UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934.
Commission File No 333-27037
UNITED FINANCIAL MORTGAGE CORP.
(Exact name of small business issuer as specified in its charter)
ILLINOIS 36-3440533
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 Enterprise Drive,
Suite 206
Oak Brook, Illinois 60523
Issuer's telephone number: (630) 571-7222
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock The Chicago Stock Exchange
Securities to be registered under Section 12(g) of the Act:
None
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
section 13 or 15(d) of the Exchange Act 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 [ ]
State the Number of shares outstanding of each of the issuer's common equity
as of the last practicable date:
Outstanding at
Class October 31, 2000
Common Stock, No Par Value 3,877,129
Transitional Small Business Disclosure Format (check one)
Yes [ ] No [X]
<PAGE>
UNITED FINANCIAL MORTGAGE CORP.
QUARTERLY REPORT ON FORM 10-QSB
QUARTER ENDED OCTOBER 31, 2000
TABLE OF CONTENTS
PAGE NO.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets (Unaudited) October 31, 1999 and 2000 3
Statement of Operations (Unaudited) - six months
ended October 31, 1999 and 2000 5
Statement of Stockholder's Equity (Unaudited) - six
months ended October 31, 1999 and 2000 6
Statements of Cash Flows (Unaudited) - six months
ended October 31, 1999 and 2000 7
Notes to Financial Statements (Unaudited) 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
Part II OTHER INFORMATION 18
EXHIBITS 19
SIGNATURES 20
<PAGE>
<TABLE>
United Financial Mortgage Corp.
Balance Sheet
(Unaudited)
Six Months Ended Six Months Ended
October 31, 1999 October 31, 2000
---------- ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 4,640,467 $ 4,259,372
Loans Held For Sale 28,459,083 34,429,576
Accounts Receivable 222,308 158,554
Due From Employees 42,700 10,717
Due from Officers 2,439 0
U.S. Savings Bonds 2,000 0
Notes Receivable 100,000 94,500
Prepaid Expense 121,212 103,586
---------- ----------
Total Current Assets 33,590,208 39,056,306
Furniture, Fixtures & Equipment
Cost 709,482 708,000
Accumulated Depreciation (338,775) (428,818)
---------- ----------
Net Furn, Fix, & Equipment 370,707 279,182
Other Assets:
Servicing Rights 269,250 330,437
Land Investments 0 126,000
Escrow Deposits 197,984 0
Security Deposits 24,410 25,854
Investment 5,850 113,102
Goodwill Net 120,987 119,639
---------- ----------
Total Other Assets 618,481 715,032
Total Assets 34,579,396 40,050,519
========== ==========
The accompanying Notes are an integral part of this statement
</TABLE>
<PAGE>
<TABLE>
United Financial Mortgage Corp.
Balance Sheet
(Unaudited)
Six Months Ended Six Months Ended
October 31, 1999 October 31, 2000
---------- ----------
<S> <C> <C>
LIABILITES AND STOCKHOLDERS EQUITY
Current Liabilities:
Accounts Payable $ 189,071 $ 259,626
Accrued Expenses 137,675 269,992
Loans Payable 616,970 0
Leases Payable-Short Term 9,858 11,500
Accrued Income Taxes 42,960 0
Deferred Taxes Payable 113,623 34,840
Escrow Payable 82,722 22,955
Notes Payable - Current 26,614,657 32,726,305
---------- ----------
Total Current Liabilities 27,807,537 33,325,217
Leases Payable-Long Term 18,967 9,000
---------- ----------
Total Liabilities 27,826,504 33,334,217
Stockholders' Equity
Common Shares, 20,000,000
Authorized, No Par Value,
Shares Issued and Outstanding;
3,895,529 at Oct 31, 1999
and 3,877,129 at Oct 31, 2000. 6,521,625 6,488,286
Preferred Shares, 5,000,000
authorized, No Par Value, 63
Series A Redeemable Shares
Issued And Outstanding at
Oct 31, 1999 and Oct 31, 2000. 315,000 315,000
Retained Earnings (83,733) (86,984)
---------- ----------
Total Stockholders Equity 6,752,892 6,716,302
Total Liabilities Plus
Stockholders Equity 34,579,396 40,050,519
========== ==========
The accompanying Notes are an integral part of this statement
</TABLE>
<PAGE>
<TABLE>
United Financial Mortgage Corp.
