UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2010
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Transition Period from_________to__________
COMMISSION FILE NUMBER: 333-142907
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WORLD MORTGAGE EXCHANGE GROUP, INC.
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(Exact Name of Registrant as Specified in Its Charter)
FLORIDA 76-0835007
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
4470 Chamblee Dunwoody Road, Suite 250, Atlanta, Georgia 30338
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(Address of principal executive offices) (Zip code)
Registrant's Telephone Number, Including Area Code: 404-255-8800
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Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Act. Yes [ ] No [X]
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Check whether the registrant is a shell company Yes [X] No [ ]
State issuer's revenues for its most recent fiscal year. $4,500
The aggregate market value of the voting stock held by non-affiliates of the
registrant computed by reference to the closing bid price of our Common Stock as
reported on the Over the Counter Bulletin Board as of the last business day of
the registrant's most recently completed second fiscal quarter was approximately
$266,927.
As of April 12, 2011 there were a total of 21,796,319 shares of common stock
issued and outstanding.
WORLD MORTGAGE EXCHANGE GROUP, INC.
INDEX
Forward-Looking Statements ................................................. iii
PART I
Item 1. Business .......................................................... 1
Item 1A. Risk Factors ...................................................... 4
Item 1B. Unresolved Staff Comments ......................................... 11
Item 2. Properties ........................................................ 11
Item 3. Legal Proceedings ................................................. 12
Item 4. Submission of Matters to a Vote of Security Holders ............... 12
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities ........................ 12
Item 6. Selected Financial Data ........................................... 14
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations ............................................ 14
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ....... 17
Item 8. Financial Statements and Supplementary Data ...................... 17
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures ............................................ 29
tem 9A. Controls and Procedures ........................................... 29
Item 9B. Other Information ................................................. 30
PART III
Item 10. Directors, Executive Officers and Corporate Governance ........... 30
Item 11. Executive Compensation ........................................... 32
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters ...................................... 33
Item 13. Certain Relationships and Related Transactions, and Director
Independence ..................................................... 34
Item 14. Principal Accountant Fees and Services ............................ 34
PART IV
Item 15. Exhibits and Financial Statement Schedules ........................ 35
Signatures ................................................................. 36
ii
FORWARD-LOOKING INFORMATION
The statements contained in this Annual Report on Form 10-K that are
not historical fact are forward-looking statements (as such term is defined in
the Private Securities Litigation Reform Act of 1995), within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The forward-looking statements
contained herein are based on current expectations that involve a number of
risks and uncertainties. These statements can be identified by the use of
forward-looking terminology such as "believes," "expects," "may," "will,"
"should," or "anticipates," or the negative thereof or other variations thereon
or comparable terminology, or by discussions of strategy that involve risks and
uncertainties.
The Company wishes to caution the reader that its forward-looking
statements that are not historical facts are only predictions. No assurances can
be given that the future results indicated, whether expressed or implied, will
be achieved. While sometimes presented with numerical specificity, these
projections and other forward-looking statements are based upon a variety of
assumptions relating to the business of the Company, which, although considered
reasonable by the Company, may not be realized. Because of the number and range
of assumptions underlying the Company's projections and forward-looking
statements, many of which are subject to significant uncertainties and
contingencies that are beyond the reasonable control of the Company, some of the
assumptions inevitably will not materialize, and unanticipated events and
circumstances may occur subsequent to the date of this report. These
forward-looking statements are based on current expectations and the Company
assumes no obligation to update this information. Therefore, the actual
experience of the Company and the results achieved during the period covered by
any particular projections or forward-looking statements may differ
substantially from those projected. Consequently, the inclusion of projections
and other forward-looking statements should not be regarded as a representation
by the Company or any other person that these estimates and projections will be
realized. The Company's actual results may vary materially. There can be no
assurance that any of these expectations will be realized or that any of the
forward-looking statements contained herein will prove to be accurate.
iii
PART I
ITEM 1. BUSINESS
OVERVIEW AND HISTORY:
World Mortgage Exchange Group, Inc., formerly known as Pop Starz
Records, Inc. (the "Company", "WMEG", "we", or "our") was incorporated July 5,
2006, under the laws of the State of Florida. The Company's original business
purpose was to develop, produce, license, acquire and distribute recorded music,
primarily in the popular Hip Hop and Pop genres. We were not successful with
this business venture.
