UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 33-2248-FW
COMPULOAN ORIGINATIONS, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 75-2072205
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1935 East Vine Street, Suite 400, Salt Lake City, Utah 84121
(Address of principal executive offices)
Registrant's telephone no., including area code: (801) 278-9944
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Class Outstanding as of June 30, 1996
Common Stock, $.0001 par value 7,049,659
TABLE OF CONTENTS
Heading Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . 1
Consolidated Balance Sheets -- June 30, 1996 and December 31, 1995. . . 2
Consolidated Statements of Operations -- three months ended June 30,
1996 and from inception on January 24, 1995 through June 30, 1995 . . 4
Consolidated Statement of Stockholders' Equity (Deficit). . . . . . . . 5
Consolidated Statements of Cash Flows -- three months ended June 30,
1996 and from inception on January 24, 1995 through June 30, 1995 . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis and Results of Operations . . .12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . .13
Item 2. Changes In Securities. . . . . . . . . . . . . . . . . . . . . . . .14
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . . . . . .14
Item 4. Submission of Matters to a Vote of Securities Holders. . . . . . . .14
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . . . . .14
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . .14
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
-i-<PAGE>
PART I
Item 1. Financial Statements
The following unaudited Consolidated Financial Statements for the period
ended June 30, 1996, have been prepared by CompuLoan Originations, Inc. (the
"Company").
COMPULOAN ORIGINATIONS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996 and December 31, 1995<PAGE>
COMPULOAN ORIGINATIONS, INC.
(Formerly Intellichip Holdings Corporation)
Consolidated Balance Sheets
ASSETS
<TABLE>
June 30, December 31,
1996 1995
(Unaudited)
CURRENT ASSETS
<S> <C> <C>
Cash (except escrows) (Note 2) $ - $ 82,845
Accounts receivable 7,809 -
Pre-paid expenses 532 1,063
Total Current Assets 8,341 83,908
NON-CURRENT ASSETS
Pre-paid interest 444,086 444,086
Note receivable - related party, net of
allowance for bad debts of $49,900 (Note 5) 149,700 149,700
Goodwill, net of accumulated amortization (Note 4) 56,000 64,000
Property and equipment, net of accumulated
depreciation (Note 3) 119,884 134,917
Organization costs, net of accumulated
amortization (Note 4) 14,185 16,034
Deposits 12,054 12,054
Total Non-Current Assets 795,909 820,791
TOTAL ASSETS $ 804,250 $ 904,699
</TABLE>
COMPULOAN ORIGINATIONS, INC.
(Formerly Intellichip Holdings Corporation)
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
June 30, December 31,
1996 1995
(Unaudited)
CURRENT LIABILITIES
<S> <C> <C>
Bank overdraft $ 1,203 $ -
Accounts payable 325,773 136,206
Accrued expenses 411,340 192,937
Royalty payable (Note 9) 347,307 314,410
Notes payable (Note 6) 518,500 150,000
Notes payable - related parties (Note 7) 220,065 147,000
Total Current Liabilities 1,824,188 940,553
LONG-TERM LIABILITIES
Royalty payable (Note 9) 352,083 352,083
TOTAL LIABILITIES 2,176,271 1,292,636
COMMITMENTS AND CONTINGENCIES (Note 9) - -
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: 10,000,000 shares
authorized of $0.0001 par value,
7,049,659 and 6,689,659 shares
issued and outstanding, respectively 705 669
Additional paid-in capital 1,496,310 1,316,346
Accumulated deficit (2,869,036) (1,704,952)
Total Stockholders' Equity (Deficit) (1,372,021) (387,937)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 804,250 $ 904,699<PAGE>
</TABLE>
COMPULOAN ORIGINATIONS, INC.
