-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Pr+rsZLA3QJhR/BegkYDpotwwE7EskHmDNePnaAVEa4YwYCoBEisYCetBHmCwx9v mxcKUmCRYgpJCTTO6t1SDQ== 0000890566-96-001200.txt : 19960928 0000890566-96-001200.hdr.sgml : 19960928 ACCESSION NUMBER: 0000890566-96-001200 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960820 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTMARK GROUP HOLDINGS INC CENTRAL INDEX KEY: 0000820771 STANDARD INDUSTRIAL CLASSIFICATION: MORTGAGE BANKERS & LOAN CORRESPONDENTS [6162] IRS NUMBER: 841055077 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-18945 FILM NUMBER: 96617913 BUSINESS ADDRESS: STREET 1: 355 N E FIFTH AVE STREET 2: STE 4 CITY: DELRAY BEACH STATE: FL ZIP: 33483 BUSINESS PHONE: 4072438010 MAIL ADDRESS: STREET 1: 355 N E FIFTH AVE STREET 2: STE 4 CITY: DELRAY BEACH STATE: FL ZIP: 33483 FORMER COMPANY: FORMER CONFORMED NAME: NETWORK FINANCIAL SERVICES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: NETWORK REAL ESTATE OF CALIFORNIA INC DATE OF NAME CHANGE: 19920623 FORMER COMPANY: FORMER CONFORMED NAME: EAGLE VENTURE ACQUISITIONS INC DATE OF NAME CHANGE: 19900620 10QSB 1 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. 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)
THREE MONTHS ENDED SIX MONTHS ENDED --------------------------------- --------------------------------- JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1996 JUNE 30, 1995 ----------- ----------- ----------- ----------- 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) =========== =========== =========== ===========
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 EX-27 2
5 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. 6-MOS DEC-31-1996 JUN-30-1996 78,472 0 4,966,573 0 0 5,073,243 837,065 (482,035) 10,655,233 7,910,414 0 0 1,300,000 22,475,937 553,688 10,655,233 0 1,002,709 0 1,097,772 0 0 0 (95,063) 0 (95,063) 0 0 0 (95,063) (.03) (.03)
-----END PRIVACY-ENHANCED MESSAGE-----