On September 8, 2009 shareholders owning a majority of our issued and
outstanding shares of common stock were sold in a private transaction. In
connection therewith, each of the Company's officers and directors tendered
their resignation. Concurrently therewith, we appointed new officers and
directors.
The Company's new officers and directors were not familiar with the
music or recording industry and changed the Company's business focus to real
estate.
CURRENT AND PLANNED OPERATIONS:
The Company's initial focus will be on the purchase and sale of real
property. In order to assist buyers in securing financing, the Company has
developed a 49 year mortgage payment program. To fully implement our business
plan, the Company will require a significant capital infusion the extent of
which cannot be reasonably forecast at this time. If we issue shares of our
common stock, existing shareholders will experience significant dilution. Any
debt financing may not be available or if available, may not be available on
terms suitable for the Company. We currently have no commitment for funding.
THE MARKET:
From 2000 through 2005, the United States experienced an unprecedented
rise in property values. Mortgage interest rates were relatively low and bank
and non-bank financial institutions were encouraged by public policy to relax
lending standards to create more mortgage debt. Some of the bigger investment
firms created complex and risky financial instruments backed by these
unpredictable assets. Quasi-government agencies were purchasing virtually all
mortgage paper originated which created a false sense of stability and security.
Speculative purchase of real estate in a practice known as "flipping"
added to the artificial inflation of property values. The system eventually
collapsed under the weight of borrowers unable to make the resulting high
monthly payments, homes values, once exposed to true market forces, and began
rapidly falling. The decline in market value of these loans and assets on the
balance sheets of these institutions, big and small, wiped out billions of
dollars of capital and threatened the financial viability of financial
institutions both large and small. In select cases, the US Government determined
that tax payer dollars were necessary to prop up these companies. In other
instances, generally smaller commercial banks have been allowed to fail. The
number of private mortgage companies that have failed is very large. Fannie Mae
and Freddie Mac, and now even FHA, only operate with government taxpayer
assistance.
1
The collapse of value in the real estate market is one of the most
severe in U.S. history. A home was generally the most valuable asset owned by an
individual. It usually was the greatest portion of a family budget. The
percentage of the national economy influenced by real estate activity is
enormous. The government-induced legacy of a collapsing real estate economy
include a decline in consumer confidence, a decline in consumer spending, rising
unemployment, and the future prospect of rising interest rates/devaluation of
the dollar due to massive government deficit spending.
The government's legislative and administrative measures aimed at
restoring liquidity to the credit markets and improving conditions in the real
estate markets has only recently begun and there is no indication yet whether
these measures have or will effectively stabilize prices and real estate values
or restore consumer confidence and increase demand in the real estate markets. .
We cannot predict the duration or ultimate severity of the current challenging
conditions, nor can we provide assurance that our responses to the current
downturn or the government's attempts to address the troubles in the economy
will be successful. If these conditions persist or continue to worsen, our
economy will suffer and the dream of home ownership will fade.
FORECLOSURES:
Throughout the country, banks have taken ownership of homes via
foreclosure. Homeowners continue to walk away from their properties as they see
little hope of their property returning to values above the mortgage amount.
Others are struggling to stay current or avoid foreclosure proceedings as the
interest rate on the favored (but much riskier) adjusted rate mortgages reset
and monthly mortgage payments can easily increase by 50% in the reset month.
These depressed assets will create unique buying opportunities for us to acquire
real estate holdings at a substantial discount from its prior fair market value.
We will also seek real estate opportunities with small community and regional
banks. Banks do not want to be landlords and would prefer to avoid the cost of
foreclosure. They need to convert their current property holdings into cash that
can be loaned out for productive uses and get the economy moving again. Our
objective is to acquire a portfolio of single family homes (and possibly
condominiums) at discounted prices. We will then use part of our remaining
working capital to make necessary repairs and upgrades to the property. To
further induce sales, we will offer a proprietary mortgage product.
This strategy is not without risk. We will have limited capital to
invest in real estate. Real estate investments are generally illiquid. Like
other companies that invest in real estate, we will have a limited ability to
market our properties in response to changes in economic and other conditions.
Moreover, we may not be able to timely dispose of properties when we find
dispositions advantageous or necessary, or complete the disposition of
properties under contract to be sold, and any such dispositions may not provide
proceeds in excess of the amount of our investment in the property or even in
excess of the amount of any indebtedness secured by the property. As a result,
we are susceptible to the risks associated with further declines in real estate
values.
