SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended Commission File
JUNE 30, 1996 NO. 0-18945
WESTMARK GROUP HOLDINGS, INC.
COLORADO 84-1055077
(State of Incorporation) (I.R.S. Employment Identification No.)
355 N.E. Fifth Avenue
Delray Beach, Florida 33483
(407)243-8010
(Address of Principal Executive Offices. Including
Zip Code and Telephone Number)
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 [ ]
THE NUMBER OF SHARES OUTSTANDING OF THE ISSUER'S COMMON STOCK AS OF JUNE
30, 1996 WAS 3,016,122.
[X] TRADITIONAL SMALL BUSINESS DISCLOSURE FORMAT.
<PAGE>
WESTMARK GROUP HOLDINGS, INC.
FORM 10-QSB REPORT INDEX
10-QSB PART AND ITEM NO.
PART I-FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Consolidated balance sheet as of
June 30, 1996 and December 31, 1995.......................3
Consolidated statement of operations for the six
months ended June 30, 1996 and 1995.......................5
Consolidated statement of cash flows for the six
months ended June 30, 1996................................6
Notes to consolidated financial statements.......................7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS............................8
PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS........................................10
ITEM 2. CHANGES IN SECURITIES...................................11
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.........................11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.....11
ITEM 5. OTHER INFORMATION.......................................12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K........................12
SIGNATURES.............................................................13
WESTMARK GROUP HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
Current Assets:
Cash and cash equivalent ................ $ 78,472 $ 311,916
Accounts receivable, net of reserve .... 75,300 8,004
Note receivable - stock sale ............ 374,222
Mortgage loans held for sale ............ 4,891,273 19,480,029
Other current assets ................... 28,198 2,202
------------ ------------
Total Current Assets .................... 5,073,243 20,176,373
------------ ------------
Fixed Assets:
Property and equipment .................. 820,588 820,588
Equipment under capital leases .......... 16,477 16,477
------------ ------------
837,065 837,065
Less Accumulated Depreciation ........... (482,035) (434,411)
------------ ------------
Total fixed assets ........................... 355,030 402,654
------------ ------------
Other Assets:
Prepaid Expenses ....................... 343,167 --
Investment Real Estate ................. 2,115,000 2,115,000
Investment Preferred Stock ............. 2,000,000 2,000,000
Goodwill, net of amortization .......... 736,375 785,833
Deposits and other assets .............. 32,418 30,298
------------ ------------
Total other assets ........................... 5,226,960 4,931,131
TOTAL ASSETS ................................. 10,655,233 25,510,158
============ ============
WESTMARK GROUP HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, DECEMBER 31,
1996 1995
------------ ------------
(UNAUDITED) (AUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable ...................... $ 613,304 $ 1,234,199
Warehouse line of credit .............. 4,793,341 18,625,866
Interest Payable ...................... 147,611 227,619
Settlement liability .................. 419,348 419,348
Other notes payable ................... 1,394,906 717,818
Payroll taxes payable ................ 13,702 141,329
Other current liabilities ............. 528,202 854,452
------------ ------------
Total Current Liabilties .................. 7,910,414 22,220,631
------------ ------------
Long-Term Liabilities:
Notes payable ........................ 1,000,000 1,000,000
Short term debt expected to refinanced 121,984 698,323
------------ ------------
Total Long Term Liabilities ................ 1,121,984 1,698,323
------------ ------------
Total Liabilities .......................... 9,032,398 23,918,954
------------ ------------
STOCKHOLDERS EQUITY
Preferred stock, no par value,
10,000,000 shares authorized;
500,000 shares issued and
outstanding at June 30, 1996 ......... 1,300,000 --
Common stock, no par value, 50,000,000
shares authorized; 3,016,122 shares
issued and outstanding at June 30, 1996,
2,632,772 shares issued and outstanding
as of December 31, 1995 ................ 22,867,937 23,165,937
Additional Paid in Capital from outstanding
options and warrants ................... 553,688 1,153,688
Accumulated deficit ........................ (23,098,790) (22,728,421)
------------ ------------
Total Stockholder Equity ................... 1,622,835 1,591,204
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . 10,655,233 25,510,158
============ ============
WESTMARK GROUP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------------------- ---------------------------------
JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1996 JUNE 30, 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Loan origination and gain on sale .............. $ 925,554 $ 932,855 $ 1,912,776 $ 1,319,814
