FORM 10-QSB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Qtr. Ended: March 31, 1998 File No.: 2-72849-NY
IMN FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 11-2558192
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
520 BROADHOLLOW ROAD MELVILLE NEW YORK 11746
(Address of principal executive offices)
(516) 844-9805
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X. No .
--- ---
Indicate the number of shares outstanding of each of the registrant's classes of
stock as of
May 18, 1998:
Common stock, $.001 par value - 31,764,107 shares outstanding.
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IMN FINANCIAL CORP. AND SUBSIDIARIES
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FORM 10-QSB
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INDEX
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PART I - FINANCIAL INFORMATION
Item I - FINANCIAL STATEMENTS (Unaudited)
Condensed Consolidated Balance Sheets -
March 31, 1998 and March 31, 1997 3-4
Condensed Consolidated Statement of Income -
Three Months Ended March 31, 1998 and 1997 5
Condensed Consolidated Statement of Cash Flows -
Three Months Ended March 31, 1998 and 1997 6-7
Condensed Consolidated Statement of Retained Earnings 8
Notes to Financial Statements 9
Item II - MANAGEMENT'S DISCUSSION AND ANALYSIS 10
PART II - OTHER INFORMATION 11
Exhibit 27 - Financial Data Schedule
SIGNATURES 12
2
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IMN FINANCIAL CORP. AND SUBSIDIARIES
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FORM 10 - QSB
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CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
ASSETS
------
3/31/98 3/31/97
Unaudited Unaudited
----------- -----------
ASSETS
Cash $ 1,563,963 $ 0
Mortgage inventory 52,648,777
Points and fees receivable 4,542,229
Stock subscription receivable 1,125,066
Investments 7,585,300
Prepaid expenses 2,386,162
Property and equipment - net 1,350,856
Notes and mortgages receivable 3,616,367
Intangible assets - net 3,943,052
Other assets 276,606
----------- -----------
TOTAL ASSETS $79,038,378 $ 0
=========== ===========
3
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IMN FINANCIAL CORP. AND SUBSIDIARIES
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FORM 10 - QSB
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CONDENSED CONSOLIDATED BALANCE SHEET
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LIABILITIES & STOCKHOLDERS' EQUITY
----------------------------------
3/31/98 3/31/97
Unaudited Unaudited
----------- -----------
LIABILITIES
Accounts payable and accrued expenses $ 4,151,805 $ 0
Warehouse lines of credit 52,133,131
Borrowers escrow funds 452,393
Capital lease obligations 191,691
Notes payable 266,071
Due to related party 5,483,627 1,500
Deferred income 664,346
Deferred income taxes 1,330,804
------------- ------------
Total Liabilities 64,673,868 1,500
STOCKHOLDERS' EQUITY
Preferred stock - authorized 5,000,000 shares
$.001 par value per share, the number of
shares outstanding at March 31, 1998 and
March 31, 1997 - 4,250 and -0-, respectively 4 0
Common stock - authorized 45,000,000 shares,
$.001 par value per share, the number of
shares outstanding at March 31, 1998 and
March 31, 1997 - 31,764,107 and
4,257,199, respectively 31,764 426
Paid-in capital 18,968,260 16,867
Stock subscription receivable (4,141,600) 0
Unrealized Gain on Available-for-Sale
Securities 374,118 0
Retained earnings (868,036) (18,793)
------------- ------------
Total Stockholders' Equity 14,364,510 (1,500)
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 79,038,378 $ 0
============= ============
4
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IMN FINANCIAL CORP. AND SUBSIDIARIES
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FORM 10 - QSB
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CONDENSED CONSOLIDATED STATEMENT OF INCOME
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(Unaudited)
Three Months Three Months
Ended Ended
3/31/98 3/31/97
------------- -------------
OPERATING INCOME
Points, Fees and Premium Income $ 5,290,460 $ 0
Interest Income 635,858 0
------------- -----------
Total Operating Income 5,926,318 0
------------- -----------
OPERATING EXPENSES
General and Administrative Expenses 4,662,944 0
Interest Expense 891,790 0
Depreciation 65,015 0
Amortization of Acquisition Goodwill 154,920 0
Other Amortization 24,649 0
------------- -----------
Total Operating Expenses 5,799,318 0
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Income from Operations 127,000 0
Income from Subsidiary 30,715 0
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Income before Provision for Income Taxes 157,715 0
Provision for Income Taxes 8,963 0
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Net Income $ 148,752 $ 0
============= ===========
Weighted Average Number of Shares Outstanding 31,764,107 1,064,300
============= ===========
Basic Earnings per share $ 0.0047 $ 0
============= ===========
Diluted Earnings per share $ 0.0047 $ 0
============= ===========
5
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IMN FINANCIAL CORP. AND SUBSIDIARIES
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FORM 10 - QSB
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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
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(Unaudited)
Three Months Three Months
Ended Ended
3/31/98 3/31/97
----------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 148,752 $ 0
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization 179,569 0
Depreciation 65,015 0
Income from subsidiary (30,715)
Changes in assets and liabilities (2,141,136) 0
--------------- -----
Net cash provided (used) by operating activities (1,778,515) 0
--------------- -----
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (100,791) 0
Purchase of intangible assets (3,315) 0
Mortgages originated - net (133,432,375) 0
Mortgages sold 124,936,217 0
--------------- -----
Net cash provided (used) by investing activities (8,600,264) 0
--------------- -----
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of preferred stock 1,274,970 0
Notes receivable advanced (1,345,387)
Advances from related parties 624,200 0
Proceeds from warehouse line of credit 130,764,000 0
Repayments of warehouse line of credit (122,283,369) 0
Collection of stock subscriptions 874,934
Collection of notes receivable 5,656 0
--------------- -----
Net cash provided by financing activities 9,915,004 0
--------------- -----
Net increase (decrease) in cash and equivalents (463,775) 0
Cash Balance at Beginning of Period 2,027,738 0
--------------- -----
Cash Balance at End of Period $ 1,563,963 $ 0
=============== =====
6
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IMN FINANCIAL CORP. AND SUBSIDIARIES
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FORM 10 - QSB
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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
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(Unaudited)
Three Months Three Months
Ended Ended
3/31/98 3/31/97
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SUPPLEMENTAL DISCLOSURES:
Interest expense $ 891,790 $ 0
========== =========
Income taxes $ 27,999 $ 0
========== =========
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Increase in Market Value of Available-for-Sale
Securities $ 18,824 $ 0
========== =========
7
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IMN FINANCIAL CORP. AND SUBSIDIARIES
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FORM 10 - QSB
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CONDENSED CONSOLIDATED STATEMENT OF RETAINED EARNINGS
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(Unaudited)
RETAINED EARNINGS - JANUARY 1, 1998 $ (1,016,788)
Net Income 148,752
---------------
RETAINED EARNINGS - MARCH 31, 1998 $ (868,036)
===============
8
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IMN FINANCIAL CORP. AND SUBSIDIARIES
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FORM 10 - QSB
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information as set forth in Article 10 of Regulation S-B. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.
