As filed with the Securities and Exchange Commission on September 19, 2000
File No. 333-42640
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
Form SB-1/A (Alternative 2)
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
DISCOUNT MORTGAGE SOURCE, INC.
(Exact name of registrant as specified in its charter)
Texas 522200 75-2882833
---------------------------- ----------------------- ------------------
(State or jurisdiction of (Primary Industrial I.R.S. Employer
incorporation or organization) Classification Code No.) Identification No.
750 I-30 East, Suite 170, Rockwall, Texas 75087 (972) 771-3863
------------------------------------------------------------
(Address, including the ZIP code & telephone number, including area code of
Registrant's principal executive office)
Michael Kamps
750 I-30 East, Suite 170, Rockwall, Texas 75087
-----------------------------------------------
(972) 771-3863 (Name, address, including zip code, and telephone number,
including area code of agent for service)
Copies to: Lamberth & Stewart, PLLC
---------
Attorneys at Law
2840 Lincoln Plaza, 500 N. Akard Street
Dallas, Texas 75201
(214) 740-4270
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
<TABLE>
CALCULATION OF REGISTRATION FEE
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Title of Each Amount Proposed Maximum Proposed Amount of
Class of Securities To be Offering Price Maximum Aggregate Registration
to be Registered Registered Per Share (1) Offering Price(1) Fee
----------------------------------------------------------------------------------------------
Common Stock,
$0.001 par value
Minimum 240,000 $0.25 $ 60,000 $ 17
Maximum 2,000,000 $0.25 $ 500,000 $139
----------------------------------------------------------------------------------------------
Total maximum 2,200,000 $0.25 $550,000 $269(2)
</TABLE>
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that the registration statement
shall hereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Represents minimum fee.
<PAGE>
Initial public offering
prospectus
Discount Mortgage Source, Inc.
Minimum of 240,000 shares of common stock, and a
Maximum of 2,000,000 shares of common stock
$0.25 per share
We are making a best efforts offering to sell common stock in our
company. We provide an automated online mortgage application and approval
process that can be accessed over the internet twenty four hours per day, and
since the process is automated, the cost savings are passed on to the consumer
by charging lower fees when closing on their mortgage loan. The common stock
will be sold by our sole officer and director, Michael Kamps. The offering price
was determined arbitrarily and we will raise a minimum of $60,000 and a maximum
of $500,000. The funds will be held in escrow by an attorney until the minimum
amount is sold, at which time the funds will be released to the company and
stock certificates issued. The offering will end on December 31, 2000 and should
we not sell the minimum amount, the funds will promptly be returned to the
investors and no interest will be paid on these funds.
<TABLE>
<CAPTION>
The Offering:
Minimum offering Maximum offering
------------------------- -------------------------
Per Share Amount Per Share Amount
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Public Offering Price . . . $0.25 $ 60,000 $0.25 $500,000
Offering expenses $0.07 16,769 0.02 33,769
----- -------- --------- --------
Net proceeds $0.18 $ 43,231 $0.23 $466,231
</TABLE>
There is currently no market for our shares and no market may ever develop for
our shares.
----------------------------
This investment involves a high degree of risk. You should purchase shares only
if you can afford a complete loss. See "Risk Factors" beginning on Page 3.
Neither the Securities and Exchange Commission nor
any state securities commission has approved or
disapproved of these securities or passed upon the
adequacy or accuracy of the prospectus. Any
representation to the contrary is a criminal offense.
-----------------------------
This Prospectus is dated September 19, 2000
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PROSPECTUS SUMMARY
OUR COMPANY
We were incorporated on July 11, 2000 in the State of Texas. We are
engaged in the application of mortgage loans over the internet. To date we have
had three applications for loans. The first loan application closed on July 24,
2000 on which we earned revenue of $995.00. The other two are in the
underwriting process. The funds from this offering will allow us to begin
advertising, make strategic marketing alliances and make agreements with other
suppliers in order to increase sales. The minimum funds raised in this offering
will take us to a point where we reach the operating stage.
As well as being a newly formed company, we:
o are controlled by one individual;
o rely on our sole officer and director to manage the business,
this offering and continuing operations to see us through to
profitability;
o have limited operating history with little revenue from
operations;
o operate in an industry with low barriers of entry which could
add to our competition, and one in which there are many
competitors already, many of which have much greater resources
than we do; and
o received a report from our independent certified public
accountant gave us a 'going concern' opinion which states that
we do not have sufficient capital or operations to show that
we can continue as a viable business for the coming year.
THE OFFERING
Minimum Maximum
--------- ---------
Common shares offered 240,000 2,000,000
Common shares outstanding before this offering 2,200,000 2,200,000
--------- ---------
Total shares outstanding after this offering 2,440,000 4,200,000
Officers, directors and their affiliates will not be able to purchase shares in
this offering.
USE OF PROCEEDS
Most of the money you invest will represent proceeds to the company. We will use
the proceeds from this offering to:
o pay expenses of this offering
o develop our website to offer more products and better service
o marketing and general working capital
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RISK FACTORS
You should carefully consider the risks described below and all other
information contained in this prospectus before making an investment decision.
We are a recently formed company, formed in the State of Texas on July 11, 2000,
with limited activity and losses that may continue for the foreseeable future.
We have not achieved profitability and expect to continue to incur net losses
for the foreseeable future. We expect to incur significant operating expenses
and, as a result, will need to generate significant revenues to achieve
profitability, which may not occur. Even if we do achieve profitability, we may
be unable to sustain or increase profitability on a quarterly or annual basis in
the future. If we are unable to achieve profitability, your investment in our
common stock may decline or become worthless.
We rely on our sole officer for decisions and he will retain substantial control
over our business after the offering and may make decisions that are not in the
best interest of all stockholders.
Upon completion of this offering, our sole officer will, in the aggregate,
beneficially own approximately 81.96% (or 47.62% if maximum is sold) of the
outstanding common stock. As a result, our sole officer will have the ability to
control substantially all the matters submitted to our stockholders for
approval, including the election and removal of directors and any merger,
consolidation or sale of all or substantially all of our assets. He will also
control our management and affairs. Accordingly, this concentration of ownership
may have the effect of delaying, deferring or preventing a change in control of
us, impeding a merger, consolidation, takeover or other business combination
involving us or discouraging a potential acquirer from making a tender offer or
otherwise attempting to take control of us, even if the transaction would be
beneficial to other stockholders. This in turn could materially cause the value
of our stock to decline or become worthless.