Interest - Prefered Stock ..................... 70,000 70,000
Other Income ................................... 7,155 15,907 11,325 24,732
----------- ----------- ----------- -----------
TOTAL REVENUES ..................................... 1,002,709 948,762 1,994,101 1,344,546
----------- ----------- ----------- -----------
EXPENSES:
Loan origination costs ........................ 199,523 117,339 572,747 222,493
Servicing sale adjustment ..................... -- -- (70,000) --
General and administrative .................... 840,311 1,710,140 1,732,588 3,084,724
Marketing and advertising .................... 9,397 13,976 32,053 26,414
Goodwill Amortization ......................... 24,729 24,729 49,458 49,458
Depreciation .................................. 23,812 49,396 47,624 49,396
----------- ----------- ----------- -----------
TOTAL EXPENSES ..................................... 1,097,772 1,915,580 2,364,470 3,432,485
----------- ----------- ----------- -----------
Loss before income tax ............................. (95,063) (966,818) (370,369) (2,087,939)
Provision for income tax ........................... -- -- -- --
NET INCOME ( LOSS) ................................. (95,063) (966,818) (370,369) (2,087,939)
=========== =========== =========== ===========
NET LOSS PER SHARE ................................. (0,03) (1.19) (0.13) (2.57)
=========== =========== =========== ===========
</TABLE>
WESTMARK GROUP HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
JUNE 30, DECEMBER 31,
1996 1995
------------ ------------
(UNAUDITED) (AUDITED)
OPERATING ACTIVITIES
Consolidated net loss ........................ ($ 370,369) ($ 2,087,939)
Adjustments to reconcile consolidated
net (loss) to net cash used by
operating activities:
Depreciation ........................... 47,624 49,396
Stock issued for services .............. 392,000 696,744
Stock issued for settlement of
litigation ........................... 174,250
Goodwill Amortization .................. 49.458 49,458
------------ ------------
Cash used in operations before working
capital changes ............................ 118,713 (1,118,091)
============ ============
(Increase)/Decrease in accounts
receivable ........................... (67,296) 431,227
(Increase)/Decrease in current
assets ............................... 25,996 (727,424)
(Increase)/Decrease in mortgage
loans held for sale .................. 14,588,756 (10,947,384)
(Increase)/Decrease in prepaid
expense .............................. (343,167) --
(Increase)/Decrease in REO loan ........ 62,050 --
(Increase)/Decrease in other assets .... 2,120 --
(Increase)/Decrease in Long term
assets ............................... 314,319 --
Increase/(Decrease)in Accounts
payable .............................. (620,895) 83,587
Increase/(Decrease)in Interest
payable .............................. (80,008) 222,198
Increase/(Decrease)in Other current
liabilities .......................... (453,877) 131,722
Increase/(Decrease)in Other notes
payable .............................. (1,107,737) 0
------------ ------------
Net cash used after working capital
changes .................................... 11,943,892 (11,547,796)
Cash used in operating activities ............ 12,062,605 (12,665,887)
INVESTING ACTIVITIES
Purchaseof fixed assets and
improvements ........................ -- (144,141)
Cash provided/(used) in investing
activities ................................. -- (144,141)
FINANCING ACTIVITIES
Net Increase/(Decrease) in
warehouse line of credit ............ (13,832,525) 10,822,027
Allowance related party ............... 2,428,593 --
Payment of notes receivable -
stock sale .......................... 374,222 --
Repayments of notes payable ........... (576,339) --
Repurchase of stock ................... (700,000) --
Sale of stock for cash ................ 10,000 411,789
Increase/(Decrease) in notes
payable - short term ................. 500,000 --
------------ ------------
Cash provided/(used) by financing
activities ................................. (12,296,049) 11,733,816
------------ ------------
Net increase/(decrease) in cash .............. (233,444) 41,879
Cash and cash equivalents,
beginning period ............................ 311,916 107,573
Cash and cash equivalent,
end of period ............................... 78,472 149,452
============ ============
Cash paid for interest ...................... 275,788 436,612
============ ============
Cash paid for income tax ..................... 0 0
============ ============
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-QSB and
Item 310b 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. Operating results for the six month period
ended June 30, 1996 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1996. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company's audited annual report on Form 10-KSB for the year ended December 31,
1995.
NOTE 2: SECOND QUARTER FINANCING ACTIVITY
The Company received $1,638,593 in advances from Heart Labs of America,
Inc. ("HLOA") which were used for working capital purposes, along with debt
satisfactions of certain settlement agreements.