Condensed Statement of Income
(Unaudited)
Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
Oct 31, 1999 Oct 31, 1999 Oct 31, 2000 Oct 31, 2000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Commissions & Fees $ 2,460,136 $ 4,890,367 $ 2,824,559 $ 5,227,130
Interest Income 432,051 917,197 524,775 1,053,340
Other Income & Expenses (3,395) (3,395) 0 0
--------- --------- --------- ---------
Total Revenues 2,888,793 5,804,169 3,349,333 6,280,470
Expenses:
Salaries & Commissions 1,717,511 3,276,856 1,801,530 3,328,652
Selling & Administrative 762,960 1,493,884 775,624 1,499,615
Depreciation 38,152 73,991 47,931 86,940
Interest Expense 432,586 905,350 496,702 1,011,805
--------- --------- --------- ---------
Total Expenses 2,951,209 5,750,080 3,121,788 5,927,013
Income (loss) Before
Income Taxes (62,416) 54,088 227,546 353,457
Income Tax Provision (158,597) (110,831) 55,585 110,032
Net Income Applicable
To Common Shareholders 96,181 164,919 171,960 243,425
========= ========= ========= =========
Basic Net Income
Per Common Share 0.0247 0.0423 0.0444 0.0628
========= ========= ========= =========
Diluted Net Income
Per Common Share 0.0232 0.0399 0.0414 0.0586
========= ========= ========= =========
Shares used in computation of
Basic Net Income
Per Share 3,895,529 3,895,529 3,877,129 3,877,129
Shares used in computation of
Diluted Net Income
Per Share 4,137,529 4,137,529 4,152,129 4,152,129
The accompanying Notes are an integral part of this statement
</TABLE>
<PAGE>
<TABLE>
United Financial Mortgage Corp.
Statement of Stockholders Equity
Six Months Ended October 31, 2000
(Unaudited)
Common Preferred Retained
Stock Stock Earnings Total
<S> <C> <C> <C> <C>
Balance, April 30, 2000 6,510,938 315,000 (330,409) 6,495,529
Retirement of 10,000 Shares (16,615) (16,615)
Net Income for the Period
Ended July 31, 2000 71,465 71,465
Balance, July 31, 2000 6,494,323 315,000 (258,944) 6,550,379
Retirement of 4,000 Shares (6,037) (6,037)
Net Income for the Period
Ended October 31, 2000 171,960 171,960
Balance, October 31, 2000 6,488,286 315,000 (86,984) 6,716,302
The accompanying Notes are an integral part of this statement
</TABLE>
<PAGE>
<TABLE>
United Financial Mortgage Corp.
Statement of Cash Flows
(Unaudited)
Six Months Ended Six Months Ended
Oct 31, 1999 Oct 31, 2000
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income or $ 164,919 $ 243,425
Adjustment to Reconcile Net Income
To Net Cash Provided by Op. Activities
Depreciation 62,263 63,017
Changes In:
Prepaids & Other Current Assets 131,438 78,829
Accrued Expenses & Other
Current Liabilities (167,145) (244,000)
Accounts Payable (46,881) 4,833
Deferred Tax Asset 0 75,079
Deposits (145,198) (2,437)
--------- ---------
NET CASH PROVIDED BY OPERATING
ACTIVITIES (604) 218,747
CASH FLOWS FROM INVESTING ACTIVITIES
Land Sales 0 108,507
Purchase of Fixed Assets (63,963) (2,331)
Goodwill 11,728 3,923
Investments (100) (44,630)
Servicing Rights (83,270) (1,863)
--------- ---------
NET CASH PROVIDED FROM INVESTING
ACTIVITIES (135,605) 63,606
CASH FLOWS FROM FINANCING ACTIVITIES
Notes Receivable 0 31,099
Notes Payable 616,970 407,545
Changes in Short-Term Debt (2,437) (2,593)
Changes in Long-Term Debt (12,584) (4,341)
Deferred Advisor Fees 78,000 0
Common Stock Redeemed (7,707) (22,652)
Mortgage Loans Made 5,520,471 (2,788,267)
Changes in Bank Line of Credit (5,760,975) 2,750,072
--------- ---------
CASH PROVIDED (USED) BY FINANCING
ACTIVITIES 431,739 370,863
INCREASE (DECREASE) IN CASH 295,529 653,216
Cash at Beginning of Period 4,344,937 3,606,156
--------- ---------
Cash at End of Period 4,640,466 4,259,372
========= =========
The accompanying Notes are an integral part of this statement
</TABLE>
<PAGE>
UNITED FINANCIAL MORTGAGE CORP.