We may have to raise additional capital which may not be available or may be too
costly.
Our capital requirements are and will continue to be more than our operating
income. We do not have sufficient cash to indefinitely sustain operating losses.
Our potential profitability depends on our ability to generate and sustain
substantially higher net sales while maintaining reasonable expense levels. We
cannot assure you that we will be able to operate on a profitable basis or that
cash flow from operations will be sufficient to pay our operating costs. We
anticipate that the funds raised in this offering will be sufficient to fund
operations through June 2001. Thereafter, if we do not achieve profitability, we
will need to raise additional capital to finance our operations. We anticipate
seeking additional financing through debt or equity offerings. We cannot assure
you that additional financing will be available to us, or, if available, any
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financing will be on terms acceptable or favorable to us. If we need and cannot
raise additional funds, further development of our business, upgrades in our
technology, additions to our product lines may be delayed and we otherwise may
not be able to execute our business plan, all of which may have a material
adverse effect on our operations; if this happens, the value of your investment
will decline and may become worthless.
We are dependent on mortgage lender relationships to approve our borrowers and
if we lose these relationships without replacing them, our business could
decline and cause your investment to become worthless.
We are dependent on four mortgage lender relationships to funds on mortgage
loans since we act as a broker. These lenders are under no obligation to
continue their relationships with us or make a loan to any potential borrower we
present to them. Our reliance on this group of lenders makes our origination
volume more susceptible to changes in the rates, services and products such
lenders offer. The loss of our relationship with any of these lenders, or the
failure of these lenders to offer competitive terms, could have a material
adverse impact on our ability to attract borrowers and close loans which could
cause the value of your investment to decline or become worthless.
If there are interruptions or delays in obtaining appraisal, credit reporting,
title searching and other underwriting services from third parties, we may
experience customer dissatisfaction and difficulties closing loans which would
affect our revenue and the value of your investment would decline or become
worthless.
We rely on other companies to perform certain aspects of the loan underwriting
process, including appraisals, credit reporting and title searches. If the
provision of these ancillary services were interrupted or delayed, it could
cause delays in processing and closing loans for our customers. The value of the
service we offer and the ultimate success of our business are dependent on our
ability to secure the timely provision of these ancillary services by the third
parties with whom we have these relationships. If we are unsuccessful in
securing the timely delivery of these ancillary services we will likely
experience customer dissatisfaction and our revenue would suffer causing the
value of your investment to decline or to become worthless.
If interest rates rise, demand for mortgages generally declines which in turn
affects our revenue adversely and will cause your investment to decline in
value.
The residential mortgage business depends upon the overall levels of sales and
refinancing of residential real estate as well as on mortgage loan interest
rates. An increase in interest rates, which is outside our control, could have a
material adverse impact on our business. Rising interest rates discourage
refinancing activities and generally reduce the number of home sales that occur.
If interest rates should rise, our revenue could be adversely affected and the
value of your investment will decline.
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FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These
forward-looking statements are not historical facts but rather are based our
current expectations, estimates and projections about our industry, our beliefs
and our assumptions. Words such as "anticipates", "expects", "intends", "plans",
"believes", "seeks" and "estimates", and variations of these words and similar
expressions, are intended to identify forward-looking statements. These
statements are not guarantees of future performance and are subject to risks,
uncertainties and other factors, some of which are beyond our control, are
difficult to predict and could cause actual results to differ materially from
those expressed, implied or forecasted in the forward-looking statements. In
addition, the forward-looking events discussed in this prospectus might not
occur. These risks and uncertainties include, among others, those described in
"Risk Factors" and elsewhere in this prospectus. Readers are cautioned not to
place undue reliance on these forward-looking statements, which reflect our
management's view only as of the date of this prospectus.
DILUTION
If you purchase common stock in this offering, you will experience an
immediate and substantial dilution in the projected book value of the common
stock from the price you pay in this initial offering.
The projected book value of our common stock as of July 15, 2000 was
$25,175 or $0.01 per share. Projected book value per share is equal to our total
assets, less total liabilities, divided by the number of shares of common stock
outstanding.
After giving effect to the sale of common stock offered by us in this
offering, and the receipt and application of the estimated net proceeds (at an
initial public offering price of $0.25 per share, after deducting estimated
offering expenses), our projected book value as of July 15, 2000 would be
approximately $68,406 or $0.03 per share, if the minimum is sold, and $491,406
or $0.12 per share, if the maximum is sold.
This means that if you buy stock in this offering at $0.25 per share,
you will pay substantially more than our current shareholders. The following
represents your dilution:
o if the minimum of 240,000 shares are sold, an immediate
decrease in book value to our new shareholders from $0.25 to
$0.03 per share and an immediate increase in book value per
common share to our current stockholders.
o if the maximum of 2,000,000 shares are sold, an immediate
decrease in book value to our new shareholders from $0.25 to
$0.13 per share and an immediate increase in book value per
common share to our current stockholders.
The following table illustrates this per share dilution:
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<TABLE>
Minimum Maximum
Assumed initial public offering price $0.25 $0.25
Projected book value as of July 15, 2000 $0.01 $0.01
Projected book value after this offering $0.03 $0.12
Increase attributable to new stockholders: $0.02 $0.11
Projected book value
as of July 15, 2000 after this offering $0.03 $0.12
Decrease to new stockholders ($0.22) ($0.13)
Percentage dilution to new stockholders 84 % 20 %
The following table summarizes on a projected basis as of July 15,
2000, shows the differences between the number of shares of common stock
purchased, the total consideration paid and the total average price per share
paid by the existing stockholders and the new investors purchasing shares of
common stock in this offering:
Minimum offering
----------------
Number Percent Average
of shares of shares Amount price per
owned owned paid share
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current
shareholders 2,200,000 90.1 $ 27,000 $ 0.012
New investors 240,000 9.9 $ 60,000 $ 0.25
---------------------------------------------------------------------
Total 2,440,000 100.0 $ 74,000
Maximum offering
----------------
Number Percent Average
of shares of shares Amount price per
owned owned paid share
-------------------------------------------------------------------------------------------------
Current
shareholders 2,200,000 52.4 $ 27,000 $ 0.012
New investors 2,000,000 47.6 $ 500,000 $ 0.25
---------------------------------------------------------------------
Total 4,200,000 100.0 $ 527,000
</TABLE>
PLAN OF DISTRIBUTION
This is a direct participation offering of our common stock and is
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being sold on our behalf by our sole officer and director, who will receive no
commission on such sales. All sales will be made by personal contact by our sole
officer and director, Michael Kamps. We will not be mailing our prospectus to
anyone or soliciting anyone who is not personally known by Mr. Kamps, introduced
to Mr. Kamps and personally contacted by him or referred to him.
