Exhibit 99.2
Financial Statements
of
MTH Mortgage, LLC
For the Periods Ended December 31, 2011 and 2010
MTH MORTGAGE, LLC
BALANCE SHEET
December 31, 2011 and 2010
|
| | | | | | | | |
ASSETS |
| | 2011 | | 2010 |
Current Assets: | | | | |
Cash in bank | | $ | 963,875 |
| | $ | 688,583 |
|
Trust account | | 581 |
| | 1,374 |
|
Account receivable | | 535,701 |
| | 226,617 |
|
Prepaid expenses | | 25,393 |
| | 22,810 |
|
Total current assets | | 1,525,550 |
| | 939,384 |
|
| | | | |
Fixed Assets: | | | | |
Office furniture & equipment | | 209,112 |
| | 279,067 |
|
Less: Accumulated depreciation | | (171,989 | ) | | (198,817 | ) |
Total fixed assets | | 37,123 |
| | 80,250 |
|
Total assets | | $ | 1,562,673 |
| | $ | 1,019,634 |
|
| | | | |
| | | | |
LIABILITIES AND MEMBERS' EQUITY |
| | | | |
Current Liabilities: | | | | |
Accounts payable | | $ | 176,007 |
| | $ | 219,870 |
|
Commissions/bonus payable | | 239,171 |
| | 122,472 |
|
Payroll taxes payable | | 3,975 |
| | 2,379 |
|
Trust account payable | | 581 |
| | 1,374 |
|
Distributions payable | | 855,000 |
| | 370,300 |
|
Total current liabilities | | 1,274,734 |
| | 716,395 |
|
| | | | |
Members' equity: | | | | |
Members' equity | | 287,939 |
| | 303,239 |
|
Total liabilities and members' equity | | $ | 1,562,673 |
| | $ | 1,019,634 |
|
MTH MORTGAGE, LLC
STATEMENT OF OPERATIONS
Years Ending December 31, 2011 and 2010
|
| | | | | | | | |
| | 2011 | | 2010 |
Income | | | | |
Loan Fees | | $ | 8,708,477 |
| | $ | 9,165,402 |
|
Buyer Rebates | | (12,469 | ) | | (13,430 | ) |
Total Income | | 8,696,008 |
| | 9,151,972 |
|
| | | | |
Operating Expense | | | | |
Administrative Fee | | 366,600 |
| | 406,250 |
|
Investor Fee | | 145,275 |
| | 404,300 |
|
Payroll | | 1,663,581 |
| | 1,802,872 |
|
Processing Fee | | 310,200 |
| | 343,750 |
|
Documentation Preparation | | 15,875 |
| | 32,238 |
|
Insurance | | 155,627 |
| | 148,696 |
|
Printing & Reproduction | | 11,775 |
| | 39,090 |
|
Professional Fees | | 76,712 |
| | 157,417 |
|
Misc Direct Costs | | 188,549 |
| | 467,302 |
|
Rent | | 188,166 |
| | 202,419 |
|
Payroll Taxes | | 108,610 |
| | 127,119 |
|
Telephone | | 36,811 |
| | 44,142 |
|
Postage & Delivery | | 6,371 |
| | 7,316 |
|
Licenses & Permits | | 12,803 |
| | 22,915 |
|
Computer Software, etc. | | 5,752 |
| | — |
|
Outside Services | | 28,437 |
| | 23,417 |
|
Office Supplies/Misc Expense | | 28,212 |
| | 28,359 |
|
Early Payoff Fees | | 40,928 |
| | 30,138 |
|
Depreciation Expense | | 38,346 |
| | 41,822 |
|
Travel & Entertainment | | 38,285 |
| | 23,903 |
|
Total Operating Expense | | 3,466,915 |
|
| 4,353,465 |
|
| | | | |
NET OPERATING INCOME | | 5,229,093 |
| | 4,798,507 |
|
| | | | |
Other Income & Expense | | | | |
Other Income - Interest | | 3,063 |
| | 1,009 |
|
Franchise Tax Expense | | (6,055 | ) | | (12,590 | ) |
Other Income (Expense) | | 5,159 |
| | — |
|
Total Other Income & Expense | | 2,167 |
| | (11,581 | ) |
| | | | |
NET INCOME | | $ | 5,231,260 |
| | $ | 4,786,926 |
|
MTH MORTGAGE, LLC
STATEMENT OF MEMBERS' EQUITY
December 31, 2011 and 2010
|