Notes to Financial Statements
October 31, 2000
(Unaudited)
Interim Financial Data
The accompanying 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 Article 10 of
Regulation S-X.
Accordingly, they do not include all of the information and notes
required by generally accepted accounting principles for complete financial
statements and should be read in conjunction with the Company's Annual
Report on Form 10-KSB for the fiscal year ended April 30, 2000. In the
opinion of management, all adjustments(consisting only of adjustments of a
normal and recurring nature) considered necessary for a fair presentation of
the results of operations have been included. Operating results for the six
month period ended October 31, 2000 are not necessarily indicative of the
results that might be expected for the year ended April 30, 2001.
United Financial Mortgage Corp. is an Illinois corporation organized on
April 30, 1986 to engage in the residential mortgage banking business. The
Company is a licensed mortgage banker in the states of Arkansas, California,
Colorado, Connecticut, Delaware, Florida, Illinois, Indiana, Kentucky,
Maryland, Missouri, Nevada, New Mexico, North Carolina, Oregon, South
Carolina, Texas, Utah, Virginia, Washington and Wisconsin. The Company also
does business in other states that do not have mortgage banking liscensure
statutes, including Idaho, Kansas, Montana, Ohio, Oklahoma, West Virginia,
and Wyoming. The Company's mortgage banking business principally has
focused on retail and wholesale residential mortgage origination activities.
The Company is expanding its mortgage servicing activities by retaining
servicing on selected loans that it produces. The Company's principal lines
of business are conducted through the Retail Origination Division, the
Wholesale Origination Division, the Commercial Division, and the Servicing
Division. The Company's Retail and Wholesale Origination business is
conducted principally in the states of California, Illinois, Washington, and
Nevada.
The Company is an approved mortgagee by the Department of Housing and
Urban Development and is qualified to originate mortgage loans insured by
the Federal Housing Administration as well as service loans for the Federal
National Mortgage Association and the Federal Home Loan Mortgage
Corporation. In addition, the Company Is approved to issue Government
National Mortgage Association securities.
Summary of Significant Accounting Policies
Net Income(Loss) Per Share
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share." SFAS No. 128 replaced the calculation of primary and fully diluted
earnings per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any dilutive
effects of options, warrants, and convertible securities. Earnings per
share amounts for all periods have been presented and, where appropriate,
restated to conform to SFAS No. 128 requirements.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
<PAGE>
United Financial Mortgage Corp.
Notes to Unaudited Financial Statements
Revenue Recognition
Revenue is recognized when loans are sold after closings. Interest income
from mortgages held by the Company and from short term cash investments is
recognized as earned.
Commissions and Fees
Commissions and fees principally consist of premiums received from
purchasers of mortgage loans originated by the Company. Gains(losses) from
purchasing, selling, investing in or otherwise trading in closed mortgage
loans are an immaterial portion of the Company's revenues and are included
in the Statement of Income under the item entitled Revenues: Commissions and
Fees.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and short-term investments with
maturity of three months or less.