NOTE 3: EARNINGS PER SHARE
Earnings per share for the three months ended June 30 1995 take into
effect a reverse of 1 to 30 recorded in July 1995.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the attached
condensed consolidated financial statements and notes thereto.
FINANCIAL RESULTS OF OPERATIONS
On a consolidated basis, total revenues increased to $1,002,709 in the
quarter ended June 30, 1996 from $948,762 in the quarter ended June 30, 1995, an
increase of 6%. The increase is a result of greater profit margins on the bulk
sale of B/C paper, increased marketing efforts in the B/C loan area along with
investor commitments to buy bulk loan packages.
Expenses for the Quarter ended June 30, 1996 decreased 43% to $1,097,772
from $1,915,580 for the quarter ended June 30, 1995. Loan origination costs
increased 42% to $199,523 for the current quarter from $117,339 in the
comparable prior year quarter ending June 30, 1995. General and Administrative
expenses decreased 51% to $840,311 from $1,710,140 for the quarter ended June
30, 1995. Marketing and Advertising expense decreased 33% to $9,397 from $13,976
for the quarter ended March 31, 1996.
A net loss resulted for the current quarter of $95,063 or $0.03 per share
as compared to a net loss of $966,818 or $1.19 per share for the quarter ended
June 30, 1995. This decreased loss is due to continued cost cutting efforts by
management in areas of General and Administrative through salary reductions, and
operational consolidations, as well as increased margins on the sale of loans.
BUSINESS OPERATIONS
During the second quarter of 1996, the Company continued increased loan
volumes in B/C paper. B/C loan fundings increased from $6.89 million in the 3
months ending June 30, 1995 to $7.83 million for the three months ended June 30,
1996, an increase of 13% and the B/C loan pipeline from $7.8 million on June 30,
1995 to $16.2 million on June 30, 1996. The loan pipeline is a leading indicator
of loan fundings and revenue and management believes that will increase in the
third quarter of 1996. For the six months ending June 30, 1996, total B/C
production increased 42% to $13 million verses $9.4 million in period ending
June 30, 1995. Total production including "A" paper was $36,200.000 for six
months ending June 30, 1996.
The Company expanded its B/C lending program through bulk sales during
the first and second quarters of 1996. B/C loans are for borrowers with credit
histories that fall below the guidelines set forth by Fannie Mae and Freddie
Mac. Although the B/C division is only 18 months old, 42% of the Company's loan
fundings during the second quarter of 1996 were from B/C loans and over 70% of
revenues realized were from B/C loans. The Company is focusing its marketing
efforts in the B/C loan market. The Company is now registered and/or licensed to
lend in 20 states. While the increase in the B/C loan pipeline has come
primarily from an increased market share in Florida, management intends to
continue its marketing strategy in additional states, including California,
Georgia, Washington, Hawaii, Idaho, Montana, and Missouri.
The Company continues to sell loan origination's on a "servicing-released"
basis to investors in the normal course of business. The Company is continuing
to seek additional warehouse lines to accommodate anticipated increase in
ordinations, along with a desire to reduce interest and fee expense. The
increase in origination's will be created by Westmark's geographic expansion and
increase in market share. The Company instituted a bulk sales program for B/C
paper in which loans are pooled and sold in packages ranging from $500,000 to
$3,000,000. During the second quarter, the bulk sales delivery was completed
successfully with institutional investors purchasing Westmark non-conforming
originations.
LIQUIDITY AND CAPITAL RESOURCES
The Company uses its cash flow from whole loan sales, loan origination
fees, net interest income and borrowings under its warehouse line of credit to
meet its working capital needs. The Company's cash requirements include the
funding of loan origination's, purchases, payment of interest expenses,
operating expenses, taxes and capital expenditures, along with settlement
agreements negotiated during the first quarter.
On June 30, 1996, total stockholders equity was $1,622,835. Adequate credit
facilities and other sources of funding, including the ability of the Company to
sell loans, are essential to the continuation of the Company's ability to
originate and purchase loans. The Company borrows funds on a short term basis to
support the accumulation of loans prior to sale. These short term borrowings are
made under a warehouse line of credit with Princap Mortgage, Inc. ("Warehouse
Facility"). Pursuant to the Warehouse Facility, the Company has available a
secured revolving credit line of $15 million to finance the Company's
origination or purchase of loans, pending sale to investors. The line of credit,
pursuant to the Warehouse Facility, has collateral of the assignment and pledge
of eligible mortgage loans, bears interest at an annual rate of 2% above prime,
payable at the time of purchase by the permanent investor. The Warehouse
Facility provides for a transaction charge of $140 per loan and requires the
Company to possess a minimum net worth of $250,000 and a compensating cash
balance on deposit in the amount of $5,000. On June 30, 1996, the balance
outstanding , pursuant to this Warehouse Facility, totaled $4,793,341. The
Company does not have any other external lines of credit for financing.