The money we raise in this offering before the minimum amount is sold
will be held under an escrow agreement with T. Alan Owen & Associates, P.C.,
Attorneys at Law. Such funds will be refunded immediately, without interest, if
the minimum amount is not sold by December 31, 2000.
Certificates for shares of common stock sold in this offering will be
delivered to the purchasers by Signature Stock Transfer, Inc., the stock
transfer company chosen by the company as soon as the minimum subscription
amount is raised.
USE OF PROCEEDS
The total cost of the offering is estimated to be $16,769 if the
minimum is sold, or $33,769 if the maximum is sold, consisting primarily of
legal, accounting and blue sky fees. We will pay these costs out of the funds we
raise in this offering.
The following table shows how we plan to use the proceeds from selling
common stock in this offering, reflecting the minimum and maximum subscription
amounts:
$60,000 $500,000
minimum maximum
--------------------------------------------------------------------------------
Legal, accounting & printing expenses 9,500 26,500
Other offering expenses 7,269 7,269
Net proceeds to company 43,231 466,231
-------- ---------
Total $ 60,000 $ 500,000
The following describes each of the expense categories:
o legal, accounting and printing expense is the estimated costs
associated with this offering; o other offering expenses
includes SEC registration fee, blue sky fees and miscellaneous
expenses with regards to this offering.
The following table shows how we plan to use the net proceeds to the
company:
$60,000 $500,000
minimum maximum
--------------------------------------------------------------------------------
Development of website $ 10,000 $ 50,000
Office equipment 4,000 46,000
Salaries -0- 78,000
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Internet security -0- 27,000
Advertising our website 19,000 215,000
Expenses in adding new products/services 5,000 30,000
General corporate overhead 5,231 20,231
-------- ---------
Proceeds to company $ 43,231 $ 466,231
We have a fully operational website which is our main asset. To date,
our internet activity is limited and we have little revenue from operations. We
have three loans in process of which one closed on July 24, 2000, resulting in
revenue of $995.00.
DESCRIPTION OF BUSINESS
We were incorporated in Texas on July 11, 2000. Our founder, Michael
Kamps is our sole director, officer and employee and broker of record and holds
2,000,000 shares of common stock which we issued to him for $2,000, composed of
$500 cash and $1,500 of his services.
We are an internet-based loan marketplace for consumers and lenders.
Currently, we operate the web site http://discountmortgagesource.com, offering
15 and 30 year fixed rate mortgages up to and including $252,700. Year to date,
the total broker compensation on loan volume has been $995. Given prevailing
market conditions, a traditional mortgage broker source would have earned $4,000
on the same loan volume. We recognize the market niche of lower broker fees, and
are developing additional product offerings that will provide for loans up to
$1,000,000, with the expectation fees will increase proportionately. To date we
have had three mortgage loan applications. The first loan closed on July 24,
2000 generating $995.00 revenue to us and the other two are in the approval
and/or closing process.
Mortgage lending on the internet can offer borrowers an easier, faster
and less expensive way to obtain mortgage loans. We have designed this platform
to decrease the cost of originating, closing and selling loans, so consumers who
obtain a loan via our technology platform will save money when compared to
obtaining a loan using a traditional lender. We offer borrowers an alternative
to the traditional mortgage transaction, allowing the consumer more control over
terms and conditions through an easy to use interactive web based mortgage
model. We believe this process results in greater satisfaction to the consumer
due to them being in control of the information and the process.
We recognize some borrowers have credit or other issues which may cause
an underwriter to decline their loan request. Consequently, the assistance of a
good loan officer is justified. However, it is our President's experience that
many borrowers do not have credit problems. They know exactly what their
financial capabilities are, where they are getting the down payment funds, what
type of mortgage they want, and so on. It is for these types of customers that
our company was founded. The borrower simply completes an on-line application
and submits it to the processor. The processor ensures that all the information
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is complete and correct and electronically submits the application to an
automated underwriter which either approves or declines the loan. If the loan is
approved, the borrower is notified of the approval along with any conditions
determined by the automated underwriter. If the loan request is declined, we
will notify the customer and recommend the use of a loan officer. We do not
employ loan officers, believing the filling of the niche in the marketplace for
informed and knowledgeable borrowers to be our focus.
The United States Mortgage Market:
The United States residential mortgage market is a substantial and
growing part of the U.S. economy. According to the Mortgage Bankers Association,
outstanding consumer mortgage debt exceeded $4.3 trillion at the end of 1998.
Loan origination volume in the U.S. reached a record high of $1.5 trillion in
1998, compared to $834 billion in 1997. The residential mortgage market is
fragmented, with the largest mortgage lender, Norwest Mortgage, accounting for
only 7.7% of funded loans in 1998 (source: FiNet.com, Inc. S-1 filing dated
August 31, 1999).
With the advent of on-line and e-commerce technologies, loan
originations can be made electronically, resulting in cost and time savings to
consumers and the mortgage brokers who assist those consumers. Although the
on-line mortgage industry is still relatively new, it is expected to grow
rapidly. According to Forrester Research, the market for on-line mortgage
originations is expected to grow from an estimated $18.7 billion in 1999 to over
$91.2 billion in 2003, representing an increase in on-line mortgage originations
from 1.5% of the existing market in 1999 to 9.6% of the projected market in 2003
(source: Mortgage.com, Inc. S-1 filing, June 26, 2000).
Marketing and Growth Strategy:
Our marketing strategy is to promote our name and attract mortgage
borrowers to our website. To attract users to our website, we have relied on
word of mouth and being one of many on-line mortgage companies that come up on
search engines.