(Formerly Intellichip Holdings Corporation)
Consolidated Statements of Operations
<TABLE>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
REVENUES
<S> <C> <C> <C> <C>
Commissions $ 189,039 $ 24,029 $ 305,106 $ 53,281
Fees 5,267 3,290 28,650 3,290
Interest income 147 - 272 -
Total Revenue 194,453 27,319 334,028 56,571
EXPENSES
Salaries and related taxes 393,758 119,796 789,318 192,602
Rent 69,826 37,002 139,153 49,763
Legal and accounting 11,646 7,521 45,398 8,521
Advertising and promotion 21,966 49,377 57,576 59,466
Depreciation and amortization 18,109 5,963 36,025 8,854
Commissions 1,895 500 4,415 500
Royalties 14,770 - 32,898 -
Loan costs 41,517 2,642 98,426 3,955
Travel 13,639 7,434 73,091 11,792
Insurance 36,233 1,767 59,688 3,433
Maintenance and repairs 7,278 2,759 11,508 4,639
Supplies 12,600 570 22,098 4,626
Telephone and utilities 29,245 10,316 58,881 13,970
Dues and licenses 5,901 329 17,214 474
Shipping 9,429 2,130 20,201 2,906
Interest 16,517 895 24,768 1,167
Other operating expenses 2,029 132 7,454 891
Total Expenses 706,358 249,133 1,498,112 367,559
NET INCOME (LOSS) $(511,905) $(221,814) $(1,164,084) $(310,988)
NET LOSS PER SHARE $ (0.07) $ (0.04) $ (0.17) $ (0.06)
</TABLE>
<PAGE>
COMPULOAN ORIGINATIONS, INC.
(Formerly Intellichip Holdings Corporation)
Consolidated Statement of Stockholders' Equity (Deficit)
<TABLE>
Additional
Common Stock Paid-In Accumulated
Shares Amount Capital Deficit
<S> <C> <C> <C> <C>
Balances, January 24, 1995 - $ - $ - $ -
Acquisition of A+ Mortgage - - 11,058 -
Issuance of shares to acquire
CompuLoan Originations, Inc. 5,150,000 515 324,485 -
Liabilities paid by officer prior
to acquisition of CompuLoan
Originations, Inc. - - 3,557 -
Acquisition of Intellichip, Inc. 249,459 25 (125) -
Common stock issued for cash 1,165,200 117 715,283 -
Additional paid-in capital for
territorial rights - - 199,600 -
Common stock issued for
consulting services 125,000 12 62,488 -
Net loss for the year ended
December 31, 1995 - - - (1,704,952)
Balances, December 31, 1995 6,689,659 669 1,316,346 (1,704,952)
Common stock issued for cash 200,000 20 99,980 -
Common stock issued for cash 50,000 5 24,995 -
Common stock issued for cash 110,000 11 54,989 -
Net loss for the six months
ended June 30, 1996 - - - (1,164,084)
Balances, June 30, 1996 (Unaudited) 7,049,659 $ 705 $1,496,310 $(2,869,036)
</TABLE>
<PAGE>
COMPULOAN ORIGINATIONS, INC.
(Formerly Intellichip Holdings Corporation)
Consolidated Statements of Cash Flows
<TABLE>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Income (loss) from operations $(511,905) $(221,814) $(1,164,084) $(310,988)
Depreciation and amortization 18,109 5,963 36,025 8,854
Changes in operating assets and liabilities:
(Increase) decrease in pre-paid expenses - 2,811 531 (3,721)
(Increase) decrease in deposits - (555) - (10,230)
(Increase) decrease in other assets (55,511) - - -
(Increase) decrease in accounts receivable (2,602) (18,145) (7,809) (20,738)
(Decrease) increase in accounts payable 10,135 68,880 189,567 70,726
(Decrease) increase in accrued expenses 121,588 (23,673) 218,403 13,379
(Decrease) increase in bank overdraft 1,203 - 1,203 -
(Decrease) increase in royalty payable 32,897 - 32,897 -
Net Cash (Used) by Operating
Activities (386,086) (186,533) (693,267) (252,718)
Cash Flows from Investing Activities:
Purchase of certificate of deposit - - - (50,000)
Purchases of fixed assets (4,358) (29,559) (11,143) (93,192)
Organizational costs - - - (18,497)
Net Cash (Used) by Investing Activities (4,358) (29,559) (11,143) (161,689)
Cash Flows from Financing Activities:
Paid in capital at inception - 60,146 - 322,512
Issuance of common stock - - 180,000 -
Issuance of notes payable 388,500 50,000 496,500 100,000
Principal payments on notes payable - - (54,935) -
Net Cash Provided by Financing
Activities 388,500 110,146 621,565 422,512
Net Increase (Decrease) in Cash and
Cash Equivalents (1,944) (105,946) (82,845) 8,105
Cash and Cash Equivalents at
Beginning of Period 1,944 114,051 82,845 -
Cash and Cash Equivalents at End of Period - 8,105 - 8,105
</TABLE>
<PAGE>
COMPULOAN ORIGINATIONS, INC.
