Rushovich, was CFO of the marketing division of Sage Holding's, a large mutual
fund and insurance group based in South Africa. In 1985 he was sent to the USA
to assist in the development of a financial planning firm (Independent Financial
Services) for Sage. In 1989 Mr. Rushovich and with other senior executives of
Independent Financial formed Independent Financial Marketing Group, a third
party marketing company. In 1990 due to political problems of being a subsidiary
of a South African corporation Mr. Rushovich was instrumental in negotiating the
buy-out of the South African parent. From 1989 to 1996 the company expanded to
be one of the largest marketers of annuities and mutual funds to banks. In 1996
Independent Financial was sold to Liberty Financial Companies.
HILLIARD A. ZOLA
Hilliard Zola brings a substantial background in law and business to his
position as President of Dierman Wortley and Zola, Inc. (DWZ). Immediately prior
to the formation of DWZ, Mr. Zola served as the Co-Managing Partner, along with
Sir Roy Denman, of Denman & Partners an international trade-consulting firm with
offices in Brussels and Washington, D. C. He also founded the International
Consulting Group, Ltd. (ICG), a Washington based firm, which provided risk
assessment and business consulting services to a wide variety of domestic and
international companies. These enterprises afforded Mr. Zola the opportunity to
combine his strategic planning skill with investment analysis, research and
government relation experience. Mr. Zola practiced law in Washington serving as
Of Counsel to several of the city's premier law firms. His prior government
background includes serving as Legal Adviser for the Economic Development
Administration of the U. S. Department of Commerce and as a Special Assistant to
the U. S. Secretary of Transportation for Policy Development & International
Affairs. In 1974 he was appointed by President Gerald Ford to serve as Vice
President of Insurance of the Overseas Private Investment Corporation (OPIC), a
U. S. Government corporation. Subsequent to his federal service, Mr. Zola became
Vice President of Alexander & Alexander, Inc., one of the nation's largest
insurance brokers where his principal efforts were devoted to political risk
analysis and various risk transfer mechanisms for major multinational
corporations and financial institutions. He appeared frequently as a speaker and
lecturer on the subject of political risk considerations and investment
strategy, including at the International Conference on Construction in the
Middle East, hosted by The Financial Times of London. Additionally he addressed
the Ministry of Public Works of Bahrain and the U. S. - Arab Chamber of Commerce
on the topic of U. S. participation in Arab infrastructure projects and at the
Fletcher School of Law and Diplomacy where his address was entitled, Geopolitics
- A Pragmatic Approach to International Relations. Mr. Zola founded the
Homebuilder Ad Hoc Policy Group in 1981 and served as it's Executive Director
through 1990. The Group was a national trade association comprised of the
nation's largest single-family homebuilders and mortgage banking companies. In
support of those activities he founded the Political Action Committee, Housing
for America and was it's Executive Director form 1981 through 1989. Mr. Zola
served as Counsel to the first post-Communist Ambassador of Hungary, Hon. Peter
Zwack and founded the Friends of Hungary Foundation, a tax-exempt non-profit
institute promoting U. S./Hungarian relations. The firm of Dierman, Wortley &
Zola, Inc. provides counsel on
<PAGE> 17
financial strategies as well as representing public and private clients in the
housing, housing finance, telecom and health care sector, here and abroad. In
addition the firm has advised numerous foreign governments and ministries on a
broad range of issues.
INVOLVEMENT DURING PAST 5 YEARS OF DIRECTORS, OFFICERS, NOMINEES OR PROMOTERS IN
LEGAL PROCEEDINGS THAT REFLECT ON FITNESS FOR OFFICE.
Two (2) former officers of Mortgage Bankers Holding Corporation, were the
subject of an investigation proceedings by the Securities and Exchange
Commission. No formal proceedings or actions/proceeding where instituted as
the date of this filing. The Company (under new management) has redeemed the
bonds/notes which where the subject matter of the investigation.
The wholly owned subsidiary CCIC (Commonwealth Capital Investment Corporation)
will be dissolved upon completion of the redemption.
ITEM 6 - COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the total remuneration to be paid to the
President and all executive officers of the registrant whose total salary
exceeds $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Awards Payouts
------------------- --------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other All
Annual Restricted LTIP Other
Name and Compen- Stock Options/ Pay- Compen-
Principal Salary Bonus sation Awards SARS outs sation
Position Year ($)(a) ($)(a) ($) ($)(a)(b) (#)(c) ($) ($)(d)
--------- ---- ------ ------ ------- ---------- -------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kevin P. Maloney 1999 $ -0- -- -- $313,700 1,000,000 -- --
President 1998 $ -0- -- -- -- -- -- --
1997 $ -0- -- -- -- -- -- --
</TABLE>
(a) During 1999, Mr. Maloney received 1,990,000 shares of stock in lieu of cash
compensation. The shares were valued at the price of the registrant's
common stock on the date the shares were issued and resulted in a $313,700
charge to compensation expense.
(b) Mr. Maloney is entitled to receive 5,000,000 shares of the registrant's
common stock upon the signing of his employment agreement on March 15,
1999. Additionally Mr. Maloney is entitled to 2,000,000 shares of the
registrant's common stock, or at his election with the concurrence of the
registrant, to receive the fair value of the stock in cash. During 1999
none of these shares were issued to Mr. Maloney.
(c) During 1999 Mr. Maloney received an option for 1,000,000 shares of the
registrant's common stock and exercised that option for 590,000 shares of
the registrant's common stock.
(d) Mr. Maloney is entitled to receive a $6,000 annual car allowance. No
allowance was paid in 1999.
<PAGE> 18
On March 15, 1999, the registrant entered into an employment agreement with Mr.
Maloney that entitles him to receive a one-time grant of 5,000,000 shares of the
registrant's common stock. In addition, Mr. Maloney is to receive 2,000,000
common shares annually and has the ability to purchase 1,000,000 common shares
annually at $0.10 per share. The agreement expires on March 14, 2004. During
1999 Mr. Maloney exercised an option for 590,000 shares of the registrant's
common stock.
During 1999, the registrant entered into an agreement with Mr. Carr, the former
Acting Chairman of the registrant that entitled him to receive a one-time grant
of 3,000,000 shares of common stock. In addition, Mr. Carr was to receive
2,000,000 common shares annually and has the ability to purchase 1,000,000
common shares annually at $0.10 per share. The agreement expired in 2003. To
date, none of these shares have been issued. During 1999, Mr. Carr terminated
his employment with the Company and has been retained as a senior consultant,
effectively canceling the issuance of stock for years two to five of this
agreement. During 1999 and 1998, Mr. Carr received shares of common stock in
lieu of cash compensation and will receive shares rather than cash as part of
the consulting arrangement in the future.
OPTIONS GRANTED IN LAST FISCAL YEAR
The following table shows the options that have been granted to the Executive
Officers of the registrant in the prior Fiscal Year.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------------- Potential Realizable
% of Total Value at Assumed
Options Annual Rates
Number of Underlying of Stock Price
Securities Granted to Appreciation for
Underlying Employees Exercise Option Term
Options in Fiscal Price Expiration --------------------
Name Granted Year (%) ($/Sh) Date 5%($) 10%($)
---- ---------- --------- -------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Kevin P. Maloney
Stock Option 1,000,000 100% $0.10 01/03/04 $2,100 $28,800
</TABLE>
a) The market price as of the date of grant was $0.08 per share.
b) All options are fully vested.
c) Potential realizable value is based on the assumption that the Common Stock
appreciates at the annual rates shown (compounded annually) from the date
of grant until the expiration of the option term. These assumed rates of
appreciation are mandated by the rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of the
future Common Stock price. There can be no assurance that any of the values
reflected in this table will be achieved.
<PAGE> 19
AGGREGATE OPTIONS EXERCISES IN LATEST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying In-the-Money
Unexercised Options at at Year-End
Shares Value Year-End 1999
Acquired On Realized
Name Exercise (#) ($)(b) Exercisable Exercisable
---- ------------ -------- ----------- -----------
<S> <C> <C> <C> <C>
Kevin P. Maloney 590,000 $112,000 410,000 $ -0-
</TABLE>
a) All options were vested, therefore, there were no unexercisable options.
b) Based upon the difference between the market value of the Common Stock at
time of exercise and exercise price.
c) Based upon market value of Common Stock at December 31, 1999.
<PAGE> 20
EMPLOYMENT AGREEMENT
Mr. Maloney, Chairman of the Board of Directors and President, CEO and
Secretary, has a five-year employment agreement with the registrant effective
March 15, 1999. The agreement provides that Mr. Maloney receive an annual base
salary of $144,000. Additionally, Mr. Maloney is eligible for incentive bonus at
the sole discretion of the Board of Directors.