As we develop name brand recognition, we intend to develop marketing
programs that will include the use of strategic purchases of online advertising
to place advertisements in areas in which it believes it can reach its target
audience. We also aspires to engage in a number of marketing activities in
traditional media such as advertising in print media, on radio and other events.
DMS also aspires to advertise in a number of targeted publications. We also
propose to purchase online advertising and sponsorships on selected websites
with high affinity to consumer credit such as websites relating to real estate
and personal finance, as well as sponsoring certain keywords on the major search
engines. For example, when a search is made for the keywords "loan" or
"mortgage," a DMS banner advertisement may appear.
The on-line nature of our business enables us to offer our services
nationwide and does not require us to establish a physical presence in new
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markets. However, we must be licensed in any state where we make loans. While we
currently make loans in Texas we expect that the expanded geographic scope of
our e-commerce lending capabilities will cause the proportion of loans we make
outside of Texas to increase. In addition, we intend to become licensed in the
states in which we are not currently licensed to originate mortgage loans.
It is our objective to be a leading provider of e-commerce on-line
mortgages. Key elements of our marketing and growth strategy include:
Plans:
o Direct e-mail. We use e-mail to prompt consumers to visit our website,
communicate with consumers throughout the lending process, and promote
loan closing;
o Direct mail to Realtors;
o Agreements with search engines so that our site will be near the
top/front of searches for our product;
o Build and promote our brand;
o Selected print media such as Realtor publications, real estate section
of local newspapers and regional issues of the Wall Street Journal;
o Selected radio spots primarily on stations featuring a news/talk
format.
As mentioned, we aspire to expand our e-commerce capability to include:
o Partnering with industry leaders to quickly acquire customers;
o Pursue multiple and recurring revenue streams. In addition to
originating single family home mortgages through our Web site, we
intend to expand those product offering to include other financial
services and products;
o Relationships with high traffic webites;
o Strategic purchases of online advertising;
o Sponsorships on selected websites with high affinity to consumer credit
such as those relating to real estate and personal finance;
o Sponsoring key words on major search engines. For example, when a
search is made for key words like "loan" or "mortgage", a DMS banner
advertisement may appear;
o Cross Selling. Through our cross-sell efforts, consumers will have the
opportunity to purchase related products and services at various points
in the loan process. Future cross- sell offerings are proposed to
include credit cards, homeowners' insurance, and life insurance. We
intend to increase the breadth of our cross-sell efforts;
o Selling goods and services promoted to our advertisers' storefronts; o
Electronic marketplaces;
o Exchanges; and
o Selling goods and services from our proprietary virtual store.
Competition:
The following are some of our major competitors in the on-line mortgage
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origination market: E-LOAN, mortgage.com,QuickenMortgage, iOwn.com, and
NextCard; traditional banks and brokers; and existing online referral agents
such as GetSmart, Microsoft's HomeAdvisor, Creditland, and MortgageAuction.com.
Our success depends upon capturing and maintaining a share of consumers who
obtain loans over the internet. In order to do this, we must continue to build
on our first mover advantage, continue to increase brand awareness among
consumers and lenders, expand our network of lenders, establish additional
strategic relationships, and continually upgrade our technology. Many of our
current competitors, however, have longer operating histories, greater name
recognition, larger customer bases, and significantly greater financial,
technical, and marketing resources than we do. In addition, participants in
other areas of the financial services industry may enter the consumer loan
marketplace.
Operations and Technology:
Our operations are very simple because everything is automated. We had
our website designed so that it is not only simple to use by an individual
wishing to finance a home via the internet, which they can do by going to our
site http://www.discountmortgagesource.com., but we also designed it so that it
is easy for us to administrate on our end.
We are dependent on mortgage lender relationships to fund our mortgage
loans since we act as a broker. We currently have four wholesale lenders. These
lenders have agreed to purchase loans originated by us provided that the loans
meet their underwriting guidelines. We expect to establish additional
relationships should our volume increase or if we determine it is advantageous
to do so. Although the lenders are under no obligation to continue their
relationships with us, our sole officer and broker of record has never had a
relationship with a lender terminated, nor has any lender declined to establish
a relationship with him. However, the loss of our relationship with these
lenders coupled with the failure to add new lender relationships, would have a
material adverse impact on our business and could cause the value of your
investment to decline or become worthless.
We have built a complete processing system to handle all phases of the
loan process for those who have good credit. The market in which the we compete
is characterized by rapidly changing technology, evolving industry standards,
frequent new service and product announcements, introductions and enhancements
and changing customer demands. Accordingly, our future success will depend on
our ability to adapt to rapidly changing technologies, to adapt its services to
evolving industry standards and to continually improve the performance, features
and reliability of its service in response to competitive service and product
offerings and evolving demands of the marketplace. The failure of the Company to
adapt to such changes would harm the company's business. In addition, the
widespread adoption of new internet, networking or telecommunications
technologies or other technological changes could require substantial
expenditures by the company to modify or adapt its services or infrastructure.
If we only raise a small amount in this offering and technology changes too
rapidly, we may not have the funds to devote to these changes and if this
happens, your investment may become worthless.
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PLAN OF OPERATIONS
Following is our plan of operations based upon the amount of capital we
raise in this offering. Discount Mortgage Source, Inc. is a statewide (State of
Texas) mortgage lender. We are currently seeking to raise between $60,000 and
$500,000 to expand our business. Our market is defined as those borrowers having
excellent credit, seeking to borrow between $100,000 and $252,700 secured by
their personal residences (either purchase or refinance) and who are willing to
apply for such credit over the internet.
Our initial concentration will be in the Austin, Texas market, as it
has been the experience of our broker of record that consumers (borrowers) in
Austin are more likely to utilize the internet than consumers in any other
metropolitan region of the state.
Assuming we raise the minimum amount in this offering, netting approximately
$43,231 to the company, we will be able to fund the following:
o Design and printing of brochures;
o Design enhancements to the existing website;
o Direct mail to the Realtors(R)in the Austin, Texas area;
o Travel and refreshment costs for broker to hold Realtor(R)
meetings in the Austin area, introducing Realtors(R) to the
Discount Mortgage Source concept and website;
o Advertising on news/talk format radio stations in the Austin
area.
At this level of funding, we would outsource our processing at a cost
of $300 per loan until we were closing at least 20 loans per month. It is
anticipated that a processor would be able to handle approximately 35-45 loans
per month. When we reach the level of hiring a processor, we will also need
computer equipment and processing software costing about $16,000. This equipment
could be leased or purchased.