NOTE 2 - EARNINGS PER SHARE
Earnings per share have been computed on the basis of the total weighted
average number of shares outstanding at March 31, 1998 and 1997.
MARCH 31, MARCH 31,
1998 1997
---------- ---------
Number of shares outstanding - Start Up Period 31,764,107 1,064,300
Increases of shares 0 0
------------ ------------
Number of shares outstanding - End of period 31,764,107 1,064,300
============ ============
Weighted Average Number of Shares
Outstanding 31,764,107 1,064,300
============ ============
NOTE 3 - PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include the accounts
of IMN Financial Corp. and its wholly owned subsidiaries, Island Mortgage
Network, Inc., Citizens Mortgage Service Company, First Equities Service Corp.
and First Equities Commercial Corp. All significant intercompany balances and
transactions have been eliminated in consolidation.
NOTE 4 - SALE OF SUBSIDIARIES
The Company sold Green Shield Mortgage Corp., 1st Potomac Mortgage
Corporation and American National Mortgage Corporation (former subsidiaries)
during the first quarter of 1998. Preceding the sales, the Company removed
certain assets pertaining to the business operations, which will be continued by
the Company's subsidiary, Island Mortgage Network, Inc. These subsidiaries were
sold for book value, resulting in no gain or loss to the Company.
9
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IMN FINANCIAL CORP. AND SUBSIDIARIES
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FORM 10 - QSB
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial position and
operating results during the periods included in the accompanying condensed
consolidated financial statements.
RESULTS OF OPERATIONS - MARCH 31, 1998 VS. MARCH 31, 1997
- ---------------------------------------------------------
The increase of revenue, operating expenses, gross profit, general and
administrative expenses and net income (loss) for both the three months ended
March 31, 1998 verses the same periods in 1997, are completely due to the
acquisition by the Company of Donald Henig, Inc., an active mortgage banker, in
May of 1997, and other subsequent subsidiary acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company believes that current operations will provide adequate cash
flow to meet current obligations. The Company has $1,125,066 in subscription
receivables, $4,542,229 in points and fees receivable and investments of
$7,585,300 as its present capital resources. Management believes that these
resources provide adequate working capital for the Company.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The exhibits filed as part of this report are listed below.
DESCRIPTION
A) EXHIBITS
27 Financial Data Schedule
B) REPORTS
* Form 8-K dated May 5, 1997
* Form 8-K-A dated August 1,1997
* Form 8-K dated September 16, 1997
* Form 10QSB - For the Quarter Ended March 31, 1997
* Form 10QSB - For the Quarter Ended June 30, 1997
Form 10QT - For the Transition Period October 1, 1996 to
* December 31, 1996
* Form 10KSB - For the Year Ended December 31, 1997
* Incorporated by reference.
11
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IMN FINANCIAL CORP. AND SUBSIDIARIES.
Dated: May 19, 1998 \s\ EDWARD CAPUANO
------------------------------------
EDWARD CAPUANO - President, Principal
Executive Officer and Principal Financial
Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
This schedule contains certain summary information extracted from the
financial statements dated March 31, 1998 and is qualified in its entirety by
reference to such financial information.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Mar-31-1998
<CASH> 1,563,963
<SECURITIES> 0
<RECEIVABLES> 5,667,295
<ALLOWANCES> 0
<INVENTORY> 52,648,777
<CURRENT-ASSETS> 69,851,497
<PP&E> 1,350,856
<DEPRECIATION> 0
<TOTAL-ASSETS> 79,038,378
<CURRENT-LIABILITIES> 64,673,868
<BONDS> 0
<COMMON> 31,764
0
4
<OTHER-SE> 14,332,742
<TOTAL-LIABILITY-AND-EQUITY> 80,075,050
<SALES> 0
<TOTAL-REVENUES> 5,926,318
<CGS> 0
<TOTAL-COSTS> 4,907,528
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 891,790
<INCOME-PRETAX> 157,715
<INCOME-TAX> 8,963
<INCOME-CONTINUING> 148,752
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 148,752
<EPS-PRIMARY> 0.005
<EPS-DILUTED> 0.005
</TABLE>