(Formerly Intellichip Holdings Corporation)
Notes to the Consolidated Financial Statements
June 30, 1996 and December 31, 1995
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
The consolidated financial statements presented are those of CompuLoan
Originations, Inc. (Originations). Originations was incorporated in
April of 1995 under the laws of the State of Utah. Originations owns
CompuLoan Financial Services Group, L.L.C. (Financial Services), which
was incorporated under the laws of the State of Utah on January 24,
1995. These two companies were organized to conduct and promote the
service of providing commercial and residential mortgages, and to
develop, own and operate computer loan origination systems.
On October 20, 1995, Intellichip Holdings Corporation (Intellichip) and
CompuLoan Originations, Inc. completed a stock purchase agreement
whereby Intellichip issued 5,150,000 shares of its common stock in
exchange for all of the outstanding common stock of Originations.
Pursuant to this reorganization, the name of Intellichip was changed to
CompuLoan Originations, Inc.
Since the shareholders of Originations control the Company, the
acquisition was accounted for as a reorganization by Originations.
The accompanying consolidated financial statements include the accounts
of Originations from January 24, 1995, the date of the formation of
Financial Services, through December 31, 1995, and the period January 1,
1996 through June 30, 1996. Collectively, Originations and Financial
Services are referred to herein as "the Company".
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using the accrual basis
of accounting. The Company has elected a calendar year end.
b. Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. The Company
had $18,235 and $8,849 of client funds held in escrow at June 30, 1996
and December 31, 1995, respectively. Also, the company had a certifi-
cate of deposit in the amount of $50,000 at December 31, 1995 which
collateralized a note payable with a financial institution (See Note 6).
c. Loss Per Share
The computations of loss per share of common stock are based on the
weighted average number of shares outstanding at the date of the
financial statements.
d. Income Taxes
At June 30, 1996 and December 31, 1995, the Company had net operating
loss carryforwards of approximately $2,900,000 and $1,700,000,
respectively, that may be offset against future taxable income through
2010. Because the Company cannot reasonably estimate the future benefit
of this carryforward, no deferred tax asset has been reported.
<PAGE>
COMPULOAN ORIGINATIONS, INC.
(Formerly Intellichip Holdings Corporation)
Notes to the Consolidated Financial Statements
June 30, 1996 and December 31, 1995
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
e. Allowance for Bad Debts
Allowance for bad debts was accrued in the amount of 25% of the related
party receivable.
f. Principles of Consolidation
The consolidated financial statements include those of Originations and
its wholly-owned subsidiary, Financial Services.
All material intercompany accounts and transactions have been eliminated.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Major additions and
improvements are capitalized; however, minor replacements, maintenance
and repairs that do not increase the useful lives of the assets are
expensed as incurred. Depreciation of property and equipment is
determined using accelerated methods over the expected useful lives of
the assets of five to seven years.
June 30, December 31
1996 1995
(Unaudited)
Furniture, fixtures and leasehold
improvements $ 31,617 $ 31,141
Computers and equipment 146,003 135,337
Sub-total 177,620 166,478
Less: accumulated depreciation (57,736) (31,561)
Property and Equipment, Net $119,884 $134,917
NOTE 4 - INTANGIBLE ASSETS
Goodwill in the amount of $80,000 resulted from the purchase of A+
Mortgage. This amount is being amortized over 5 years, resulting in
amortization expense of $8,000 for the six months ended June 30, 1996 and
1995.
Organization costs are recorded at the original cost of $20,043. These
costs are being amortized over 5 years, resulting in amortization expense
of $4,009 for the period ended December 31, 1995, and $2,004 for the six
months ended June 30, 1996.
<PAGE>
COMPULOAN ORIGINATIONS, INC.