In the event that the registrant terminates Mr. Maloney's employment with or
without cause or Mr. Maloney terminates his employment, the registrant shall pay
Mr. Maloney his salary for the balance of the year, the full portion of the
incentive bonus, if any, earned for the year in which the termination occurs,
make a lump sum cash payment on each anniversary date of the employment
agreement for the remainder of the employment agreement in an amount equal to
the base salary.
Mr. Maloney received a one-time grant of 5,000,000 shares of the registrant's
common stock upon executing the employment agreement. Additionally, Mr. Maloney
will annually receive 2,000,000 shares of stock in the registrant, vested
quarterly to Mr. Maloney in 500,000 increments on the 1st of March, June,
September and December. Mr. Maloney may exercise his right to receive the common
stock vested or with the agreement of the registrant, may take the fair value of
the common stock in cash. The shares covered by the one-time grant will survive
any stock reversal, split or any other type of stock adjustment.
Additionally, Mr. Maloney is granted the option annually to purchase 1,000,000
shares of the registrant's common shares at an exercise price of $0.10 per
share. The shares covered by this option will survive any stock reversal, split
or any other type of stock adjustment.
In the event of a change in control of the registrant, Mr. Maloney is entitled
to terminate his employment with the registrant within one year. Upon such
termination, the registrant shall pay Mr. Maloney a lump sum payment equal to
three times his annual base salary and the full portion of the incentive bonus,
if any, earned for the year. Additionally, upon a change in control of the
registrant, any options for common stock of the registrant granted to or held by
Mr. Maloney, to the extent not yet vested or exercisable shall become
immediately vested and exercisable. Such options will remain exercisable for a
period of five years after the date of termination following a change in
control.
COMPENSATION OF DIRECTORS
Directors (upon final nomination) will be compensated with restricted stock of
250,000 shares divided quarterly, as to be determined by the Board of Directors.
<PAGE> 21
ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:
A. AGREEMENTS WITH AFFILIATED PARTIES
There are no past or present transactions that the registrant, directors,
nominees, executive officers, 5% shareholders, or any family members past
or present are directly or indirectly involved.
B. TRANSACTIONS WITH PROMOTERS AND PUBLIC RELATIONS FIRMS.
The registrant in 1999 retained two public relations firms:
Capital Research Group/The Subway.com was compensated with an option to
purchase 1,000,000 shares of the registrant's common stock at $0.22/share
OHN Research Group was compensated with an option to purchase 400,000
shares of the registrant's common stock at $0.22/share
ITEM 8 - DESCRIPTION OF SECURITIES
The registrant has authorized for issuance 100,200,000 share of capital stock,
of which 200,000 share are designated as preferred stock, Series B $100 par
value and 100,000,000 share are designated as common stock, $0.0001 par value.
The following is a brief description of the Common Stock and Preferred.
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Additionally, all
holders of Series A Convertible Preferred Stock are entitled to vote their
shares on a ten share for one share basis on all matters submitted for the
approval of the Common Shareholders. In all matters other than the election of
Directors, when a quorum is present at any stockholders' meeting, the
affirmative vote of the majority of shares present in person or represented by
proxy shall decide any question before such meeting. Directors are elected by a
plurality of the votes of the shares present in person or represented by proxy
at a stockholders' meeting. The Board of Directors of the registrant currently
consists of two members but effective with the 2000 Annual Meeting it will be
increased to seven members. Members of the Board of Directors are elected
annually for a one-year term.
The holders of Common Stock are not entitled to cumulative voting rights with
respect to the election of Directors, and, as a consequence, minority
stockholders will not be able to elect Directors on the basis of their votes
alone. Subject to preferences that are applicable to the outstanding shares of
Series A Convertible Preferred Stock, holders of Common Stock are entitled to
receive ratably such dividends as may be declared by the Board of Directors out
of funds legally available therefor.
<PAGE> 22
In the event of a liquidation, dissolution or winding up of the Company, holders
of the Common Stock would be entitled to share ratably in all assets remaining
after payment of liabilities and the satisfaction of any liquidation preference
of any then outstanding series of Preferred Stock, including the Convertible
Preferred Stock. Holders of Common Stock have no preemptive rights and no right
to convert their Common Stock into any other securities. There are no redemption
or sinking fund provisions applicable to the Common Stock. All outstanding
shares of Common Stock are fully paid and nonassessable.
As of March 31, 2000, there were 65,416,694 shares of Common Stock issued,
701,650 shares of Common Stock held in the registrant's treasury resulting in
64,715,044 Common Shares outstanding.
TRANSFER AGENT
The Transfer Agent and Registrar for the registrant's Common Stock is Chase
Mellon Shareholder Services
SERIES B NON-VOTING PREFERRED STOCK
The registrant has 200,000 shares of Series B Non-Voting Preferred Stock
authorized and outstanding on March 31, 2000. The following description of the
preferences, limitations and relative rights of the Series B Non-Voting
Preferred Stock is qualified in its entity by reference to the Restated Articles
of Incorporation of the Company which is filed as an exhibit to this
Registration Statement.
DIVIDENDS The holders of the Series B Non-Voting Preferred Stock are not
entitled to receive dividends.
LIQUIDATION PREFERENCE In the event of any liquidation, dissolution or winding
up of the registrant, the holders of Series B Non-Voting Preferred Stock do not
receive a liquidation preference over the holders of the registrant's common
stock.
REDEMPTION The shares of Series B Non-Voting Preferred Stock shall not be
redeemable by the registrant. However, the registrant shall have the right to
purchase shares of Series B Non-Voting Preferred Stock pursuant to agreements
within the holders thereof when the Board of Directors approves such purchases.
VOTING RIGHTS The holders of shares of Series B Non-Voting Preferred Stock shall
not have a right to vote on any matter brought before the shareholders.
<PAGE> 23
PART II
ITEM 1 - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
The Company's stock is currently traded on the Over the Counter, Bulletin Board
(OTC: BB:) under the symbol "NICM". The following table sets forth, based upon
information received from the National Quotation Bureau, the high and low bid
prices for the Common Stock for the quarters indicated. The quotations represent
bid between dealers and do not include retail mark-up, mark-down or commissions,
and do not represent actual transactions.
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
2000
High $1.50
Low $0.0625
1999
High $0.16 $0.60 $0.39 $0.24
Low $0.05 $0.09 $0.17 $0.06
1998
High $0.22 $0.80 $0.64 $0.55
Low $0.09 $0.14 $0.0625 $0.03
At March 31, 2000 there were 1,388 holders of record of 64,715,044 outstanding
shares of Common Stock, exclusive of holders which maintain their ownership in
"Street-Name" at brokerage houses, and two holders of record of 200,000 shares
of Series B, non-voting Preferred Stock.
SHARES ELIGIBLE FOR SALE
At May 31, 2000, all outstanding shares (72,929,194 shares) of Common Stock are
freely trading shares as the common stock of the registration was not considered
a "designated security" under the Securities Exchange Act, Section 3(a)(51A) of
the Penny Stock Reform Act and the attendant regulations under Rule 15g-9.
Therefore, all issuances of the registrant's common stock were made without
restrictive legend.
<PAGE> 24
DIVIDENDS
The registrant has never paid a dividend and anticipates that for the
foreseeable future, earnings will be retained for the development of its
business. The payment of future dividends will be at the sole discretion of the
registrant's Board of Directors and will depend upon. among other things, future
earnings, capital requirements, the general financial condition of the
registrant and general business conditions.
Series B Non-Voting Preferred Stock does not qualify for a dividend.
ITEM 2 - LEGAL PROCEEDINGS
MATERIAL PENDING LEGAL PROCEEDINGS
On March 14, 1999, the registrant acquired all of the outstanding stock of
National Institute Companies of America, Inc. ("NICA"), including all of its
wholly owned subsidiaries, The acquisition of NICA was accounted for as a
purchase and, accordingly, the results of operations of NICA for the period
subsequent to March 14, 1999 were included in the registrant's financial
statements. The purchase price for NICA was approximately $780,000 to be paid in
the registrant's common stock. The registrant has yet to issue the stock as the
seller has yet to remit approximately $800,000 of gross revenues that the
registrant believes is due them.