| | | | |
Members' equity, December 31, 2009 | | $ | 303,673 |
|
| | |
Net operating income - 2010 | | 4,786,926 |
|
| | |
Members' distributions - 2010 | | (4,787,360 | ) |
| | |
Members' equity, December 31, 2010 | | 303,239 |
|
| | |
Net operating income - 2011 | | 5,231,260 |
|
| | |
Members' distributions - 2011 | | (5,246,560 | ) |
| | |
Members' equity, December 31, 2011 | | $ | 287,939 |
|
MTH MORTGAGE, LLC
STATEMENT OF CASH FLOWS
Years Ending December 31, 2011 and 2010
INCREASE/(DECREASE) IN CASH OR CASH EQUIVALENTS
|
| | | | | | | | |
| | 2011 | | 2010 |
Cash flows from operating activities: | | | | |
Net income | | $ | 5,231,260 |
| | $ | 4,786,926 |
|
Adjustments to reconcile cash flow | | | | |
Depreciation | | 38,346 |
| | 41,822 |
|
Decrease/(increase) in current assets | | | | |
Accounts receivable | | (309,084 | ) | | 77,369 |
|
Prepaid expenses | | (2,583 | ) | | 11,478 |
|
Increase/(decrease) in current liabilities | | | | |
Accounts payable | | (43,863 | ) | | (403,104 | ) |
Commissions/bonus payable | | 116,699 |
| | 57,811 |
|
Payroll taxes payable | | 1,596 |
| | (5,995 | ) |
Member distribution payable | | 484,700 |
| | 175,400 |
|
| | | | |
Total adjustments | | 285,811 |
| | (45,219 | ) |
| | | | |
Cash provided by operations | | $ | 5,517,071 |
| | $ | 4,741,707 |
|
| | | | |
Cash flow from investing activities: | | | | |
Equipment (purchased)/sold, net | | 4,781 |
| | (15,414 | ) |
Cash provided by/(used in) investing | | $ | 4,781 |
| | $ | (15,414 | ) |
| | | | |
Cash flow from financing activities: | | | | |
Distributions to members | | (5,246,560 | ) | | (4,787,360 | ) |
Cash used in financing activities | | $ | (5,246,560 | ) | | $ | (4,787,360 | ) |
| | | | |
Net increase/(decrease) in cash | | 275,292 |
| | (61,067 | ) |
| | | | |
Cash at beginning of period | | 688,583 |
| | 749,650 |
|
| | | | |
Cash at end of period | | $ | 963,875 |
| | $ | 688,583 |
|
MTH MORTGAGE, LLC
NOTES TO FINANCIAL STATEMENTS
December 2011
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company was incorporated in Arizona in October 23, 2000, as MTH Mortgage, LLC (“MTH” or the “Company”).
The financial statements of MTH are prepared in conformity with generally accepted accounting principles (“GAAP”) and general practices in the mortgage industry. Preparations of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported operations of the Company for the periods presented.
A summary of the significant accounting policies used in the preparation of the accompanying comparative financial statements follows:
Recognition of revenue - The Company recognizes fees as earned upon the closing of the related escrow.
Cash equivalents - For purposes of the statements of cash flows, cash equivalents include time deposits, certificates of deposit, and all highly liquid investments with original maturities of 3 months or less.
Escrow funds held in trust - Funds received by the Company in connection with open escrows are deposited in separate trust bank accounts. These trust funds are not available for operating purposes.