Accounts Receivable
Accounts receivable consist of advances made in connection with loan
origination activities.
Concentration of Credit Risk
Credit risk with respect to mortgage loan receivables and accounts
receivable generally is diversified due to the large number of customers and
the timely sale of the loans to investors, generally within one (1) month.
The Company performs extensive credit investigation and verification
procedures on loan applicants before loans are approved and funds disbursed.
In addition, each loan is secured by the underlying real estate property.
As a result, the Company has not deemed it necessary to provide reserves for
the ultimate realization of the mortgage loan receivables.
Fixed Assets
Fixed assets consist of furniture, fixtures, equipment and leasehold
improvements and are recorded at cost and are depreciated using the straight
line method over their estimated useful lives. Furniture, fixtures and
equipment are depreciated over 5-7 years and leasehold improvements over the
shorter of the lease term or the estimated useful life of the asset. Upon
asset retirement or other disposition, cost and the related allowance for
depreciation are removed from the accounts, and gain or loss is included in
the statement of income. Amounts expended as repairs and maintenance are
charged to operations.
Fair Value of Financial Instruments
The carrying value of the Company's financial instruments, including cash
and cash equivalents, mortgage receivables, accounts receivables, accounts
payable and notes payable, as reported in the accompanying balance sheet,
approximates fair value.
Income Taxes
The Company accounts for income taxes using the liability method in
accordance with SFAS No. 109., "Accounting for Income Taxes." The liability
method provides that deferred tax assets and liabilities are determined
based on differences between financial reporting and tax basis of assets and
liabilities and are measured using the enacted tax rates and laws that will
be in effect when the differences are expected to reverse.
<PAGE>
United Financial Mortgage Corp.
Notes to Unaudited Financial Statements
Earnings (Loss) Per Common Share
Earnings(loss) per common share are calculated on net income(loss) After
the deduction for dividends paid on the Series A Preferred Shares. The
number of common shares used in the computation is based upon the number of
shares outstanding at the end of the period.
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income." ("SFAS 130"). SFAS 130, establishes the standards
for reporting and displaying comprehensive income and its components
(revenues, expenses, gains, and losses) as part of a full set of financial
statements. This statement requires that all elements of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as other financial statements. The statement is effective for
fiscal years beginning after December 15, 1997. Since the standard applies
only to the presentation of comprehensive income, it should not have any
impact on the Company's results of operations, financial position or cash
flows. Comprehensive income and regular income are one and the same for the
current period.
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 131, "Disclosures about
segments of an Enterprise and Related Information." ("SFAS 131"). SFAS 131
is effective for years beginning after December 15, 1997. SFAS No. 131
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and
financial reports. It also establishes standards for related disclosures
about products and services, geographic areas and major customers. SFAS No.
131 is effective for financial statements for fiscal years beginning after
December 15, 1997, and therefore the Company has adopted the new
requirements.
<PAGE>
United Financial Mortgage Corp.
Notes to Unaudited Financial Statements
Notes Payable
The Company has mortgage warehouse credit facilities aggregating $49
million with several commercial banks and other financial institutions.
These credit facilities are used to fund approved mortgage loans and are
collateralized by mortgage loans. The Company is not required to maintain
compensating balances.
Amounts outstanding under the various credit facilities
consist of the following:
October 31, 2000
-----------
$20 million mortgage warehouse credit facility
at a commercial bank; interest at LIBOR;
plus 160 basis points; expires 09/28/01 $ 12,175,770
$25 million mortgage warehouse credit facility
at a commercial bank; interest at commercial
paper rate; plus 150 basis points. expires 12/00 18,598,005
$2 million mortgage warehouse credit facility at
a commercial bank; interest at LIBOR plus
160 basis points; expires 09/28/01 1,544,985
-----------
Total $ 32,318,760
===========
Retirement Plan
The Company has a 401K plan covering all eligible employees. Company
contributions to the plan are discretionary.