Historically, the Company has obtained financing through the issuance of
its common stock and borrowings on a negotiated basis. During the second quarter
of 1996, the Company issued 348,000 shares and canceled 142,356 shares of stock
for a net change of 205,644. In May and June 1995, the Company raised $600,000
cash through the issuance of convertible promissory notes in the principal
amount of $600,000 and the warrants entitling holders to purchase certain
securities ("Bridge Financing"). In April 1996, the Company and all these
investors agreed to restructure the investment and the Company paid such
investors an aggregate amount of $600,000 and issued such investors 300,000
shares of Series B Preferred Stock ("Series B Preferred Stock") with a stated
value of $600,000. The Series B Preferred Stock has a liquidation preference of
$600,000, plus accrued and unpaid dividends, is redeemable by the Company at a
redemption price of $600,000, plus accrued and unpaid dividends from the date of
redemption, subject to adjustment in the event of certain circumstances, and is
convertible into shares of Common Stock at a conversion price equal to the
lessor of $2.00 or 84% of the closing bid price prior to the date of conversion
(subject to further adjustment).
In the second quarter of 1996, Heart Labs has advanced $1,638,593. Total
advanced for the six month period ending June 30, 1996 was $2,428,593. $40,000
of the advance was paid back in the third quarter. These fundings were utilized
to discharge outstanding debts and for working capital purposes. The long-term
debt expected to be refinanced was refinanced as short-term and was reduced from
$698,323 to $121,984 in the second quarter. The Company's internally generated
cash flows from operations has historically been and continue to be insufficient
for its cash needs. It is expected that internal sources of liquidity will
improve when net cash is provided by operating activities and, until such time,
the Company will rely on external sources for liquidity. The Company has not
established any other lines of credit or other similar financial arrangements
with any lenders. If it appears at any time in the future that the Company is
again approaching a condition of cash deficiency, the Company will be required
to seek additional debt or equity financing or bring cash flows in balance. If
such action is required, there is no assurance that the Company will be
successful in any such effort.
RECENT TRANSACTIONS
On June 10, 1996, the Company filed an SB-2 Registration Statement with the
Securities and Exchange Commission. The Prospectus relates to the issuance by
the Company of up to 495,334 shares of Company Common Stock, $.001 par value
("Common Stock"), to fund debt settlements, 245,334 shares to be issued upon the
date of this Prospectus and up to 250,000 shares to be issued to (1) cover any
short-fall in funding certain debt settlements and (2) fund any outstanding debt
obligations or settlements that may be negotiated in the future. This Prospectus
also relates to the resale of 2,373,787 shares of Common Stock which may be sold
by the holders thereof ("Selling Stockholders") from time to time as market
conditions permit in the market, or otherwise, at prices and terms then
prevailing or at prices related to the then current market price, or in
negotiated transactions. The shares of Common Stock to be resold include 666,526
shares currently issued and outstanding and up to 1,707,261 shares to be issued
upon (i) exercise of warrants outstanding to purchase an aggregate of 666,666
shares ("Warrants"), (ii) exercise of options outstanding to purchase an
aggregate of 331,995 shares ("Options"), and (iii) conversion of 418,750
outstanding shares of the Company's Series A and Series B Preferred Stock to
adjustment (collectively, "Preferred Stock") presently convertible to purchase
an aggregate of 708,690 shares, subject to adjustment. The shares to be issued
by the Company to cover any short-fall in funding certain debt settlements or to
fund debt obligations or additional debt settlements will be offered on a
negotiated "best-efforts, no minimum" basis. The Company will retain all
proceeds from the exercise of the Warrants and Options, regardless of the number
exercised. Such proceeds (a maximum amount of approximately $2,248,865) will be
used for working capital and general corporate purposes. The Company will not
receive any proceeds from the resale of Common Stock by the Selling Stockholders
or upon conversion of the Preferred Stock. The Company's Common Stock is traded
on the Nasdaq SmallCap Market under the symbol "WGHI".