Properties - Office furniture, fixtures and equipment, and leasehold improvements are stated at cost. Depreciation and amortization is computed using a combination of straight-line and declining balance methods over useful lives of 5 to 7 years. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation or amortization are removed form the accounts, and any resulting gain or loss is reflected in income for the period. Repairs and maintenance are charged to expense as incurred.
Compensated Absences - Employees of the Company are entitled to paid vacation, paid sick days, and personal days offs, depending on job classifications, length of service and other factors. It is impractical to estimate the amount of compensation for future absences and accordingly, no liability has been recorded in the accompanying financial statements. The Company's policy is to recognize the costs of compensated absences when actually paid to employees. At December 31, 2011, the estimated amount of unpaid vacation balance pay was $15,950.
Income Taxes - No provision has been made for Federal or Arizona state income taxes since the MTH is not a taxable entity; the individual shareholders report their distributive shares of the Company's income/loss on their corporate tax returns.
NOTE 2 - RELATED PARTY TRANSACTIONS
The Company has entered into a software license agreement with imortgage.com (which is a 45% owner of the Company). The terms of the agreement allow the Company to use the software of imortgage.com to help in the origination of mortgage applications. There is no fee for this arrangement. The Company also entered into a service agreement with imortgage.com. The terms of the agreement require imorgage.com to process all loan applications taken by the Company, provide legal and accounting services and support and any other administrative support needed by the Company. The cost to the MTH on a per loan basis of $600, calculated as $275 processing fee and $325 administration fee.
NOTE 3 - CONCENTRATION OF CREDIT RISK
The Company markets to homebuilder's customers within the States of Arizona, California, Colorado, Nevada and Florida. In the event of a major downturn within those markets, MTH could be negatively affected.
NOTE 4 - DEPOSITS IN EXCESS OF FDIC INSURANCE
The Company has accumulated more than $250,000 in one bank account as of December 31, 2011. Management is aware and believes there is minimum risk to the Company as distributions and expenses will normally keep the balance below $250,000. Also, FDIC now insures all balances on business checking.
NOTE 5 - LEASE OBLIGATIONS
Effective December 31, 2011, the Company terminated its lease on its Tucson office. Effective December 13, 2011, the Company entered into a new lease for its Tucson office. The lease is for a period of 32 months ending August 31, 2014. Rent payable is $500 per month through August 31, 2012, $516 per month through August 31, 203 and $531 per month through August 31, 2014.
The estimated rent is as follows:
|
| | | | |
2012 | | $ | 6,062 |
|
2013 | | 6,251 |
|
2014 | | 4,252 |
|
| | $ | 16,565 |
|
The Company moved its corporate headquarters to North Scottsdale, Arizona, on March 1, 2006. Starting April 1, 2006, the Company has had a lease in effect for a period of 96 months. Effective April 1, 2009, the Company changed its lease agreement to reduce the amount of space it was using. The Company presently occupies the reduced space on a month-to-month basis at a base rent of $3,467.
The Company opened an office in Concord, California, on January 1, 2005. Effective April 1, 2006, the Company renegotiated its Concord office lease approximately doubling its space. The new lease period is 45 months commencing July 22, 2006, when construction of the office improvements was completed. Effective February 1, 2010, the Company extended the lease of its Concord office. Rent is $2,150 per month and the lease is now a month-to-month agreement.
The Company opened an office is Southern California in December 2005. At this time, the office is in the same location as the builder and rent is $2,234 per month. This is also a month-to-month agreement.
Effective January 1, 2012, the Company entered into a sub-lease agreement for its Denver, Colorado office. The lease is for a period of 77 months ending May 31, 2018. Rates are per square foot, starting at $16.00 per square foot and rising to $18.50 per square foot.
The estimated rent is as follows:
|
| | | | |
2012 | | $ | 9,420 |
|
2013 | | 11,775 |
|
2014 | | 12,102 |
|
2015 | | 13,574 |
|
2016 | | 13,816 |
|
2017 | | 4,359 |
|
| | $ | 65,046 |
|
The Company opened an office in Florida in April 2009. This is a month-to-month lease, payable $374 per month.