In March 2000, the registrant instituted suit in the 134th Judicial District
Court of Dallas County, Texas in Cause Number 00-2349-G, entitled Plaintiff's
Original Petition, Application for Temporary Restraining Order, and Application
for Temporary Injunction and Permanent Injunction against James L. Burmeister,
the chairman of NICA prior to its acquisition by the registrant. The suit seeks
injunctive relief, damages and attorneys fees. On March 30, 2000, the Court
granted the registrant's request for a Temporary Restraining Order ("TRO"). On
April 10, 2000 the TRO was extended by the Court. A mediation between the
parties to the suit was unproductive and the case is on a standard course of
discovery and, ultimately, trial of the issues. The TRO has expired and the
registrant elected to forego its right to seek a Temporary Injunction since it
believes that any further damage which could be inflicted by the Defendant would
be offset by aggressive marketing and expansion of the registrant's business
plan.
It is the registrant's position that the acquisition is complete and that it
does not owe the seller any further consideration as called for in the Stock
Purchase Agreement ("Agreement") as the evidence in the aforementioned case will
substantiate the registrant's claims of fraud and fraudulent inducement by the
defendant. Specifically, the defendant grossly overstated the revenue stream
generated by NICA in order to induce the registrant into paying excessive
consideration for the acquisition.
<PAGE> 25
The registrant's legal counsel on this matter is of the opinion that a high
degree of probability exists that the verdict will deny the Defendant any
further payments under the Agreement and that the Court will rule as a matter of
law that the stock of NICA was transferred to the registrant under the
Agreement. Additionally, the registrant's legal counsel is of the opinion that
the verdict will award the registrant damages against the Defendant for the
commissions that the Defendant wrongfully converted to his own use. (Refer to
Exhibit 99.2 for Opinion of Counsel Re; Mortgage Bankers Holding Corporation
Stock Purchase Agreement dated June 16, 2000.)
MATERIAL LEGAL PROCEEDINGS KNOWN TO BE CONTEMPLATED BY GOVERNMENTAL AUTHORITIES
Two (2) former officers of Mortgage Bankers Holding Corporation, were the
subjects of an investigation proceedings by the Securities and Exchange
Commission. No formal proceedings or actions / proceeding where instituted as
the date of this filing. The Company (under new management) has redeemed that
bonds/notes which where the subject matter of the investigation.
The wholly owned subsidiary CCIC (Commonwealth Capital Investment Corporation)
will be dissolved upon completion of the redemption.
ITEM 3 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Not Applicable
ITEM 4 - RECENT SALES OF UNREGISTERED SECURITIES
During the prior three years the registrant has one public offering of
securities as follows:
Date: 5 November 1998
Title: Regulation D 504 B Offering
Amount: $50,000 = 2,365,863 shares of common stock
There were no underwriters
The persons or class of persons who purchased securities are as follows:
1. Windsor Capital Finance, Inc $10,000 = 388,350 shares
Person'(s) name: Robert Crivello
Address: 3220 Old Ranch Parkway, Suite 300
Seal Beach, California 90740
2. Shape Family Trust $20,000 = 766,669 shares
Person'(s) name: Steven M. Shape
Address: 910 Skokie Blvd. Suite 204
Northbrook, Ill. 60062
3. Phoenix Financial LTD $20,000 = 766,669 shares
Person'(s) name: Rick Shirrell
Address: P.O Box 190428
St. Louis, Mo. 63119
Total offering price was: $50,000
<PAGE> 26
Commissions were paid in the form of Stock to:
1. Britannia Development Company Limited: 194,175 shares
Person'(s) name: John Brda
Address: 10 South Brentwood, Suite 416
St. Louis, MO 61305
2. M&A West: 250,000 shares
Person'(s) name: Scott Kelly
Address: 583 San Mateo Ave
San Bruno, CA 94066
The Company claimed the exemption under Regulation D, 504 B, as promulgated
there under.
The Company (under new management) settled this sale and issuance upon
being sued by the purchasers. Based upon the opinion of counsel, the matter
was settled in which it was recognized that the plaintiff was entitled to
the shares.
Additionally the registrant issued shares of common stock, Series A Convertible
Preferred Stock and Series B Non-Voting Preferred Stock during the past three
years (January 1, 1997 to March 31, 2000) as follows:
FIRST THREE MONTHS OF 2000
COMMON SHARES
During the quarter, Kevin P. Maloney ("Maloney") , the Chairman of the Board,
President and CEO of the registrant received 1,000,000 shares of common stock,
for compensation at prices varying from $0.21 to $0.35 per share (average price
$0.28 per share.
In addition to the 1,000,000 shares that Mr. Maloney received for compensation,
another 2,250,000 shares were issued for employee compensation at prices from
$0.21 to $0.35 per share.
The registrant issued 1,950,000 shares for services rendered at prices from
$0.082 to $0.35 per share.
<PAGE> 27
The registrant issued 2,545,000 shares for legal settlements at prices from
$0.55 to $0.625 per share. The majority of the shares (2,500,000) were issued to
resolve the previously discussed Windsor Capital matter.
The registrant issued 2,750,000 common shares at $0.10 per share from the
exercise of stock options and 125,000 shares were issued at a purchase prices of
$0.22 per share.
During the quarter the registrant issued 7,000,000 shares of common stock to its
wholly owned subsidiary CCIC. During the quarter CCIC sold the 2,320,000 shares
of common stock classified as treasury stock at December 31, 1999 and 6,298,350
of the shares issue to CCIC in the quarter. At March 31, 2000 there remained
701,650 shares unsold and they were classified as treasury stock at March 31,
2000.
SERIES A CONVERTIBLE PREFERRED STOCK
None
SERIES B NON-VOTING PREFERRED STOCK
None
1999
COMMON SHARES
During the year 551,667 shares of Series A Convertible Preferred Stock was
converted into 5,516,670 shares of common stock.
During the year, Mr. Maloney received 2,580,000 shares of common stock,
1,990,000 shares were for compensation at prices varying from $0.07 to $0.27 per
share (average price $0.16 per share) and 590,000 shares were from the exercise
of the option granted to him in his employment agreement at an exercise price of
$0.10 per share.
In addition to Mr. Maloney's exercise of stock options, 2,050,000 common shares
were acquired at $0.10 per share from the exercise of stock options and
1,928,570 shares were issued at purchase prices from $0.11 to $0.1875 per share.
In addition to the 1,990,000 shares that Mr. Maloney received for compensation
another 1,450,000 shares were issued for employee compensation at prices from
$0.07 to $0.31 per share.
<PAGE> 28
The registrant issued 1,825,000 shares for services rendered at prices from
$0.12 to $0.20 per share.
The registrant issued 1,996,154 shares for legal settlements at prices from
$0.0625 to $0.34 per share.
During the year the registrant issued 11,000,000 shares of common stock to its
wholly owned subsidiary CCIC. During the year CCIC sold 8,680,000 of those
common shares with the remainder of 2,320,000 shares of common stock classified
as treasury stock at December 31, 1999.
SERIES A CONVERTIBLE PREFERRED STOCK
During the year the registrant issued 160,000 shares of Series A Convertible
Preferred Stock.
SERIES B NON-VOTING PREFERRED STOCK
None
1998
COMMON SHARES
During the year 1,975,000 shares of Series A Convertible Preferred Stock was
converted into 6,250,000 shares of common stock.
During the year the registrant issued 774,000 shares of common stock (average
price of issuance of $0.138 per share) for legal settlements. The majority
(750,000 shares) related to Raymond Sobirtalski, the former Chairman of the
Board and CEO of MBHC who terminated his employment with the registrant in
November 1998.
During the year the registrant issued 6,146,500 shares of common stock (average
price of issuance of $0.125 per share) for compensation and services tendered.
The majority (4,000,000 shares) was issued for consulting services.
<PAGE> 29
SERIES A CONVERTIBLE PREFERRED STOCK
None
SERIES B NON-VOTING PREFERRED STOCK
None
1997
COMMON SHARES
During the year 25,000 shares of Series A Convertible Preferred Stock was
converted into 250,000 shares of common stock.
During the year the registrant completed an arms length non-monetary transaction
in which the registrant exchanged 200,000 shares of Series B Non-Voting
Preferred Stock and 150,000 shares of common stock in return for 765,191 voting
shares of common stock in the Growth Fund Partnership, Inc. ("GFPI").
SERIES A CONVERTIBLE PREFERRED STOCK
During the year the registrant acquired all of the outstanding common stock of
CCIC for the issuance of 300,000 shares of Series A Convertible Preferred Stock.
The acquisition of CCIC was accounted for as a purchase and, accordingly, the
results of operations of CCIC for the period subsequent to July 31, 1996 were
included in the registrant's financial statements. The excess of liabilities
assumed over the net fair value of assets acquired was minimal.