At this level of funding, we will be profitable and operationally self
sustaining and will not need to raise additional capital for operations.
Assuming we raise the maximum amount in this offering, netting approximately
$466,231 to the company, we will be able to accomplish the following in addition
to the activities listed above:
o Quickly expand the Austin model to other metropolitan areas of
Texas, without having to wait for profits from Austin to
finance the expansion;
o Identify other promising states in which to do business, and
obtain licensing in those states, with a view to becoming a
nationwide lender;
o Be approved by FNMA (Fannie Mae) and FHLMC (Freddie Mac) as a
"seller servicer", allowing us to build additional
income/value by servicing the product we originate;
o Obtain a warehouse line of credit, allowing us more control of
closings and the opportunity for additional income.
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DESCRIPTION OF PROPERTY
Our corporate facilities are shared with our sole officer and director
which includes the use of telephones and equipment for $150.00 per month. This
arrangement will start in August 2000 and continue until such time as the
Company needs and can afford to lease its own office facilities.
We also lease space on an internet service provider's server based upon
the amount of memory we use.
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The directors and officers of the company, their ages and principal
positions are as follows:
Name Age Position
--------------------------------------------------------------------------------
Michael Kamps 42 President; Secretary and Director
Background of Directors and Executive Officers:
Michael Kamps. Mr. Kamps, a 42 year old native Texan, formed the company and at
this time is its only officer and director. He graduated from Texas A&M
University, College Station Texas in 1979, and since that time has been involved
in many aspects of the financial and real estate industries. Mr. Kamps has held
numerous licenses and certifications, including that of Certified Public
Accountant, and licensed Real Estate and Insurance agent. Mr. Kamps has been a
mortgage loan broker since 1986. As of January, 2000, mortgage loan officers and
brokers are required to be licensed in the State of Texas, and Mr. Kamps is
licensed as a Mortgage Broker. Since July, 1996, Mr. Kamps has been President of
Heritage Funding Company, LLC, a full service mortgage brokerage firm.
Initially, Mr. Kamps will not spend full time on the activities of the
company since his current activities would take up some of his time. In
addition, the company's activities need very little time since most steps in the
business of the company are automated. These activities include operating
Heritage Funding Company, LLC, a traditional - as opposed to a fully automated
internet based - residential mortgage company. Mr. Kamps can devote more and
more time to the activities of the company as time goes on since his employees
can run Heritage Funding Company, LLC. and Mr. Kamps can step aside from those
responsibilities at any time. Initially, he expects to spend ten hours per week
and increase that weekly time as the activities of the company require. Mr.
Kamps is prepared to devote himself full time to the success of the company.
13
<PAGE>
REMUNERATION OF DIRECTORS AND OFFICERS
Our sole officer and director has received no compensation other than
the 1,500,000 shares of common stock he received for services on July 11, 2000
and has no employment contract with the company.
Name of Person Capacity in which he served Aggregate
Receiving compensation to receive remuneration remuneration
--------------------------------------------------------------------------------
Michael Kamps President, Secretary 1,500,000 shares
and Treasurer of common stock
Mr. Kamps received the common stock upon formation of the company and
it is impracticable to determine the cash value. Since the common stock was
issued upon forming of our company for services performed which we cannot
estimate the value since that work continues through the filing and
effectiveness of this registration statement, with no other compensation to be
granted for the work done on this filing.
As of the date of this offering, we have no plans to pay any
remuneration to anyone in or associated with our company. When we have funds
and/or revenue, our board of directors will determine any remuneration at that
time.
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
In July 2000, the president of the company received 2,000,000 shares of
common stock which we issued to him for $2,000, composed of $500 cash and $1,500
of his services.
In July 2000, we entered into an agreement with two companies to
develop and link our website for which the companies received a total of 200,000
shares valued at $0.125 per share. In addition, we are required to register
their shares as part of this offering.
As of the date of this filing, there are no agreements or proposed
transactions, whether direct or indirect, with anyone, but more particularly
with any of the following:
o a director or officer of the issuer;
o any principal security holder;
o any promoter of the issuer;
o any relative or spouse, or relative of such spouse, of the
above referenced persons.
PRINCIPAL SHAREHOLDERS
The following table lists the officers, directors and stockholders who,
at the date hereof, own of record or beneficially, directly or indirectly, more
than 10% of the outstanding commonstock, and all officers and directors of the
company:
14
<PAGE>
Name and Address Amount owned
Title of Owner before offering Percent
--------------------------------------------------------------------------------
President, Secretary Michael Kamps 2,000,000 90.91%
And Director 750 I-30 East, Suite 170
Rockwall, Texas 75087
--------------------------
Total 2,000,000 100.00%
After offering: Minimum 2,000,000 81.96%
--------------
Maximum 2,000,000 47.62%
SECURITIES BEING OFFERED
We are offering for sale common stock in our company at a price of
$0.25 per share. We are offering a minimum of 240,000 shares and a maximum of
2,000,000 shares. The authorized capital in our company consists of 50,000,000
shares of common stock, $0.001 par value per share. As of July 15, 2000, we had
2,200,000 shares of common stock issued and outstanding.
Every investor who purchases our common stock is entitled to one vote
at meetings of our shareholders and to participate equally and ratably in any
dividends declared by us and in any property or assets that may be distributed
by us to the holders of common stock in the event of a voluntary or involuntary
liquidation, dissolution or winding up of the company.
The existing stockholders have no preemptive rights to purchase common
stock offered for sale by us, and no right to cumulative voting in the election
of our directors.
RELATIONSHIP WITH ISSUER OF EXPERTS NAMED IN REGISTRATION STATEMENT
The experts named in this registration statement were not hired on a
contingent basis and have no direct or indirect interest in our company. Our
attorney may purchase shares in this offering. Our certified public accountant
may not purchase shares in this offering.
LEGAL PROCEEDINGS
We are not involved in any legal proceedings at this time.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
We have retained the same accountant, Charles E. Smith, as our
independent certified public accountant since our inception on July 11, 2000. We
have had no disagreements with him on accounting and disclosure issues.