(Formerly Intellichip Holdings Corporation)
Notes to the Consolidated Financial Statements
June 30, 1996 and December 31, 1995
NOTE 5 - NOTE RECEIVABLE - RELATED PARTY
During the period ending December 31, 1995, an independent represen-
tative agreement was entered into with a shareholder in California. Per
this agreement, the shareholder agreed to pay $199,600 for the right to
act as an independent representative in Southern California and the
Company agreed to pay the shareholder $100 for each broker contract and
$50 for each agent contract. In addition, the commission shall be $50
for each loan that is submitted and funded by the contracted builders,
real state agents and brokers. The Company shall withhold 15% of the
commissions due until the shareholder's obligation is fulfilled.
NOTE 6 - NOTES PAYABLE
Notes payable consisted of the following:
Note payable to West One Bank, June 30, December 31,
bears an interest rate of 7%, 1996 1995
payable in a lump sum in (Unaudited)
February of 1996, collateralized
by certificate of deposit $ - $ 50,000
Note payable to an individual,
bears an interest rate of 18%,
due in a lump sum in March of 1996 100,000 100,000
Note payable to Jupiter Capital, bears
an interest rate of 8%, payable in
lump sums through June of 1997 418,500 -
Total notes payable $ 518,500 $ 150,000
NOTE 7 - NOTES PAYABLE - RELATED PARTIES
Notes payable to related parties consisted of the following:
Note payable to shareholder, bears June 30, December 31,
an interest rate of 8%, payable in 1996 1995
monthly installments of $5,000 of (Unaudited)
principal and interest, due May 22,
1996, personally guaranteed by
officers of the Company $ 30,065 $ 35,000
Note payable to shareholder, bears no
interest rate, payable in a lump
sum in March of 1996 27,000 27,000
Note payable to shareholder, bears no interest
rate, payable in a lump sum in March of 1996. 27,000 27,000
Balance forward $ 84,065 $ 89,000
<PAGE>
COMPULOAN ORIGINATIONS, INC.
(Formerly Intellichip Holdings Corporation)
Notes to the Consolidated Financial Statements
June 30, 1996 and December 31, 1995
NOTE 7 - NOTES PAYABLE - RELATED PARTIES (Continued)
June 30, December 31,
1996 1995
(Unaudited)
Balance forward $ 84,065 $ 89,000
Note payable to shareholder/officer,
bears no interest rate, due on
demand 63,000 50,000
Note payable to shareholder, bears an
interest rate of 8%, payable in monthly
installments of $2,000 until balance
is paid off 8,000 8,000
Note payable to a shareholder, bears an
interest rate of 8%, payable in stock
before February of 1997 15,000 -
Note payable to a shareholder, bears an
interest rate of 8%, payable in a lump
sum in March of 1997. 50,000 -
Total notes payable to related parties $220,065 $147,000
NOTE 8 - OPERATING LEASES
The Company has entered into a lease agreement for office space until
March 1, 1998. Minimum future rental obligations will be $184,980,
$192,378, and $49,038 for the years ending December 31, 1996, 1997 and
1998, respectively.
The Company has also entered into a lease agreement for office furniture
until August 5, 1997. Minimum future rental obligations will be $24,422
and $16,281 for the years ended December 31, 1996 and 1997, respectively.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Return of Capital and Guaranteed Payments to a Shareholder
One shareholder has an agreement with the Company to receive double the
amount of his initial $325,000 capital contribution. The total amount to
be paid to the shareholder is to be made in twenty-four equal monthly
payments. The payments to the shareholder are to start on the first day
of the thirteenth month following the formation of the Company in January
1995 and continue on the first day of each succeeding twenty-three
months. $650,000 has been recorded as a royalty payable with an
offset to pre-paid interest. Pre-paid interest will be amortized over a
three year period, from the time the original $325,000 investment was
made to the time the commitment is paid off.
<PAGE>
COMPULOAN ORIGINATIONS, INC.