SERIES B NON-VOTING PREFERRED STOCK
During the year the registrant completed an arms length non-monetary transaction
in which the registrant exchanged 200,000 shares of Series B Non-Voting
Preferred Stock and 150,000 shares of common stock in return for 765,191 voting
shares of common stock in the Growth Fund Partnership, Inc. ("GFPI").
ITEM 5 - INDEMNIFICATION OF DIRECTORS AND OFFICERS
In accordance with the New York Business Corporation Law (the "Law"), the
registrant's Articles of Incorporation (the "Articles") contain provisions which
provide indemnification rights to officers, directors, employees and agents of
the registrant ("Potential Indemnitees"), subject to certain limitations set
forth in the Law and in the Articles. A Potential Indemnitee has a right of
mandatory indemnification by the registrant if he is successful on the merits in
defense of any proceeding brought against him for actions taken on behalf of the
registrant. Under the Articles, the registrant may indemnify a Potential
Indemnitee if the Board of Directors shall determine that Potential Indemnitee
acted in good faith and in a manner he reasonably believed to be in the best
interests of the registrant, and with
<PAGE> 30
respect to any criminal action or proceeding had no reasonable cause to believe
his conduct was unlawful. The registrant may advance a Potential Indemnitee the
expense incurred in defense of any action upon receipt of an agreement of the
Potential Indemnitee to repay the expenses unless it is determined that he is
entitled to indemnification under the Articles. In addition, the Articles also
provide that the directors of the registrant shall not be liable to the
registrant or its stockholders to the fullest extent permitted by the Law.
FINANCIAL STATEMENTS
a. Each of the following items are contained in the registrant's audited annual
financial statements and are set forth herein beginning on page F-1.
(i) Report of Stokes Kelly & Hinds, LLP, Independent Auditors
(ii) Consolidated Balance Sheets as of December 31, 1999 and 1998
(iii) Consolidated Statements of Operations for the Years Ended
December 31, 1999 and 1998
(iv) Consolidated Statements of Stockholders' Equity (Deficit) for
the Years Ended December 31, 1999 and 1998
(v) Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999 and 1998
(vi) Notes to Financial Statements
b. Each of the following items is contained in the registrant's unaudited
interim financial statements and is set forth herein beginning on page F-19.
(i) Consolidated Balance Sheet as of March 31, 2000
(ii) Consolidated Statements of Operations for the three month
period ended March 31, 2000 and 1999
(iii) Consolidated Statements of Stockholders' Equity (Deficit) for
the three months ended March 31, 2000 and 1999
(iv) Consolidated Statements of Cash Flows for the three months
ended March 31, 2000 and 1999
(v) Notes to Financial Statements
<PAGE> 31
PART III
EXHIBITS
2 Stock Purchase Agreement dated December 8, 1998 between the registrant
and National Institute Companies of America, Inc.
3.1 Articles of Incorporation of the Registrant, as amended
3.2 Amended and Restated By-Laws of the Registrant
4. Specimen of Common Stock Certificate
10.1. Employment Agreement of Kevin P. Maloney dated March 15, 1999
10.2. Buy-Sell Agreement between Oxford International, Inc. and Mortgage
Bankers Holding Corp. dated March 3, 2000 for sale of registrant's
shares of Growth Fund Partnership, Inc.
21. Subsidiaries of Registrant
24. Power of Attorney
27. Financial Data Schedules
99.1 Windsor Capital Finance, Inc. v. MBHC, et al. Release
99.2 Opinion of Counsel Re; Mortgage Bankers Holding Corporation Stock
Purchase Agreement dated June 16, 2000
<PAGE> 32
SIGNATURES
In accordance with Section 12 of the Securities and Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
National Institute Companies of America, Inc.
Date: June 23, 2000 By: /s/ Kevin P. Maloney
-----------------------------
Kevin P. Maloney
Chairman of the Board of Directors,
President, Chief Executive Officer and
Secretary
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
registration statement has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
Date: June 23, 2000 By: /s/ Kevin P. Maloney
-----------------------------
Kevin P. Maloney
Chairman of the Board of Directors,
President, Chief Executive Officer and
Secretary
(Principal Executive Officer)
Date: June 23, 2000 By: /s/ Timothy E. Smail
-----------------------------
Timothy E. Smail
Treasurer and Director
<PAGE> 33
MORTGAGE BANKERS HOLDING CORP.
FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
F-1
<PAGE> 34
TABLE OF CONTENTS
<TABLE>
<S> <C>
Independent Auditor's Report F-3
Consolidated Financial Statements
Balance Sheets F-4
Statements of Operations F-6
Statements of Stockholders' Equity (Deficit) F-7
Statements of Cash Flows F-8
Notes to Financial Statements F-10
</TABLE>
F-2
<PAGE> 35
[STOKES KELLY & HINDS, LLC
Letterhead]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of Mortgage Bankers Holding Corp.
Washington, Pennsylvania
We have audited the accompanying consolidated balance sheets of Mortgage Bankers
Holding Corp. and Subsidiaries (Company or Corporation) as of December 31, 1999
and 1998, and the related consolidated statements of operations, stockholders'
equity (deficit), and cash flows for the years 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 audits.
We conducted our audits 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 overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits, the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of Mortgage Bankers Holding Corp. and Subsidiaries as of December 31,
1999 and 1998, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
/s/ STOKES KELLY & HINDS, LLC
Stokes Kelly & Hinds, LLC
Pittsburgh, Pennsylvania
May 5, 2000
F-3
<PAGE> 36
MORTGAGE BANKERS HOLDING CORP.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
ASSETS
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 59,404 $ 5,236
Accounts receivable 109,170 14,630
Investment in Growth Fund Partnership, Inc. 2,500,000 --
---------- ----------
TOTAL CURRENT ASSETS 2,668,574 19,866
INVESTMENT IN GROWTH FUND PARTNERSHIP, INC, -- 2,500,000
PROPERTY, PLANT AND EQUIPMENT
Less accumulated depreciation of $136,659
in 1999 and $123,736 in 1998 61,045 602,925
GOODWILL
Less accumulated amortization of $56,673 in 1999 705,517 --
---------- ----------
TOTAL ASSETS $3,435,136 $3,122,791
========== ==========
</TABLE>
See accompanying notes.
F-4
<PAGE> 37
MORTGAGE BANKERS HOLDING CORP.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 208,694 $ 325,561
Accrued and withheld payroll taxes 421,322 374,471
Accrued interest 376,253 192,760
Accrued legal settlements
Accrued other 19,179 --
Debt 2,572,619 2,320,001
----------- -----------
TOTAL CURRENT LIABILITIES 5,073,067 3,212,793
----------- -----------
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock (par value $.0001 - authorized 100,000,000 and 50,000,000
shares, 47,796,594 and 19,470,500 issued and outstanding
at December 31, 1999 and 1998) 4,780 1,947
Preferred stock Series A (par value $.0001 - authorized 5,000,000 shares, -0-
and 391,667 issued and outstanding at December 31, 1999 and 1998) -- 39
Preferred stock Series B (par value $100 - authorized 200,000 shares, 200,000
shares issued and outstanding at December 31, 1999 and 1998) 2,500,000 2,500,000
Treasury Stock (common: 2,320,000 and -0- shares at 1999 and 1998) at cost (232) --
Additional paid-in-capital 4,384,133 1,820,492
Retained earnings (deficit) (8,526,612) (4,412,480)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (1,637,931) (90,002)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 3,435,136 $ 3,122,791
=========== ===========
</TABLE>
See accompanying notes.
F-5
<PAGE> 38
MORTGAGE BANKERS HOLDING CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
REVENUE
Mortgage and insurance related fees and commissions $ 318,813 $ 230,505
Interest -- 226,465
----------- -----------
318,813 456,970
OPERATING EXPENSES
Salaries and contracted services 767,063 695,438
Depreciation and amortization 85,448 36,479
Professional fees 147,191 80,200
Other operating expenses 1,551,197 500,762
----------- -----------
2,550,899 1,312,879
----------- -----------
LOSS FROM OPERATIONS (2,232,086) (855,909)
OTHER INCOME AND (EXPENSE)
Interest expense (183,492) (170,769)
Amortization -- (308,497)
Provision for loan loss -- (78,781)
Legal settlements (1,690,547) (106,760)
Loss on abandonment of building (8,007) --
----------- -----------
(1,882,046) (664,807)
----------- -----------
LOSS BEFORE PROVISION OR CREDIT FOR
FEDERAL AND STATE INCOME TAXES (4,114,132) (1,520,716)
FEDERAL AND STATE INCOME TAXES -- --
----------- -----------
NET LOSS $(4,114,132) $(1,520,716)
=========== ===========
Basic earnings (loss) per share $ (.16) $ (.18)
Diluted earnings (loss) per share $ (.16) $ (.18)
Average shares outstanding - basic 25,878,602 8,530,090
=========== ===========
Average shares outstanding - diluted 25,878,602 8,530,090
=========== ===========
</TABLE>
See accompanying notes.