Lease Commitments
The Company conducts its operations from leased premises and has
several equipment leases as part of standard business practice. The
following table reveals the estimated minimum rental payments under the
Company's operating leases. Total rent expense under these leases was
approximately $80,000, for the three months ended October 31, 2000.
Future minimum rental payments for the next five years at
October 31, 2000 are as follows:
Year Ending April 30, Operating Leases
2001 294,299
2002 255,269
2003 209,693
2004 124,892
2005 74,151
--------
Total Commitment $ 958,304
========
<PAGE>
United Financial Mortgage Corp.
Notes to Unaudited Financial Statements
Future lease payments capital leases at October 31, 2000:
Year Ending April 30, Capital Leases
2001 17,573
2002 12,008
2003 5,415
2004 451
-------
Total Commitment $ 35,447
Less Interest 14,947
Less Short Term 11,500
-------
Long Term $ 9,000
=======
Income Taxes
The income tax provision consists of the following for the
period ended October 31st:
1999 2000
------- -------
Current:
Federal $ 35,625 $ 38,191
State 7,335 7,863
------- -------
SubTotal 42,960 46,054
Deferred:
Federal (127,534) 179,570
State (26,256) 36,970
------- -------
SubTotal (153,790) 216,540
Total (110,830) 262,594
======= =======
The components of the deferred tax asset (liability) are as
follows for the period ending October 31st:
1999 2000
------- -------
Loss Carry-Forward 0 137,711
Accelerated Depreciation 31,625 12,966
Deferred Receivables (168,988) (229,506)
------- -------
Deferred Tax Asset(Liab) (137,363) (124,882)
Valuation Allowance 23,740 89,983
Net Deferred Tax Asset
(Liability) $ (113,623) $ (34,840)
======= =======
<PAGE>
United Financial Mortgage Corp.
Notes to Unaudited Financial Statements
Series A Preferred Stock
The Series A Preferred Stock is non-voting, nonparticipating and has a
liquidation preference upon dissolution of the Company of $5,000 per share.
The holders of the Preferred Stock are entitled to a variable dividend only
at the discretion of and determination by the Board of Directors. No
dividend was declared for the periods ended October 31, 1999 and 2000.
Stockholders' Equity
Warrants
At October 31, 2000, the Company had total warrants outstanding to
purchase 275,000 shares of the Company's Common Stock. The exercise price
of the warrants range between $0.50 and $7.40 per share. Warrants for
22,000 shares and 58,000 expire on the fifth anniversary of their issuance.
Warrants for 195,000 shares expire on November 15, 2000. In certain
circumstances, the warrants have certain "piggy back" or other registration
rights.
As of October 31, 2000, an advisor to the Company was issued warrants
to purchase 195,000 shares of the Company's Common Stock at an exercise
price of $0.50 per share. The warrants are exercisable until November 15,
2000 and contain certain registration rights.
The Company has reserved 275,000 common shares for issuance upon
exercise of all warrants.
In March of 1999, the Company implemented a stock repurchase program.
As of October 31, 2000, the Company has purchased 22,900 shares and has
returned such shares to 'authorized but not issued' shares.
Servicing
During the recent period ended October 31, 2000, the Company has
continued to build its servicing portfolio. As of the balance sheet date,
the servicing portfolio was seventeen million, three hundred ninety one
thousand, four hundred seven dollars (17,391,407) in residential loans.
Stock Option Plan
In December, 1993 the Company adopted the Non-Qualified and Incentive
Stock Option Plan and established the number of common shares issuable under
the plan at 500,000 shares. The exercise price for options under the plan
is the fair market value of the Common Stock on the date on which the option
is granted. The option price is payable either in cash, by the surrender of
common shares in the Company, or a combination of both. The aggregate
number of options granted in any one year cannot exceed 10% of the total
shares reserved for issuance under the plan. Options may be exercisable
immediately, after a period of time or in installments, and expire on the
tenth anniversary of the grant. The plan will terminate in December, 2003.
The total number of shares granted as of October 31, 2000 was 174,000.