SUBSEQUENT EVENTS
The Company completed an agreement which included the sale of Network
Capital Group ("Network"), a wholly-owned subsidiary of WGHI to PBF Land Company
("PBF"). As part of this agreement, WGHI acquired real estate in Palm Beach
County, Florida with a value in excess of $2,000,000 and has an option to
acquire additional property worth approximately $4,000,000. Consideration for
the Palm Beach real estate was in convertible preferred shares with no coupon,
and with an extended conversion time at market. As part of this agreement, WGHI
divests itself of California real estate that was the primary asset of Network.
This transaction will result in approximately $150,000 in annual savings to the
Company, and avoid potential environmental concerns. PBF will be retained by and
act for WGHI to manage the real property interests transferred by to WGHI by
PBF. For this management, PBF will be paid a fee of $10,000 per month.
Management has the option to prepay this expense.
The Company acquired the stock of Green World Technologies, Inc. ("Green
World") from GTB Company. Green World is a nationwide marketer of the Talon
Refrigerant Management System("Talon"), an energy-saving add-on to air-cooled
condensers found in air conditioners, heat pumps and refrigeration systems.
Green World has been establishing a dealer network and currently has commitments
from nine dealers and negotiations with 50 more located on the West Coast, plus
Hawaii and the Pacific Basin, from the Marshall to the Fiji Island. In
consideration for the acquisition, the Company issued 130,000 shares of Class D
Convertible Preferred Stock, stated value of $10.00 per share ("Preferred
Stock"), which Preferred Stock is convertible into Common Stock at the option of
the holder at any time within one year of issuance at a conversion price of $.45
per share of Common Stock. The converted shares may be registered on the next
registration statement and will not be converted before one year. Green World
has executed an exclusive contract for the sales of its Talon with Trane
Specialty A/C Products ("Trane"). The contract calls for Trane to purchase no
less than 7,125 units over the next 24 months, with 2,535 units in the first 12
months and 4,800 the remaining 12 months and is renewable for an additional 24
months. Additionally, the contract allows the distributor the exclusive right to
market in 16 California counties including those counties in the San Francisco
Bay area. The Talon unit has an average payback from energy savings of eight
months and is regarded as one of the premier energy saving devices being
marketed today.
Management has determined that certain Warrants and Options have expired or
were issued improperly. Management has instructed counsel of its intention to
remove all Warrants and Options from the amended SB-2 Registration Statement.
The Company will restate the issued and outstanding Warrants and Options with
the subsequent filing of the amended SB-2. It is anticipated that the share
count will reflect a decrease in the number of outstanding shares on a fully
diluted basis.
PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a defendant in Robert J. Conover vs. Greentree Mortgage Co.,
L.P. and Greentree Management Corporation (collectively, "Greentree"), Westmark
Group Holdings, Inc., Westmark Mortgage Corporation and Michael F. Morrell,
Superior Court of New Jersey, Chancery Division, Burlington County, filed
September 25, 1995. The plaintiff served as president and chief financial
officer of Greentree pursuant to an employment agreement between the plaintiff
and Greentree. Plaintiff was discharged from those positions in September 1995.
Plaintiff brought this action for compensatory damages based upon alleged breach
of such employment agreement. Plaintiff seeks, among other things, damages
against Westmark and Mr. Morrell based upon an allegation of intentional
interference with contractual obligations and a third party beneficiary claim
with respect to the Company. Mr. Morrell is indemnified by the Company.
On October 27, 1995, the plaintiff sought a temporary restraining order and
preliminary injunction enjoining the Company from the acquiring Greentree. Such
request was denied as the Court found that, among other things, the applicable
test requiring plaintiff to show a likelihood of success on the merits was not
met. The Company has terminated negotiations with Greentree. Greentree has
agreed to maintain a minimum net worth of $1,000,000. Management believes that
this obligation does not transfer in any way to the Company in connection with
its attempted purchase of certain assets of Greentree. Greentree disputes the
allegations of the complaint. The Company believes that there is not legal
justification for the joinder of the Company and Mr. Morrell as defendants in
the pending dispute between the plaintiff and Greentree, and intends to
vigorously defend this allegation.
In the matter of Saxon Mortgage v. Westmark, Saxon Mortgage obtained a
judgment in the amount of $469,348 in connection with various repurchase
obligations. An amount of $50,000 has been paid, and the remaining liability of
$419,348 is accrued at December 31, 1995. The Company has reached a settlement
which calls for monthly payments of $11,788 for 36 months.