F-6
<PAGE> 39
MORTGAGE BANKERS HOLDING CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDING DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Preferred Stock Preferred Stock
Common Stock Series A Series B
Shares $ Shares $ Shares $
----------- ----- ---------- ---- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1998 6,300,000 630 2,186,667 219 200,000 18,000,000
Issuance of stock for compensation 672,500 67
Issuance of stock for services rendered 5,474,000 547
Issuance of stock for legal settlement 774,000 77
Conversion of preferred to common stock 6,250,000 626 (1,795,000) (180)
Write down of GFPI Investment (15,500,000)
Loss for the year ended 1998
----------- ----- ---------- ---- ------- -----------
BALANCE AT DECEMBER 31, 1998 19,470,500 1,947 391,667 39 200,000 2,500,000
Issuance of stock 4,568,570 457
Issuance of stock for compensation 3,440,000 344
Issuance of stock for services rendered 1,825,000 183
Issuance of stock for legal settlement 1,996,154 200
Issuance of preferred stock 160,000 16
Issuance of stock to subsidiary 11,000,000 1,100
Retirement and cancellation of common stock (20,300) (2)
Conversion of preferred to common stock 5,516,670 551 (551,667) (55)
Loss for the year ended 1999
----------- ----- ---------- ---- ------- -----------
BALANCE AT DECEMBER 31, 1999 47,796,594 4,780 -- (0) 200,000 2,500,000
=========== ===== ========== ==== ======= ===========
</TABLE>
<TABLE>
<CAPTION>
Additional Retained
Paid In Earnings
Treasury Stock Capital (Deficit) Total
Shares $ $ $ $
--------- ---- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1998 944,770 (2,891,764) 16,053,855
Issuance of stock for compensation 93,533 93,600
Issuance of stock for services rendered 675,506 676,053
Issuance of stock for legal settlement 106,683 106,760
Conversion of preferred to common stock 446
Write down of GFPI Investment (15,500,000)
Loss for the year ended 1998 (1,520,716) (1,520,716)
--------- ---- --------- ---------- -----------
BALANCE AT DECEMBER 31, 1998 1,820,492 (4,412,480) (90,002)
Issuance of stock 354,972 355,429
Issuance of stock for compensation 515,356 515,700
Issuance of stock for services rendered 364,817 365,000
Issuance of stock for legal settlement 201,196 201,396
Issuance of preferred stock 16
Issuance of stock to subsidiary 2,320,000 (232) 1,127,300 1,128,168
Retirement and cancellation of common stock (2)
Conversion of preferred to common stock 496
Loss for the year ended 1999 (4,114,132) (4,114,132)
--------- ---- --------- ---------- -----------
BALANCE AT DECEMBER 31, 1999 2,320,000 (232) 4,384,133 (8,526,612) (1,637,931)
========= ==== ========= ========== ===========
</TABLE>
See Accompanying Notes
F-7
<PAGE> 40
MORTGAGE BANKERS HOLDING CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDING DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income (Loss) $(4,114,132) $(1,520,716)
Adjustments to Reconcile Net
Income (Loss) to Net Cash
Used by Operating Activities:
Depreciation and amortization 85,448 344,976
Issuance of common stock for expenses 2,566,202 876,859
Provision for loan loss -- 78,781
Loss on abandonment of building 8,007 --
(Increase) decrease in:
Accounts receivable (79,833) 5,132
Other assets -- 5,510
Increase (decrease) in:
Accounts payable (116,867) 197,848
Accrued payroll -- (448,623)
Accrued payroll taxes 46,851 214,227
Accrued interest 183,492 136,639
Accrued other -- (1,368)
Accrued legal settlements 1,475,000 --
----------- -----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 54,168 (110,735)
----------- -----------
FINANCING ACTIVITIES
Increase in long-term debt -- 296,931
----------- -----------
NET INCREASE IN CASH 54,168 186,196
BEGINNING CASH BALANCE (DEFICIT) 5,236 (180,960)
----------- -----------
ENDING CASH BALANCE $ 59,404 $ 5,236
=========== ===========
</TABLE>
F-8
<PAGE> 41
MORTGAGE BANKERS HOLDING CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDING DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
-------- -----------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE
Cash paid during the year for interest $ -- $ --
NON-CASH ACTIVITIES
Writedown of investment in Growth Fund Partnership, Inc. $ -- $15,500,000
Conversion of preferred stock and issuance
of common stock 39 --
Acquisition of NICA financed through debt 780,000 --
Abandonment of property in settlement of debt 527,382 --
Issuance of treasury shares 232 --
</TABLE>
See accompanying notes.
F-9
<PAGE> 42
MORTGAGE BANKERS HOLDING CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting polices of Mortgage Bankers Holding Corp. and
subsidiaries ("Corporation" or "Company") and the methods of applying these
policies conform with generally accepted accounting practices. The accounting
and reporting policies and the methods of applying these policies which
significantly effect the determination of the Company's financial position,
results of operations and cash flows are summarized below.
NATURE OF OPERATIONS
Mortgage Bankers Holding Corp. owned and operated the following wholly owned
subsidiaries:
Mortgage Bankers Service Corporation ("MBSC") - MBSC was a mortgage
corporation licensed in three states that provides conforming and
non-conforming mortgage loans. During 1998, MBSC ceased operations and out
of existence documents were filed with the appropriate state authorities.
Commonwealth Capital Investment Corporation ("CCIC") - CCIC issued
unregistered securities to Pennsylvania residents desiring long term
investments, pursuant to Section 203(d) of the Pennsylvania Securities Act
of 1972 as amended. Proceeds from the sales are used for lending to a
variety of individuals and companies and corporate working capital needs.
During 1998, CCIC ceased operations and out of existence documents were
filed with the appropriate state authorities.
Pinnacle Insurance and Investment Group, Inc. ("PIIG") - PIIG was a licensed
insurance agency in the state of Pennsylvania. PIIG offers a variety of
life, annuity and burial supplement insurance productivity. During 1998,
PIIG ceased operations and out of existence documents were filed with the
appropriate state authorities.
International Auto Funding Corp. ("IAF") - IAF was licensed in the States of
Pennsylvania and West Virginia. This subsidiary began operations on July 1,
1998. IAF offers sub-prime auto financing products. IAF was known as Prince
George Home, which was inactive at December 31, 1997. During 1998, IAF
ceased operations and out of existence documents were filed with the
appropriate state authorities.
National Settlements, Inc. ("NSI") - NSI was licensed in the state of
Pennsylvania. NSI is an abstract Corporation that closes residential
mortgage loans. NSI was acquired by the Company on May 1, 1998. During 1998,
NSI ceased operations and out of existence documents were filed with the
appropriate state authorities.
F-10
<PAGE> 43
MORTGAGE BANKERS HOLDING CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
National Institute Companies of America, Inc, ("NICA") and its wholly
owned subsidiaries:
National Institute for Estate Planning, Inc. which provides estate
planning services.
National Institute for Financial Services, Inc. which provides
financial services.
National Institute for Retirement Planning, Inc. which provides
retirement planning services.
NIEP Agency, Inc which is a licensed insurance agency.
National Institute for Employee Benefits, Inc. which provides employee
benefit consulting.
During 1998, there were changes in management, and the Company redirected its
operating focus from mortgage banking activities to expanding their insurance
and estate planning services through cooperation and agreements with community
banks.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Corporation
and its wholly owned subsidiaries. All significant inter-company balances and
transactions have been eliminated.
USE OF ESTIMATES
The preparation of the financial statements in conformity with general accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
While management uses available information recognize losses on loans and
investment, further reductions in the carrying amounts may be necessary based
upon changes in economic conditions. It is reasonably possible that estimated
losses may change materially in the near term. However, the amount of the change
that is reasonably possible cannot be estimated as of the date of the report.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, the company considers cash on hand and
deposits in other financial institutions with an original maturity of (90) days
or less to be cash or cash equivalents.
F-11
<PAGE> 44
MORTGAGE BANKERS HOLDING CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
PROPERTY, PLANT AND EQUIPMENT
Land is carried at cost. Building, furniture, fixtures and equipment are carried
at cost less accumulated depreciation. Building, furniture, fixtures and
equipment are depreciated using the straight line method over the estimated
useful life of the assets ranging from 3 to 40 years.