15
<PAGE>
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our certificate of incorporation provides that the liability of our
officers and directors for monetary damages shall be eliminated to the fullest
extent permissible under Texas law, which includes elimination of liability for
monetary damages for defense of civil or criminal actions. The provision does
not affect a director's responsibilities under any other laws, such as the
federal securities laws or state or federal environmental laws.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the
foregoing provisions, or otherwise, the small business issuer has been
advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.
We have no underwriting agreement and therefore no provision for
indemnification of officers and directors is made in an underwriting by a broker
dealer.
LEGAL MATTERS
Our attorney has passed upon the legality of the common stock issued
before this offering and passed upon the common stock offered for sale in this
offering. Our attorney is Lamberth & Stewart, PLLC, 2840 Lincoln Plaza, 500 N.
Akard Street, Dallas, Texas 75201.
EXPERTS
The financial statements as of July 15, 2000, and for the period from
inception (July 11, 2000) to July 15, 2000 of the company included in this
prospectus have been audited by Charles E. Smith, independent certified public
accountant, as set forth in his report. The financial statements have been
included in reliance upon the authority of him as an expert in accounting and
auditing.
SUMMARY FINANCIAL DATA
The following table sets forth certain of our summary financial
information. This information should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this prospectus.
16
<PAGE>
Audited
Balance Sheet: July 15, 2000
--------------------------------------------------------------
Working Capital $ 175
Total Assets $25,175
Total Liabilities $ -0-
Stockholders' Equity $25,175
July 11, 2000 (date
of inception) to
Statement of Operations: July 15, 2000
--------------------------------------------------------------
Revenue $ -0-
Cost of Sales $ -0-
Operating Expense $ 1,825
Net Income (Loss) $(1,825)
DIVIDEND POLICY
To date, we have not declared or paid any dividends on our common
stock. We do not intend to declare or pay any dividends on our common stock in
the foreseeable future, but rather to retain any earnings to finance the growth
of our business. Any future determination to pay dividends will be at the
discretion of our board of directors and will depend on our results of
operations, financial condition, contractual and legal restrictions and other
factors it deems relevant.
CAPITALIZATION
The following table sets forth our capitalization as of July 15, 2000.
Our capitalization is presented on:
o an actual basis;
o a pro forma basis to give effect to net proceeds from the sale of the
minimum number of shares (240,000) we plan to sell in this offering;
and
o a pro forma basis to give effect to the net proceeds from the sale of
the maximum number of shares (2,000,000) we plan to sell in this
offering.
After After
Actual Minimum Maximum
July 15, 2000 Offering Offering
------------- -------- --------
Stockholders' equity
Common Stock, $0.001 par value;
25,000,000 shares authorized; 2,200 2,440 4,200
Additional Paid In Capital 24,800 67,791 489,031
Retained deficit (1,825) (1,825) ( 1,825)
Total Stockholders' Equity 25,175 68,406 491,406
17
<PAGE>
Total Capitalization 25,175 68,406 491,406
Number of shares outstanding 2,200,000 2,440,000 4,200,000
The company has only one class of stock outstanding. The common stock
sold in this offering will be fully paid and non assessable, having voting
rights of one vote per share, have no preemptive or conversion rights, and
liquidation rights as is common to a sole class of common stock. The company has
no sinking fund or redemption provisions on any of the currently outstanding
stock and will have none on the stock sold in this offering.
TRANSFER AGENT
We will serve as our own transfer agent and registrar for the common
stock until such time as this registration is effective and we sell the minimum
offering, then we intend to retain Signature Stock Transfer, Inc., 14675 Midway
Road, Suite 221, Dallas, Texas 75244.
18
<PAGE>
Charles E. Smith
Certified Public Accountant
709-B West Rusk
Suite 580
Rockwall, Texas 75087
TELEPHONE (214) 212-2307
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
of Discount Mortgage Source, Inc.
I have audited the accompanying balance sheets of Discount Mortgage
Source, Inc. (a development stage company) as of July 15, 2000, and the related
statements of operations, stockholders' equity and accumulated deficit, and cash
flows for the period from inception (July 11, 2000) to July 15, 2000. These
financial statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based on
my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Discount Mortgage
Source, Inc. as of July 15, 2000, and the results of operations and its cash
flows for the period from inception (July 11, 2000) to July 15, 2000 in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As described in Note F to the
financial statements the Company is a start up enterprise and presently does not
have capital resources which raises doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustment that might arise from the outcome of this uncertainty.
Charles E. Smith
Rockwall, Texas
July 22, 2000
F-1
<PAGE>
DISCOUNT MORTGAGE SOURCE, INC.
a Development Stage Company
BALANCE SHEETS
July 15, 2000
ASSETS
------
July 15, 2000
----------------
CURRENT ASSETS:
Cash $175
PROPERTY AND EQUIPMENT:
Website 25,000
----------------
TOTAL ASSETS $25,175
================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
LIABILITIES 0
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value 2,200
Additional paid-in-capital 24,800
Deficit accumulated during the development stage (1,825)
----------------
Total Stockholders' Equity 25,175
----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $25,175
================
See accompanying notes F-2
<PAGE>
DISCOUNT MORTGAGE SOURCE, INC.
a Development Stage Company
STATEMENT OF OPERATIONS
Period from Inception (July 11, 2000) to July 15, 2000
Period from
Inception
(July 11, 2000)
to
July 15, 2000
----------------
REVENUE:
Sales $0
Interest income
Total revenue $0
COST OF SALES: 0
----------------
GROSS PROFIT 0
OPERATING EXPENSE:
Depreciation and amortization 0
Consulting - related party 1,500
General and administrative 325
----------------
Total Operating Expense 1,825
----------------
NET LOSS ($1,825)
================
Weighted average shares outstanding 2,160,000
================
Loss per share - basic and diluted ($0.00)
================
See accompanying notes F-3
<PAGE>
<TABLE>
<CAPTION>
DISCOUNT MORTGAGE SOURCE, INC.