Contingencies
The Company is a defendant in a series of complaints relating to its
business activities. The Company has aggressively defended its position in
these matters and has filed counter-claims in certain of the cases. The
Company does not believe the outcome of these lawsuits will have a material
impact on its financial statements.
<PAGE>
United Financial Mortgage Corp.
Notes to Unaudited Financial Statements
Expansion
On October 9, 1998, the Company purchased certain assets of
Mortgage Service of America, Inc. for $187,291 under the purchase method of
accounting. MSA is in the mortgage loan origination business and originated
primarily first mortgages. The purchase price was paid in cash. Assets in
the amount of $50,000 are being depreciated over their useful lives and
goodwill of $137,291 will be amortized over 17.5 years.
Basis of Presentation
Earnings per share is presented in accordance with the provision of the
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
(SFAS 128), which requires the presentation of "basic" and "diluted"
earnings per share. Basic earnings per share is based on the weighted
average shares outstanding without regard for common stock equivalents, such
as stock options and warrants. Diluted earnings per share includes the
effect of common stock equivalents.
The following reconciles basic earnings per share to diluted earnings per
share under the provisions of SFAS 128:
Period Ended October 31, 1999
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic Earnings Per Share
Income Available to Common
Shareholders 164,919 3,895,529 .0423
Effect of Dilutive Securities 242,000
Diluted Earnings Per Share
Income Available to Common
Shareholders 164,919 4,137,529 .0399
Period ended October 31, 2000
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic Earnings Per Share
Income Available to Common
Shareholders 243,425 3,877,129 0.0628
Effect of Dilutive Securities 275,000
Diluted Earnings Per Share
Income Available to Common
Shareholders 243,425 4,152,129 0.0586
<PAGE>
ITEM 2 MANAGEMENT DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
This Management Discussion and Analysis of Financial Condition and
Results of Operations includes forward-looking statements which involve
risks and uncertainties. Actual events or results may differ materially
from those discussed in the forward-looking statements as a result of
certain factors.
The Company, founded in 1986, operates as a full-service mortgage
banking company principally engaged in the origination and sale of first
mortgage loans secured by residential real estate. On a limited scale, the
Company also originates commercial loans; and services residential mortgage
loans.
Results of Operations
Six Months Ended October 31, 2000
Commission and fee revenue increased from $4,890,367 for the six months
ended October 31, 1999 to $5,227,130 for the six months ended October 31,
2000. This percentage increase of approximately 6.9% primarily is the
result of an increase in the number of loan originations. The increase in
loan originations was largely the result of product offerings that met
consumer demands.
Interest income increased from $917,197 for the six months ended
October 31, 1999 to $1,053,340 for the six months ended October 31, 2000.
This increase was attributable to the increase in loan originations and
higher interest income on invested capital.
Salary and commission expense increased from $3,276,856 for the six
months ended October 31, 1999 to $3,328,652 for the six months ended October
31, 2000. The increase was attributed to the increasing cost of wholesale
originations through the premiums that are paid for these originations.
Selling and administrative expenses increased from $1,493,884 for the
six months ended October 31, 1999 to $1,499,615 for the six months ended
October 31, 2000. This increase reflected the increase in loan volume and
incremental expenses associated with this increase.
Depreciation and amortization expense increased from $73,991 for the
six months ended October 31, 1999 to $86,940 for the six months ended
October 31, 2000. This principally resulted from technology investments
made during fiscal year 1999.
Interest expense increased from $905,350 for the six months ended
October 31, 1999 to $1,011,805 for the six months ended October 31, 2000.
This increase was the result of increased use of warehouse lines of credit
to fund the increased loan originations.
<PAGE>
Liquidity and Capital Resources
During the six months ended October 31, 1999 and October 31, 2000, net
cash generated(used) by operating activities was ($604) and $218,747,
respectively. Net cash generated by operating activities increased from the
first six months of 1999 to the first six months of 2000 due to an increase
in net income and the cash flow impact of the deferred tax asset from year
to year.