GOODWILL
Goodwill represents the excess cost of the acquisition of NICA over the fair
value of it's assets acquired and liabilities assumed. Goodwill is being
amortized on the straight line method over 15 (fifteen) years.
Included in other amortization expense for 1998 is the write down of goodwill,
organizational costs and deferred origination fees related to the subsidiaries
that ceased operations during 1998.
INCOME TAXES
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes" requires the determination of deferred income taxes utilizing the
liability method under which deferred tax assets and liabilities are determined
based on the differences between the financial accounting and tax basis of
assets and liabilities. Deferred tax assets or liabilities at the end of each
period will be determined using the current tax rate expected to apply to
taxable income in the period in which the deferred tax asset of liability is
expected to be settled or realized. There are no substantial differences between
financial and tax reporting.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments", requires disclosure of fair value information
about financial instruments, whether or not recognized in the statements of
financial condition. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions used, including
the discount rate and estimated future cash flows. In that regard, the derived
fair value estimates cannot be realized in immediate settlement of the
instruments. Statement No. 107 excludes certain financial instruments and all
non-financial instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts present do not represent the underlying value of
the Company.
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
CASH AND CASH EQUIVALENTS - The carrying amounts reported in the balance sheets
for cash and cash equivalents approximate those assets' fair values.
OFF BALANCE SHEET ITEMS - The fair value of these items approximate their
contractual amount.
F-12
<PAGE> 45
MORTGAGE BANKERS HOLDING CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTES PAYABLE AND INVESTOR NOTES PAYABLE - Fair values of notes payable are
estimated using discounted cash flow analysis based on the company's incremental
borrowing rates for similar types of borrowing arrangements.
ACCOUNTS RECEIVABLE - The carrying amounts reported in the balance sheets
approximate fair value.
INVESTMENT - The carrying amount reported in the balance sheets approximate fair
value.
F-13
<PAGE> 46
MORTGAGE BANKERS HOLDING CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE B - PROPERTY, PLANT AND EQUIPMENT
At December 31, 1999 and 1998 property, plant and equipment was comprised of the
following:
<TABLE>
<CAPTION>
1999
Cost Accumulated Depreciation Net Value
-------- ------------------------ ---------
<S> <C> <C> <C>
Furniture, fixtures
and equipment $197,704 $136,659 $ 61,045
-------- -------- --------
Total property, plant
and equipment $197,704 $136,659 $ 61,045
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1998
Cost Accumulated Depreciation Net Value
-------- ------------------------ ---------
<S> <C> <C> <C>
Land $132,178 $ -- $132,178
Building 396,435 14,041 382,394
Building improvements 22,627 1,810 20,817
Furniture, fixtures
and equipment 175,421 107,885 67,536
-------- -------- --------
Total property, plant
and equipment $726,661 $123,736 $602,925
======== ======== ========
</TABLE>
During 1999, the Corporation exchanged the land, building and building
improvements for settlement of the installment note and lease obligation.
NOTE C - INVESTMENT IN GFPI - GROWTH FUND PARTNERSHIP, INC.
In August of 1997 the Corporation completed an arms length non-monetary
transaction in which the Corporation exchanged 200,000 shares of preferred stock
- Series B, par value of $100, and 150,000 shares of common stock in return for
756,191 voting shares of Common Stock in the Growth Fund Partnership, Inc.
("GFPI"). This series of preferred stock is redeemable at $100 per share, or
$20,000,000. This investment represents less than 1% of the outstanding stock of
GFPI. GFPI is a diversified closely held Florida corporation the assets of which
are comprised of large holdings in real estate and mineral and mining rights.
The Corporation recorded its investment at the estimated fair value for
non-liquid common stock of $18 million.
During 1998, the Corporation decided to sell its investment in GFPI. Subsequent
to December 31, 1999, the Corporation entered into a sales agreement to sell its
investment for $2,500,000. Accordingly, the investment was written down to this
value with a corresponding reduction in preferred stock Series B as of December
31, 1998.
F-14
<PAGE> 47
MORTGAGE BANKERS HOLDING CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE D - ACQUISITION
On March 3, 1999, the Corporation acquired the stock of National Institute
Companies of America, Inc., ("NICA") including all of its wholly owned
subsidiaries. The acquisition of NICA was accounted for as a purchase and
accordingly the results of operations of NICA for the period March 3, 1999 to
December 31, 1999 are included in the accompanying 1999 financial statements.
Operations for the entire year 1999 would not be significantly different if the
acquisition was reflected as of January 1, 1999. The purchase price of a NICA
was approximately $780,000 to be paid in Company common stock and the Company
has not issued the stock. The seller has yet to remit approximately $800,000 of
gross revenues that the Company believes are due them. A note payable to the
seller has been recorded since no shares of the Company's common stock have been
issued.
In March 2000, the Company instituted suit against the former Chairman of NICA
prior to the acquisition. The suit seeks injunction relief, damages and attorney
fees. The Company's legal counsel is of the opinion that the verdict will deny
the defendant any further payments under the Agreement (including the note
payable referenced above) and will rule as a matter of law that the stock of
NICA was transferred to the Company under the agreement. The excess of the
purchase price over the fair value of assets acquired and liabilities assumed
was approximately $763,000 and accounted for as goodwill.
Since March 3, 1999, the Corporation has operated the NICA business realizing
revenues and incurring related expenses. The Corporation has received a legal
opinion from counsel that a purchase and sale has in fact occurred.
NOTE E- DEBT
Debt at December 31, 1999 and 1998 comprises the following:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Notes payable to 2 individuals in the amounts of $100,000 and $75,000. The
notes were a result of working capital provided in 1994 and a consulting
agreement, respectively. The interest rate on the notes is
9% and 10% respectively $ 203,218 $ 203,218
- Investment notes due January 1, 1998 through the year 2004. These notes
pay interest at rates ranging from 6.5% to 12.0%. Subsequent to December
31, 1999, the principal amount of these notes were paid
in full 1,589,401 1,589,401
- Installment note and lease obligation due for the purchase of building
and land. This obligation is secured by the land and the building. The
term of the note and lease includes interest. During 1999, the Company
exchanged the land, building and building improvements in
settlement of the installment note and lease obligation -- 527,382
- Note payable NICA shareholder (See Note D) 780,000 --
---------- ----------
TOTAL DEBT $2,572,619 $2,320,001
========== ==========
</TABLE>
F-15
<PAGE> 48
MORTGAGE BANKERS HOLDING CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE F - INCOME TAXES
The Corporation provided for no federal or state taxes for the years ended
December 31, 1999 and 1998. At December 31, 1999, the Corporation had federal
net operating loss carry forwards of approximately $ 9.1 million, portions of
which will begin to expire beginning in the calendar year 2017. The Company and
its subsidiaries file separate state returns and have a combined state tax net
operating loss carry forward of approximately $ 8.5 which will begin to expire
in the calendar year 2009. The state limits use of net operating losses to
$1,000,000 per year.
The components of the net deferred tax assets are:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carry-forward $ 8,527,000 $ 4,412,000
=========== ===========
Tax benefit @ 40% $ 3,410,000 $ 1,764,000
Valuation allowance (3,410,000) (1,764,000)
----------- -----------
Net deferred tax assets/(liabilities) $ -- $ --
=========== ===========
</TABLE>
Future realization of the tax benefits of the net operation loss carry-forward
at December 31, 1999, and 1998 ultimately depends on the existence of sufficient
taxable income. Accordingly, management has established a valuation allowance
equal to the amount of deferred tax assets.
NOTE G - STOCK TRANSACTIONS
During 1999, 11,000,000 shares of common stock were issued to CCIC, a wholly
owned subsidiary of the Company. As of December 31, 1999, CCIC had sold
8,680,000 shares. The 2,320,000 shares that have not been sold as of December
31, 1999 are shown as treasury shares in the statement of stockholders equity
(deficit).
During 1999, the Company entered into an agreement with the current Company
President that entitles him to receive a one-time grant of 5,000,000 shares of
the Company's common stock. In addition, the President is to receive 2,000,000
common shares annually and has the ability to purchase 1,000,000 annually at
$.10 per share. The agreement expires in 5 years. To date, none of these shares
have been issued except for the issuance of 590,000 shares from the exercise of
the stock option. Also, during 1999, the President was issued shares of common
stock in lieu of cash compensation.
The one time grant of shares and the annual grant were not valued as at December
31, 1999 and the President has not elected to receive those shares. No
compensation expense was recognized relative to the stock option as the exercise
price exceeded the market value as of the date of grant. The stock issued the
President in lien of compensation was valued based upon the market price on the
date of issue.