a Development Stage Company
STATEMENT OF STOCKHOLDERS' EQUITY AND ACCUMULATED DEFICIT
Period from inception (July 11, 2000) to July 15, 2000
Common Stock Paid In
Shares Amount Capital Total
-------------------------------------------------------------- ----------------
<S> <C> <C> <C> <C>
Balance,
July 11, 2000
(date of inception) -0- -0- -0- -0-
Shares issued on July 11, 2000 for:
Cash 500,000 500 500
Services 1,500,000 1,500 1,500
July 12, 2000 for:
Website development 200,000 200 24,800 25,000
Net Loss (1,825)
-------------------------------------------------------------- ----------------
Balance
June 30, 2000 2,200,000 $2,200 $24,800 $25,175
============================================================== ================
</TABLE>
See accompanying notes F-4
<PAGE>
<TABLE>
<CAPTION>
DISCOUNT MORTGAGE SOURCE, INC.
a Development Stage Company
STATEMENT OF CASH FLOWS
Period from inception (July 11, 2000) to July 15, 2000
Period from
Inception
(July 11, 2000)
to
July 15, 2000
----------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($1,825)
Adjustments to reconcile net loss to net
cash (used) by operating activities:
Items not requiring cash - stock issued for services 1,500
----------------
NET CASH (USED) BY OPERATING ACTIVITIES: (325)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of assets 0
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 500
----------------
Total cash flows from financing activities 500
----------------
NET INCREASE IN CASH $175
CASH, BEGINNING OF PERIOD 0
----------------
CASH, END OF PERIOD $175
================
</TABLE>
Note:
----
Non-cash investing activity - the company issued 200,000 shares valued
at $0.125 per share for a total of $25,000 for development of its
website.
See accompanying notes F-5
<PAGE>
DISCOUNT MORTGAGE SOURCE, INC.
a Development Stage Company
NOTES TO FINANCIAL STATEMENTS
July 15, 2000
Note A - Nature of Business and Summary of Significant Accounting Policies:
---------------------------------------------------------------------------
History: The Company was organized July 11, 2000 under the name of Discount
Mortgage Source, Inc. in the State of Texas and is in the development stage. The
Company's business plan outlines its plan of operations which is to allow people
to obtain residential mortgage loans over the internet. Its development
activities included the setting up of the Company's website and advertising its
website to encourage borrowers to apply for loans on the internet.
Basis of Accounting:
It is the Company's policy to prepare its financial statements on the accrual
basis of accounting in conformity with generally accepted accounting principles.
Sales are recorded as income in the period in which they are earned and expenses
are recognized in the period in which the related liability is incurred.
Revenue Recognition:
Revenue is recognized when a loan is closed. The company receives a fee for each
loan that is processed through its website and subsequently closed.
Cash and Cash Equivalents:
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments with a maturity of three months or less to be cash
equivalents.
Loss per Common Share:
Loss applicable to common share is based on the weighted average number of
shares of common stock outstanding during the period presented.
Accounting Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the amount reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Stock based compensation:
The Company accounts for stock based compensation in accordance with FAS 123 and
APB No. 25 and the Financial Accounting Standards Board Interpretation No. 44.
This requires that we base the issuance of stock at the fair value of the
consideration received.
F-6
<PAGE>
DISCOUNT MORTGAGE SOURCE, INC.
A Development Stage Company
NOTES TO FINANCIAL STATEMENTS
July 15, 2000
Note A - Nature of Business and Summary of Significant Accounting Policies
(con't):
--------------------------------------------------------------------------------
Software Development Costs: The Company accounts for its software
development costs under the provisions of Statement of Position 98-1 "Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use",
which was issued by the AICPA in 1998. This requires the capitalization of the
costs incurred in connection with developing or obtaining internal-use software.
Income Tax:
The Company is subject to the greater of federal income taxes computed under the
regular system or the alternative minimum tax (ATM) system. The Company uses an
asset and liability approach for the accounting and financial reporting of
income tax as required by SFAS No. 109. Under this method, deferred tax assets
and liabilities are determined based on temporary differences between the
financial carrying amounts and the tax bases of assets and liabilities using
enacted tax rates in effect in the years in which the temporary differences are
expected to reverse.
Note B - Web site:
-----------------
The Company's primary asset is its web site which is the center of its
operational and income generating activities for which it paid $25,000. The cost
of the web site is being amortized over three years starting in August 2000, the
first full month of operation.
The cost of developing the web site is accounted for under the provisions of
Statement of Position 98-1 "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use", which was issued by the AICPA in 1998.
This requires the capitalization of the costs incurred in connection with
developing or obtaining internal-use software.
In March 2000, the Financial Accounting Standards Board issued Interpretation
No. 44 (FIN No. 44) "Accounting for Certain Transactions Involving Stock
Compensation", an interpretation of APB Opinion No. 25" which was effective July
1, 2000. The website development was paid for by issuing 200,000 shares of
common stock, the value of which was $0.125 per share which was arbitrarily
determined and negotiated since there was no readily determinable market value
for the Company's shares.
F-7
<PAGE>
DISCOUNT MORTGAGE SOURCE, INC.
A Development Stage Company
NOTES TO FINANCIAL STATEMENTS
July 15, 2000
Note C - Stockholders' Equity:
-----------------------------
Common Stock:
The Company is authorized to issue 50,000,000 common shares of stock at a par
value of $0.001 per share. These shares have full voting rights. At July 15,
2000, there were 2,200,000 shares outstanding respectively. The Company has not
paid a dividend to its shareholders.
Common stock issuances
On July 11, 2000, the Company issued 2,000,000 shares to the President for
$2,000, comprised of $500 cash and $1,500 of his services. The services were
valued at $1,500 and the stock issued at par.
On July 12, 2000, the Company issued to unrelated parties 200,000 shares for the
development of its website valued at $25,000. The value assigned of $0.125 per
share was arbitrarily determined and negotiated by the Company and the
developers of the website since there was no readily determinable market value
for the shares.
Note D - Income Taxes:
---------------------
The Company had a net operating loss of $1,825 for the period presented. The
Company's year end is September 30. No deferred tax asset has been recognized
for the operating loss as any valuation allowance would reduce the benefit to
zero.
Operating losses expire: 2020 $1,825
The Company has adopted the asset and liability method of accounting for income
taxes as required by SFAS No. 109. In accordance with SFAS No. 109, the Company
has recorded a valuation allowance equal to the deferred tax asset as a result
of the Company's "going concern" opinion referred to in Note F and the
uncertainty that it will be realized.
F-8
<PAGE>
DISCOUNT MORTGAGE SOURCE, INC.