The Company is a defendant in Conway et al v. Danna, Network Financial
Services, Inc., et al. The suit alleges Unfair Practices, Fraud (Negligent
Misrepresentations; Intentional Misrepresentations; Concealment); Breach of
Written Contract; Breach of Implied Covenant of Good Faith and Fair Dealing;
Common Count; and Breach of California Securities Statutes against Network
Financial Services, Inc. (a.k.a. Westmark Group Holdings, Inc.) and others. The
Company considers the risk of loss in this matter to be remote and,
consequently, no amount has been accrued as of December 31, 1995.
The Company is plaintiff in Network Financial Services, Inc. v. McCurdy,
Raiche, Ryals, Nash & Moss Land Company, filed March 1993 in Monterey County,
California Superior Court. The plaintiff alleges fraud, negligent
misrepresentation, breach of fiduciary duty, negligence, quiet title, RICO
violations and conversion. Defendant McCurdy initiated a cross-complaint naming,
among others, the Company as a cross defendant. The cross-complaint seeks
damages for breach of a stock option agreement, breach of contract, and
declaratory relief. The Company has finalized a settlement with defendants
Raiche and Ryals, wherein defendants Raiche and Ryals transferred 7,166 shares
to the Company's Common Stock to the Company in addition to one-half (1/2)
interest in certain property. The balance of the pending litigation involving
defendant and cross-complaint McCurdy and others is unaffected by the
Raiche/Ryals settlement. Management intends to vigorously defend this
cross-complaint.
The Company is defendant in Knight v. Lomas Mortgage U.S.A. and Westmark
Mortgage Corporation. The complaint is based upon a contention by the Plaintiff
that Lomas Mortgage U.S.A. as the servicing agent wrongfully impaired the credit
rating of Plaintiff and breached the written agreement between the parties. A
preliminary determination indicates that the basis for the dispute is between
Lomas U.S.A. and the Plaintiff, but the Company has been named as a party
defendant in view of the original contractual relationship between the Plaintiff
and Westmark. The Company considers the risk of loss in this matter to be
remote, and consequently, no amount has been accrued as of December 31,1995.
The Company is a defendant in Ortega v. Michael Santa Maria et al filed in
Orange County Superior Court of the State of California.. The complaint is based
upon a contention by the Borrower Ortega that Santa Maria, individually and as a
owner/manager/broker of Bann Cor Mortgage made false presentations of material
fact to plaintiffs. The Company acquired this loan from Bann Cor and
subsequently sold the loan to Imperial Credit Industries. A preliminary
determination indicates that the basis for the dispute is between Santa Maria,
the broker and Bann Cor. However, the Company has been named as a party
defendant. Westmark generally and specifically denies each and every allegation
contained in the complaint. The Company considers the risk of loss in this
matter to be minimal and fully intends to defend this action.
From time to time the Company is a defendant (actual or threatened) in
certain lawsuits encountered in the ordinary course of its business, the
resolution of which, in the opinion of management, should not have a material
adverse affect on the Company's financial position.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
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 hereunto duly authorized.
WESTMARK GROUP HOLDINGS, INC.
BY: /C/ NORMAN J. BIRMINGHAM
NORMAN J. BIRMINGHAM,
DIRECTOR, CHAIRMAN, PRESIDENT
& CHIEF EXECUTIVE OFFICER
(PRINCIPAL ACCOUNTING OFFICER AND DULY
AUTHORIZED OFFICER OF THE REGISTRANT)
BY: /C/ MARK D. SCHAFTLEIN
MARK D. SCHAFTLEIN,
DIRECTOR & PRESIDENT OF WESTMARK MORTGAGE
CORPORATION, CHIEF FINANCIAL OFFICER OF
WESTMARK GROUP HOLDINGS, INC.
(DULY AUTHORIZED DIRECTOR & OFFICER OF THE
REGISTRANT)
DATED: AUGUST 19, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FINANCIAL STATEMENTS OF THE COMPANY IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 78,472
<SECURITIES> 0
<RECEIVABLES> 4,966,573
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,073,243
<PP&E> 837,065
<DEPRECIATION> (482,035)
<TOTAL-ASSETS> 10,655,233
<CURRENT-LIABILITIES> 7,910,414
<BONDS> 0
0
1,300,000
<COMMON> 22,475,937
<OTHER-SE> 553,688
<TOTAL-LIABILITY-AND-EQUITY> 10,655,233
<SALES> 0
<TOTAL-REVENUES> 1,002,709
<CGS> 0
<TOTAL-COSTS> 1,097,772
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (95,063)
<INCOME-TAX> 0
<INCOME-CONTINUING> (95,063)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (95,063)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