F-16
<PAGE> 49
MORTGAGE BANKERS HOLDING CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
During 1999, the Company entered into an agreement with the former acting
chairman ("Individual") that entitles the individual to receive a one time grant
of 3,000,000 shares of the Company's common stock. In addition, this individual
is to receive 2,000,000 common shares annually and has the ability to purchase
1,000,000 common shares annually at $.10 per share. The agreement expires in 5
years. To date, none of these shares have been issued. During 1999, this
Individual terminated his employment with the Company and has been retained as a
senior consultant, effectively canceling the issuance of stock for years two
through five of the agreement. During 1999 and 1998, this Individual received
shares of common stock in lieu of cash compensation and will receive shares
rather than cash as part of the consulting arrangement in the future.
The one time grant and annual grant were not valued at December 31, 1999. This
individual had not elected to receive these shares. No compensation expense was
recognized relative to the stock options as the exercise price exceeded the
market price as of the date of grant. The stock issued in lieu of cash
compensation was valued based upon the market price as of the date of issue.
NOTE H- LITIGATION
The Company is engaged in various lawsuits that management believes will not
result in a material adverse effect on the Company.
The majority of the legal settlements reflected in 1999 resulted in the issuance
of common stock of the Company and related to matters originating when the
Company was under the control of the prior management. The largest legal
settlement related to the sale of the Company's stock in November 1998 under a
Regulation D 504 B Offering. The Company resolved the claim in early 2000
agreeing to issue 2.5 million shares of common stock (valued at the current
market price of $0.55 per share of $1.375 million). The shares were issued in
the first quarter of 2000.
NOTE I - FAIR VALUES OF FINANCIAL INSTRUMENTS
The estimated fair values of the Corporations financial instruments are as
follows:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
------------------------------ ------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 59,404 $ 59,404 $ 5,236 $ 5,236
Accounts receivable 109,170 109,170 14,630 14,630
Investment in GFPI 2,500,000 2,500,000 2,500,000 2,500,000
Financial Liabilities:
Long term debt 2,572,619 2,572,619 2,320,001 2,320,001
</TABLE>
F-17
<PAGE> 50
MORTGAGE BANKERS HOLDING CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE J - COMMITMENTS
As of December 31, 1999, the Company has a three year lease at $ 1,600 per month
for its Washington, PA office and a three year lease at $ 1,500 per month for
its Dallas, Texas office.
NOTE K - SUBSEQUENT EVENTS
Subsequent to December 31, 1999, the Company changed its name to National
Institute Companies of America, Inc. ("NICA") to better reflect its on-going
operations.
Subsequent to December 31, 1999, the Company entered into an agreement to
purchase 100% of the outstanding common stock of Continuing Education
Associates, Inc. ("CEA"). The total purchase price is estimated to be $225,000
payable in cash of $100,000 and 350,000 common shares of the Company's
restricted stock. The transaction is expected to close in the second quarter of
2000.
Subsequent to December 31, 1999, the Company entered into an agreement to
purchase 100% of the outstanding common stock of Oxford International, Inc.
("Oxford") which is engaged in investment banking activities. The total purchase
price is estimated to be $4.75 million payable in 5,000,000 common shares of the
Company's restricted stock and 50% of Oxford's earnings for fiscal year 2000.
The transaction is expected to close in the second quarter of 2000.
NOTE L- OPERATIONS
During the past two years the Company has changed their emphasis on mortgage
banking to expanding the sale of insurance and related products and with the
acquisition of NICA in 1999 to the providing of a vast array of estate planning
products. In addition, during 1999 and the first quarter of 2000 significant
liabilities have been settled and all significant litigation has been resolved.
The Company has continued to expand their operations with the planned
acquisition of additional companies in the year 2000. Management expects planned
revenues to be sufficient to meet all future obligations.
F-18
<PAGE> 51
NATIONAL INSTITUTE COMPANIES OF
AMERICA, INC.
FINANCIAL STATEMENTS
THREE MONTHS ENDED
MARCH 31, 2000 AND 1999
F-19
<PAGE> 52
TABLE OF CONTENTS
<TABLE>
<S> <C>
Financial Statements
Balance Sheets F-21
Statements of Operations F-23
Statements of Stockholders' Equity (Deficit) F-24
Statements of Cash Flows F-26
Notes to Financial Statements F-27
</TABLE>
F-20
<PAGE> 53
NATIONAL INSTITUTE COMPANIES OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
March 31, 2000 and 1999
ASSETS
UNAUDITED
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 123,286 $ 4,300
Accounts receivable 109,170 14,630
Investment in Growth Fund Partnership, Inc. 2,500,000 2,500,000
Notes Receivable 400,000 --
---------- ----------
TOTAL CURRENT ASSETS 3,132,456 2,518,930
PROPERTY, PLANT AND EQUIPMENT
Less accumulated depreciation of $140,659 and $130,930
in 2000 and 1999, respectively 85,897 618,014
GOODWILL
Less accumulated amortization of $69,375 and $5,667
in 2000 and 1999 respectively 692,815 756,523
---------- ----------
TOTAL ASSETS $3,911,168 $3,893,467
========== ==========
</TABLE>
See accompanying notes.
F-21
<PAGE> 54
NATIONAL INSTITUTE COMPANIES OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 AND 1999
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
UNAUDITED
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 212,985 $ 296,344
Accrued and withheld payroll taxes 421,322 386,184
Accrued interest 20,323 238,633
Accrued legal claims 75,000 --
Accrued other 19,179 4,795
Debt 1,067,718 3,100,001
----------- -----------
TOTAL CURRENT LIABILITIES 1,816,527 4,025,957
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock (par value $.0001 - authorized 100,000,000 shares, 65,416,694
and 20,987,170 issued; 64,715,044 and 20,987,170
outstanding at March 31, 2000 and 1999, respectively) 6,542 2,098
Preferred stock Series A (par value $.0001 - authorized
5,000,000 shares, -0- and 240,000 shares issued and outstanding
at March 31, 2000 and 1999, respectively) -- 24
Preferred stock Series B (par value $100 - authorized 200,000 shares,
200,000 shares issued and outstanding at March 31, 2000 and 1999) 2,500,000 2,500,000
Treasury Stock (common: 701,650 shares at March 31, 2000) at cost (70) --
Additional paid-in-capital 8,911,913 1,820,492
Retained earnings (deficit) (9,323,744) (4,455,104)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 2,094,641 (132,490)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 3,911,168 $ 3,893,467
=========== ===========
</TABLE>
See accompanying notes.
F-22
<PAGE> 55
NATIONAL INSTITUTE COMPANIES OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
UNAUDITED
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
REVENUE
Mortgage and insurance related fees and commissions $ 13,101 $ 16,110
----------- -----------
OPERATING EXPENSES
Salaries and contracted services 883,756 --
Depreciation and amortization 16,702 12,861
Professional fees 147,371 --
Other operating expenses 118,334 --
----------- -----------
1,166,163 12,861
----------- -----------
LOSS FROM OPERATIONS (1,153,062) 3,249
OTHER INCOME AND (EXPENSES)
Interest expense -- (45,873)
Loss on abandonment of building -- --
----------- -----------
-- (45,873)
----------- -----------
LOSS BEFORE PROVISION OR CREDIT FOR FEDERAL
AND STATE INCOME TAXES AND EXTRAORDINARY ITEM (1,153,062) (42,624)
FEDERAL AND STATE INCOME TAXES -- --
----------- -----------
LOSS BEFORE EXTRAORDINARY ITEM (1,153,062) (42,624)
EXTRAORDINARY ITEM - GAIN ON EXTINGUISHMENT OF
INTEREST ON INVESTMENT NOTES 355,930 --
----------- -----------
NET LOSS $ (797,132) $ (42,624)
=========== ===========
Basic Earnings (Loss) Per Share $ (.02) $ (.00)
=========== ===========
Diluted Earnings (Loss) Per Share $ (.02) $ (.00)
=========== ===========
Average shares outstanding - Basic 49,657,565 25,878,602
=========== ===========
Average shares outstanding - Diluted 49,657,565 25,878,602
=========== ===========
</TABLE>
See accompanying notes.