(Formerly Intellichip Holdings Corporation)
Notes to the Consolidated Financial Statements
June 30, 1996 and December 31, 1995
NOTE 9 - COMMITMENTS AND CONTINGENCIES (Continued)
Royalty Payments
The same shareholder that has an agreement for the "return of capital
and guaranteed payments," as noted above, also has an agreement with the
Company to receive royalty payments. The payments are based on gross
revenues for each calendar year after the formation of the Company. The
royalty payments will be paid on the tenth day of the fourth month after
formation of the Company and continue on the tenth day of each
succeeding month thereafter. The following is a schedule of the royalty
percentages for future calendar years:
Calendar year 1996 8%
Calendar year 1997 7%
Calendar year 1998 6%
Calendar year 1999 and thereafter 5%
The agreement also states that when the aforementioned "return of capital
and guaranteed payments" have been totally paid to the shareholder, the
royalty payments shall immediately be reduced to five percent of gross
revenues.
Another agreement was entered into with another investor where a royalty
of one dollar per closed mortgage loan for all loans originated after
July 24, 1995, shall be paid to the investor until the investor has
received all of his original investment of $100,000 back.
In addition, a stock purchase and royalty agreement was entered into
between the Company and two investors on August 14, 1995. The investors
agreed to invest $500,000 and the Company agreed to issue 1,000,000
shares and pay a royalty of five percent of gross income (not including
escrow flow deposits and disbursements) beginning January 1, 1996.
NOTE 10 - GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates
the realization of assets and liquidation of liabilities in the normal
course of business. However, the Company does not have significant cash
or other material assets, nor does it have an established source of
revenues sufficient to cover its operating costs and allow it to
continue as a going concern. It is the intent of the Company to seek
additional financing through equity transactions and to re-negotiate all
royalty agreements.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
On October 20, 1995, the Company completed a Stock Purchase Agreement
(the "Agreement") with CompuLoan Originations, Inc., a Utah corporation
("CompuLoan"), relating to the acquisition by the Company of CompuLoan and it's
subsidiaries. CompuLoan was incorporated in April 1995 and owns CompuLoan
Financial Services Group, L.L.C. ("Financial Services"), which was incorporated
under the laws of the State of Utah on January 24, 1995. Because the former
shareholders of CompuLoan now control the Company, the acquisition under the
terms of the Agreement was accounted for as a reorganization. The financial
information presented herein includes the accounts of CompuLoan from January 24,
1995, the date of the formation of Financial Services, through June 30, 1996.
Results of Operations
Total revenues of $194,453 for the three months ended June 30, 1996
("second quarter of 1996") and $334,028 for the first six months of 1996 ("first
half of 1996") represent increases of approximately 612% and 490% when compared
with the three month period ended June 30, 1995 ("second quarter of 1995") and
six month period ended June 30, 1995 ("first half of 1995"), respectively.
These results are due to increases in commissions and fees received during the
1996 periods which were substantially higher that the comparable 1995 periods,
during which time the Company was in its initial phase of operations.
Management attributes the increases in commissions and fees to increased
marketing by the Company during 1996.
Total expenses for the second quarter of 1996 and first half of 1996
increased 184% and 308% respectively when compared to the same periods for 1995,
primarily due to the Company's limited activity during the 1995 periods.
Salaries and related taxes increased 229% and 310% for the second quarter of
1996 and first half of 1996, respectively, reflecting the hiring of additional
personnel in 1996 as the Company expanded its marketing efforts. Rent increased
89% and 180 % for the first quarter of 1996 and first half of 1996, respec-
tively, due to the Company's move to new expanded facilities. Other increases
during the 1996 periods included increased legal and accounting expenses of 55%
and 433% for the second quarter of 1996 and first half of 1996, respectively,
primarily attributed to the Company's year-end audit, merger and related outside
accounting expenses. Depreciation and amortization increased 204% and 307% for
the second quarter of 1996 and first half of 1996, respectively, due to the
depreciation of certain computer and office equipment in 1996. The Company also
experience increases in other areas related to the Company's expanded business
operations including increases in travel, insurance, supplies and telephone and
utilities.
The net loss for the second quarter of 1996 was $511,905 compared to a
net loss of $221,814 for the 1995 period. The net loss for the first half of
1996 was $1,164,084 compared to a net loss of $367,559 for the first half of
1995. The increased net loss for the 1995 periods is attributed to increased
operating costs.