A Development Stage Company
NOTES TO FINANCIAL STATEMENTS
July 15, 2000
Note D - Income Taxes (con't):
-----------------------------
The components of the provision (benefit) for income taxes included in the
financial statements as of July 15, 2000 are as follows:
Deferred tax assets:
Net operating loss carryforwards $( 274)
Valuation allowance 274
----------
Total deferred income tax assets -0-
Total deferred income tax liabilities -0-
-----------
Net deferred income tax assets $ -0-
The Company's effective tax rate on a pre-tax income (loss) from continuing
operations differs from the U.S federal statutory rate as follows:
U.S. federal statutory rate ( 34)%
Increase (decrease) in rates resulting from:
Change in valuation allowance for deferred tax asset 34 %
----------
Effective tax rate 0 %
Note E - Related Party Transactions:
-----------------------------------
In July 2000, the Company issued to its President 2,000,000 shares in
consideration for $2,000, comprised of $500 cash and $1,500 of his services. The
services were valued at $1,500 and the stock was issued at par.
Note F - Going Concern:
----------------------
The Company has minimal capital resources available to meet obligations expected
to be incurred given that it is a start up enterprise. Accordingly, the
Company's continued existence is dependent upon the successful operation of the
Company's plan of operations, selling common stock in the Company, or obtaining
financing. Unless these conditions among others are met, the Company may be
unable to continue as a going concern.
F-9
<PAGE>
No dealer, salesman or any other person has been authorized to give any
quotation or to make any representations in connection with the offering
described herein, other than those contained in this Prospectus. If given or
made, such other information or representation'; must not he relied upon as
having been authorized by the Company or by any Underwriter. This Prospectus
does not constitute an offer to sell, or a solicitation of an otter to buy any
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such an offer or solicitation in such jurisdiction.
TABLE OF CONTENTS
Prospectus Summary 2
Corporate Information 2
Risk Factors 3
Forward Looking Statements 5
Dilution 5
Plan of Distribution 6
Use of Proceeds 7
Description of Business 8
Plan of Operations 11
Description of Property 12
Director's, Executive Officers and Significant Employees 13
Remuneration of Officers and Directors 13
Interest of Management and Others in Certain Transactions 14
Principal Shareholders 14
Securities Being Offered 15
Relationship with Issuer of Experts Named in Registration Statement 15
Legal Proceedings 15
Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure 15
Disclosure of Commission Position of Indemnification for
Securities Act Liabilities 16
Legal Matters 16
Experts 16
Summary Financial Data 16
Dividend Policy 17
Capitalization 17
Transfer Agent 18
Financial Statements F-1
Until the (90th day after the later of (1) the effective date of the
registration statement or (2) the first date on which the securities are offered
publicly), all dealers that effect transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
19
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 1. Indemnification of Directors and Officers
Our Articles of Incorporation and our Bylaws limit the liability of
directors to the maximum extent permitted by Texas law. We carry no director or
executive liability insurance.
Item 2. Other Expenses of Issuance and Distribution
All expenses, including all allocated general administrative and
overhead expenses, related to the offering or the organization of the Company
will be borne by the Company.
The following table sets forth a reasonable itemized statement of all
anticipated out-of-pocket and overhead expenses (subject to future
contingencies) to be incurred in connection with the distribution of the
securities being registered, reflecting the minimum and maximum subscription
amounts.
Minimum Maximum
--------------------------
SEC Registration Fee $ 269 $ 269
Printing and Engraving Expenses 2,000 19,000
Legal Fees and Expenses 5,000 5,000
Edgar Fees 1,800 1,800
Accounting Fees and Expenses 2,500 2,500
Blue Sky Fees and Expenses 5,000 5,000
Miscellaneous 200 200
--------------------------
TOTAL $ 16,769 $ 33,769
Item 3. Undertakings
The Registrant hereby undertakes to:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act; and
(ii) Reflect in the prospectus any facts or events which,
individually or together,
represent a fundamental change in the information in the Registration Statement.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
1.1
<PAGE>
Item 4. Unregistered Securities Issued or Sold Within One Year
The Company sold on July 11, 2000 to its founder 2,000,000 shares of
common stock which was issued to him for $2,000, composed of $500 cash and
$1,500 of his services. This stock was issued under the exemption under the
Securities Act of 1933, section 4(2); this section states that transactions by
an issuer not involving any public offering is an exempted transaction. The
company relied upon this exemption because in a private transaction during July
1999, the founder, sole officer and director purchased stock for a combination
of $500 cash and $1,500 of services.
The Company issued 200,000 shares on July 12, 2000 to two companies,
(100,000 shares each) in consideration for building and developing the website.
This stock was valued at $25,000 or $0.125 per share. This stock was issued
under the exemption under the Securities Act of 1933, section 4(2); this section
states that transactions by an issuer not involving any public offering is an
exempted transaction. The company relied upon this exemption because in a
private transaction on July 12, 2000, these companies developed the web site in
exchange for 200,000 shares (100,000 each) of stock valued at $0.125 per share
or a total of $25,000. The purchasers were sophisticated investors who purchased
the stock for their own account and not with a view toward distribution to the
public. The certificates evidencing the securities bear legends stating that the
shares may not be offered, sold or otherwise transferred other than pursuant to
an effective registration statement under the Securities Act, or an exemption
from such registration requirements.
Item 5. Exhibits
The following Exhibits are filed as part of the Registration
Statement:
Exhibit No. Identification of Exhibit
3.1* - Articles of Incorporation
3.2* - By Laws
4.2* - Specimen Stock Certificate
10.4* - Subscription Escrow Agreement
10.6* - Form of Subscription Agreement
23.1 - Opinion of Lamberth & Stewart, PLLC, Attorneys at Law
23.2 - Consent of Charles E. Smith, Certified Public Accountant
23.3* - Consent of Lamberth & Stewart, PLLC, Attorneys at Law
* Filed previously
1.2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form SB-1 and authorizes this Registration Statement
to be signed on its behalf by the undersigned, being duly authorized, in the
City of Rockwall, State of Texas, on the date indicated below.
Discount Mortgage Source, Inc.
By: /S/ Michael Kamps
-----------------------------
Michael Kamps, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following person in the capacity and on
the date indicated:
Signature Title Date
--------------------------------------------------------------------------------
/S/ Michael Kamps President, Secretary,
----------------------------- Treasurer; Director September 19, 2000
Michael Kamps, President
1.3