F-23
<PAGE> 56
NATIONAL INSTITUTE COMPANIES OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
THREE MONTHS ENDED MARCH 31, 2000
UNAUDITED
<TABLE>
<CAPTION>
Preferred Stock Preferred Stock
Common Stock Series A Series B
Shares $ Shares $ Shares $
---------- --------- --------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 2000 47,796,594 $ 4,780 -- -- 200,000 $2,500,000
Issuance of stock for compensation 3,250,000 325
Issuance of stock 2,875,100 288
Issuance of stock for services rendered 1,950,000 195
Issuance of stock for legal settlement 2,545,000 255
Issuance of stock to subsidiary 7,000,000 700
Reduction of treasury shares
Loss for the three months ended March 31, 2000
---------- --------- --------- --------- ------- ----------
BALANCE AT MARCH 31, 2000 65,416,694 $ 6,542 -- -- 200,000 $2,500,000
========== ========= ========= ========= ======= ==========
</TABLE>
<TABLE>
<CAPTION>
Additional Retained
Paid In Earnings
Treasury Stock Capital (Deficit) Total
Shares $ $ $ $
---------- ----- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 2000 2,320,000 $(232) $4,384,133 $(8,526,612) $(1,637,931)
Issuance of stock for compensation 853,675 854,000
Issuance of stock 289,712 290,000
Issuance of stock for services rendered 206,305 206,500
Issuance of stock for legal settlement 1,405,160 1,405,415
Issuance of stock to subsidiary 1,772,928 1,773,628
Reduction of treasury shares (1,618,350) 162 -- 162
Loss for the three months ended March 31, 2000 (797,132) (797,132)
---------- ----- ---------- ----------- -----------
BALANCE AT MARCH 31, 2000 701,650 $ (70) $8,911,913 $(9,323,744) $ 2,094,641
========== ===== ========== =========== ===========
</TABLE>
See Accompanying Notes
F-24
<PAGE> 57
NATIONAL INSTITUTE COMPANIES OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 1999
UNAUDITED
<TABLE>
<CAPTION>
Preferred Stock Preferred Stock
Common Stock Series A Series B
Shares $ Shares $ Shares $
----------- -------- -------- ---- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1999 19,470,500 $ 1,947 391,667 $ 39 200,000 $2,500,000
Conversion of preferred to common stock 1,516,670 151 (151,667) (15)
Loss for the three months ended March 31, 1999
----------- -------- -------- ---- ------- ----------
BALANCE AT MARCH 31, 1999 20,987,170 $ 2,098 240,000 $ 24 200,000 $2,500,000
========== ======== ======== ==== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
Additional Retained
Paid in Earnings
Treasury Stock Capital (Deficit) Total
Shares $ $ $ $
--------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1999 -- -- $1,820,492 $(4,412,480) $ (90,002)
Conversion of preferred to common stock 136
Loss for the three months ended March 31, 1999 (42,624) (42,624)
--------- --------- ---------- ----------- ---------
BALANCE AT MARCH 31, 1999 -- -- $1,820,492 $(4,455,104) $(132,490)
========= ========= ========== =========== =========
</TABLE>
F-25
<PAGE> 58
NATIONAL INSTITUTE COMPANIES OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
UNAUDITED
<TABLE>
<CAPTION>
2000 1999
----------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net (Loss) (797,132) (42,624)
Adjustments to Reconcile Net
Income (Loss) to Net Cash
Used by Operating Activities:
Depreciation and amortization 16,702 12,861
Issuance of common stock for expenses 1,060,500 --
Debt foregiveness on investor note interest (355,930) --
Increase (decrease) in:
Accounts payable and accrued expenses 4,291 33,164
----------- --------
NET CASH (USED) BY OPERATING ACTIVITIES (71,569) 3,401
----------- --------
INVESTING ACTIVITIES
Purchase of equipment (28,852) (4,473)
Purchase of investment (400,000) --
----------- --------
NET CASH USED BY INVESTING ACTIVITIES (428,852) (4,473)
----------- --------
FINANCING ACTIVITIES
Conversion of preferred stock to common stock -- 136
Decrease in debt (1,504,901) --
Issuance of common stock 2,069,204 --
----------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 564,303 136
----------- --------
NET INCREASE (DECREASE) IN CASH 63,882 (936)
BEGINNING CASH BALANCE 59,404 5,236
----------- --------
ENDING CASH BALANCE $ 123,286 $ 4,300
=========== ========
SUPPLEMENTAL DISCLOSURE
Cash paid during the year for interest $ -- $ --
NON-CASH INVESTING AND FINANCING ACTIVITIES
Reduction in treasury shares $ 162 $ --
Issuance of stock for legal settlements 1,405,415 $ --
</TABLE>
See accompanying notes.
F-26
<PAGE> 59
NATIONAL INSTITUTE COMPANIES OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
UNAUDITED
NOTE A - Basis of Presentation
On January 5, 2000, the Company changed its name to National Institute Companies
of America, Inc. from Mortgage Bankers Holding Corporation to better reflect its
on-going operations.
Mortgage Bankers Holding Corp. owned and operated the following wholly owned
subsidiaries:
Mortgage Bankers Service Corporation ("MBSC") - MBSC was a mortgage
corporation licensed in three states that provides conforming and
non-conforming mortgage loans. During 1998, MBSC ceased operations and out
of existence documents were filed with the appropriate state authorities.
Commonwealth Capital Investment Corporation ("CCIC") - CCIC issued
unregistered securities to Pennsylvania residents desiring long term
investments, pursuant to Section 203(d) of the Pennsylvania Securities Act
of 1972 as amended. Proceeds from the sales are used for lending to a
variety of individuals and companies and corporate working capital needs.
During 1998, CCIC ceased operations and out of existence documents were
filed with the appropriate state authorities.
Pinnacle Insurance and Investment Group, Inc. ("PIIG") - PIIG was a licensed
insurance agency in the state of Pennsylvania. PIIG offers a variety of
life, annuity and burial supplement insurance productivity. During 1998,
PIIG ceased operations and out of existence documents were filed with the
appropriate state authorities.
International Auto Funding Corp. ("IAF") - IAF was licensed in the States of
Pennsylvania and West Virginia. This subsidiary began operations on July 1,
1998. IAF offers sub-prime auto financing products. IAF was known as Prince
George Home, which was inactive at December 31, 1997. During 1998, IAF
ceased operations and out of existence documents were filed with the
appropriate state authorities.
National Settlements, Inc. ("NSI") - NSI was licensed in the state of
Pennsylvania. NSI is an abstract Corporation that closes residential
mortgage loans. NSI was acquired by the Company on May 1, 1998. During 1998,
NSI ceased operations and out of existence documents were filed with the
appropriate state authorities.
F-27
<PAGE> 60
NATIONAL INSTITUTE COMPANIES OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
UNAUDITED
National Institute Companies of America, Inc, ("NICA") and its wholly
owned subsidiaries:
National Institute for Estate Planning, Inc. which provides estate
planning services.
National Institute for Financial Services, Inc. which provides
financial services.
National Institute for Retirement Planning, Inc. which provides
retirement planning services.
NIEP Agency, Inc which is a licensed insurance agency.
National Institute for Employee Benefits, Inc. which provides employee
benefit consulting.
The consolidated financial statements include the accounts of the Corporation
and its wholly owned subsidiaries. All significant inter-company balances and
transactions have been eliminated.
The accompanying consolidated financial statements of the Corporation are
unaudited. However, in the opinion of management, they include all adjustments
necessary for a fair presentation of financial position, results of operations
and cash flows. The amounts presented for the three months ended March 31, 2000
are not necessarily indicative of the results for a full year. Additional
information contained in the audited financial statements in form 10-KSB of the
Corporation for the year ended December 31, 1999 dated May 5, 2000, which should
be read in conjunction with this quarterly report.
F-28
<PAGE> 61
NATIONAL INSTITUTE COMPANIES OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
UNAUDITED
NOTE B - INCOME TAXES
No federal or state income tax has been provided for the three months ended
March 31, 2000 due to the loss in the current period and the existence of unused
net operating loss carryforwards.
NOTE C - INVESTMENT
During the first quarter of 2000, the Company funded $400,000 out of an expected
amount of $650,000 for a promissory note receivable that bears interest at 10%.
The Company at its option has the ability to convert this note to a minority
ownership interest.
NOTE D - INVESTMENT NOTES PAYABLE
During the first quarter of 2000, substantially all the principal amount on the
investment notes were paid in full. The individuals that purchased the
investment notes were non-affiliated third parties who did not hold an equity
position in the Company. Interest on the investment notes was forgiven as part
of the payment of the notes and reflected on the consolidated statement of
operations as an Extraordinary Item - Gain on Extinguishment of Interest on
Investment Notes.
NOTE E - LEGAL SETTLEMENT
The Company issued approximately 2,500,000 shares of common stock valued at $
1,375,000 to settle an accrued legal claim. The law suit originated when the
Company was under the control of prior management and related to the sale of the
Company's stock in November 1998 under a Regulation D 504 B offering.
F-29