Net cash generated(used) by investing activities changed from
($135,605) for the six months ended October 31, 1999 to $63,606 for the six
months ended October 31, 2000. The change from 1999 to 2000 largely was
attributable to the sale of property in fiscal year 2000. This was
partially offset by investments.
Cash flow from financing activities for the first six months of 1999
and first six months of 2000 was $431,738 and $370,863, respectively.
The net cash flow from operating, financing, and investing activities
was $295,529 for the first six months 1999 and $653,216 for the first six
months 2000.
Cash flow requirements depend on the level and timing of the Company's
activities in loan origination in relation to the timing of the sale of such
loans. In addition, the Company requires cash flow for the payment of
operating expenses, interest expense, and capital expenditures. Currently,
the Company's primary sources of funding are borrowings under warehouse
lines of credit, proceeds from the sale of loans in the secondary market and
internally generated funds.
During the first six months of fiscal year 2000, the Company has
continued to pursue its strategy of servicing mortgage loans. In order to
engage in this business, the Company has retained the servicing rights on
loans that the Company originates. Such retention has resulted in some
reduction in short term cash flow available. The Company has employed
capital to finance the retention of servicing rights. This capital
principally has been expended to pay the costs associated with loan
origination, such as loan officer compensation, broker commissions, and
miscellaneous overhead expenses. However, the retention of servicing rights
is expected to create an asset on the Company's balance sheet and create
future cash flow streams.
Industry Trends
Interest rates in recent quarters have remained flat to slightly lower.
This has benefited the Company in the short term via an increase in loan
origination activity. However, with a Presidential election still
undecided in the U.S. and other forces at work, the long term outlook on
rates is still very much in debate.
The Company believes that the industry will continue to offer broader
and more diversified product offerings and that technology will play an
increasing part in real estate transactions. This includes expanded use of
Internet capabilities which the Company will continue to aggressively
pursue.
The Company's business base is concentrated principally in the Midwest
and Western United States. As such, the Company may be subject to the
effects of economic conditions and real estate markets specific to such
locales.
Inflation and Seasonality
The Company believes the effect of inflation, other than its potential
effect on market interest rates, has been insignificant. Historically,
seasonal fluctuations in mortgage originations generally do not have a
material effect on the financial condition or operations of the Company.
Due to the technological and infrastructure advancements, such as increasing
the servicing portfolio, the Company hopes to continue to minimize
seasonality fluctuations.
<PAGE>
PART II - OTHER INFORMATION
ITEM
1. Legal Proceedings - Item 3. Entitle "Legal Proceedings" is
incorporated herein(by Reference from the
Company's Annual Report on Form 10-KSB as
Filed with United State Securities Exchange
Commission on October 31, 2000
2. Changes in Securities - None
(a) None
(b) None
(c) None
(d) None
3. Defaults upon Senior Securities - None
4. Submission of Matters to a vote of Security Holders
On August 23, 2000, the Company held its annual meeting of
shareholders.Shareholder's voted to elect the proposed slate of
directors; approve the appointment of the Company's independent
auditors; authorize the Company to retain professionals as needed for
the Company's application to become a federal savings bank; and
authorize the issuance of 10,000,000 additional shares of common
stock, and up to an additional 4,000,000 shares of preferred stock as
the Board of Directors shall determine.
5. Other Information - None
6. Exhibits and Reports on Form 8-K
(a) Exhibit (see exhibit list)
(b) Reports on Form 8-K - (1) The Company filed current
reports on Form 8-K on August 03, 2000, August 21, 2000
and September 20, 2000.
<PAGE>
ITEM 6(a) EXHIBIT LIST
DESCRIPTION
27 Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirement 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.
United Financial Mortgage Corp.
December 11, 2000 By: /s/ Joseph Khoshabe
----------------------------
Joseph Khoshabe
Chairman and Chief Executive
Officer
December 11, 2000 By: /s/ Steve Khoshabe
----------------------------
Steve Khoshabe
Chief Financial Officer
December 11, 2000 By: /s/ Robert S. Luce
----------------------------
Robert S. Luce
Secretary