Net Operating Losses
The Company has accumulated approximately $2,900,000 and $1,700,000 of
net operating loss carryforwards as of June 30, 1996 and December 31, 1995,
respectively, which may be offset against future taxable income through the year
2010 when the carryforwards expire. The use of these losses to reduce future
income taxes will depend on the generation of sufficient taxable income prior to
the expiration of the net operating loss carryforwards. In the event of certain
changes in control of the Company, there will be an annual limitation on the
amount of net operating loss carryforwards which can be used. No tax benefit
has been reported in the Company's financial statements because the Company
believes there is a 50% or greater chance the carryforward will expire unused.
Accordingly, the potential tax benefits of the loss carryforward is offset by
valuation allowance of the same amount.
Liquidity and Capital Resources
During the second quarter of 1996 and first half of 1996, the Company
used net cash of $386,086 and $693,267, respectively, in its operating
activities compared to $186,533 and $252,718 for the corresponding 1995 periods.
These increases in 1996 are attributed primarily to its loss from operations.
Also during the second quarter of 1996 and first half of 1996, the Company
realized net cash from financing activities of $388,500 and $621,565, respec-
tively, primarily from the sale of common stock and the issuance of notes.
Working capital at March 31, 1996 was a negative $1,815,847 compared to a
negative $856,645 at December 31, 1995. This further reduction in working
capital for the first half of 1996 is attributed to the Company's operating
loss, decrease in cash, and increases in accounts payable, accrued expenses and
notes payable. The cash decrease from $82,645 at December 31, 1995 to $-0- on
June 30, 1996 was due to increased operating costs.
As of June 30, 1996, the Company had total assets of $804,250 and total
stockholders' deficiency of $1,372,021. In comparison, as of December 31, 1995,
the Company had total assets of $904,699 and total stockholders' deficiency of
$387,937. The decrease of approximately 11% in total assets for the six month
period ended June 30, 1996 is due to the payment of operating costs and
decreased cash positions.
The Company anticipates meeting its working capital needs during the
current fiscal year partially with revenues from operations, but due to past
losses the Company is also investigating the possibility of interim financing to
provide working capital and to increase marketing activities related to the
Company's services. Although management has not made any arrangements or
definitive agreements, the Company is contemplating both equity and debt
financing through private sources, or through the additional private placement
of securities and/or a public offering, although there can be no assurance that
the Company could successfully complete any such offerings. If the Company's
operations are not adequate to fund its operations and it is unable to secure
financing from the sale of its securities or from private lenders, the Company
could experience additional losses which could curtail the Company's operations
and services which could result in the loss of current customers. The continu-
ation of the Company as a going concern is directly dependent upon the success
of its future operations and ability to obtain additional financing.
As of June 30, 1996, the Company was not in compliance with certain net
worth requirements established by the U.S. Department of Housing and Urban
Development in July 1993. The Company has been advised by its independent
auditors that continued noncompliance of these regulations could result in
sanctions by HUD and the potential loss of future business. The Company is
presently negotiating with a private investment group which would provide the
necessary funding to restructure the Company's equity and come into compliance
with the HUD net worth requirements. Although there can be no assurance that
such funding will be obtained by the Company, management believes that the
transaction could be finalized and financing made available to the Company
during the second quarter of 1996.
In the opinion of management, inflation has not had a material effect on
the operations of the Company.
PART II
Item 1. Legal Proceedings
There are presently no material pending legal proceedings to which the
Company is a party or to which any of its property is subject and, to the best
of its knowledge, no such actions against the Company are contemplated or
threatened.
Item 2. Changes In Securities
This Item is not applicable to the Company.
Item 3. Defaults Upon Senior Securities
This Item is not applicable to the Company.
Item 4. Submission of Matters to a Vote of Security Holders
This Item is not applicable to the Company.
Item 5. Other Information
On August 7, 1996, the Company filed Form S-8 issuing 350,000 shares of
common stock in consideration of services rendered.
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
No report on Form 8-K was filed by the Company during the three month
period ended June 30, 1996.<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COMPULOAN ORIGINATIONS, INC.
Date: August 15, 1996 By /S/ Leon J. Petersen
Leon J. Petersen, Chairman, Chief Executive
Officer and Director
Date: August 15, 1996 By /S/ Stuart Palmer
Stuart Palmer, Chief Financial Officer and
Principal Accounting Officer
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