MORTGAGE FINANCING:
As we expand our real estate program, we want to offer reasonable and
legitimate financing options to buyers. Adjustable rate mortgages have all but
sunk the real estate market. Buyers were offered a teaser rate, with no
repayment of principal for years. Some borrowers were even offered the
opportunity to pay less than the required monthly payment. When the payment date
was reset, buyers realized that they could no longer afford the monthly loan
payments or saw that the outstanding principal balance of their mortgage
obligation was greater than when the loan was first secured. Concurrently, the
values of their homes were rapidly falling below the mortgage balance. Mortgage
work out programs and government incentives have failed to stem the tide of
rising foreclosure rates.
2
Typically, financial planners recommend that borrowers secure a fixed
rate mortgage. While the initial payment period on the fixed term 30 year
mortgage may be greater than the initial monthly fee on an adjustable rate
mortgage, borrowers will have the opportunity to budget their expenses. They
know their monthly payments as long as they stay in the home. In order to reduce
the interest expense over the lease term, many borrowers choose a 15 year
mortgage. However, monthly payments are significantly greater, squeezing even
more buyers out of the housing market.
Management believes that offering traditional fixed rate mortgages will
be the key to home ownership in the future. However, a 30 year amortization will
still prevent many potential borrowers from realizing their lifetime dream. For
this reason, we hope to develop and implement a 49 year fixed rate mortgage. If
we do not have sufficient funds to underwrite these mortgages, which, in all
likelihood, will be the case until we obtain additional capital, we will work
with community banks and private lenders to offer a 49 year term mortgage. We
may also purchase homes, resell these homes and assist the Buyer in financing
the purchase by using our 49 year mortgage.
While the total amount of interest a borrower would pay on a 49 year
mortgage is significantly greater than the interest payable on a 30 year
mortgage, statistics indicate that only a very small percentage of homeowners
have lived in the same home for 30 years and made payments during that time on
the same mortgage. In fact, most Americans move every seven years. For a typical
buyer the monthly savings in cash flow will more than offset any additional
interest paid during the term of the loan.
Implementing this program will require a significant amount of time,
work and capital. In addition, the financial markets may not be receptive to
this novel approach to lending money. These mortgages would not qualify for
purchase by FANNIE MAE or FREDDIE MAC. As a result, there will be very little
liquidity in these mortgages and we will either own or service these mortgages.
COMPETITION:
Both the real estate and mortgage lending industries are highly
competitive. We will face competition from multi-billion real estate development
firms, real estate investment trusts and large financial institutions which have
billions of dollars at their disposal to loan to prospective home purchasers or
to purchase large parcels of land. It will be very difficult for us to compete
with these firms. We do not have the capital to purchase large land parcels and
we cannot underwrite mortgages. Nevertheless, we hope to establish a niche
market. While large home builders generally concentrate their efforts in a small
concentrated area where homes are grouped together, we hope to have the
flexibility to pick and choose homes throughout an entire region and attempt to
identify those residential properties which offer a reasonable return on our
investment.
Currently, our 49 year mortgage program is in the developmental stages.
We have discussed this program with several community banks and underwriters and
have received enthusiastic response. Our goal is to initially enter into a
partnership, joint venture or referral service with mortgage underwriters or
community banks who will implement a 49 year mortgage program. We believe that
one of the keys to this program is to service these mortgages in-house.
Traditionally, buyers are obligated to make monthly payments. If they are
delinquent, penalties are assessed for the following month. If delinquencies
continue, foreclosure notices are sent and ultimately the home goes into
foreclosure.
3
We believe that there is a better way. We must identify the problem and
determine if there is a suitable answer. To answer this question we will
directly contact the buyer. A job loss, illness or death in the family is no
reason to force families out of their home. In conjunction with our lending
partners, our goal will be to implement a mortgage workout plan. Deferrals,
longer terms, interest only loans for a fixed period of time are all options
which will be utilized. There will be no need to go to third parties whose
primarily motivation is fees for themselves and not helping the consumer.
LICENSING:
We do not intend to become a licensed mortgage broker. We will rely on
community banks or other similarly situated financial institutions to underwrite
and originate mortgages. We may also rely on independent mortgage brokers. As we
begin to implement our business model, local ordinances and state statutes may
impose additional licensing, insurance and bond requirements. If we begin to
underwrite mortgages, we will likely be subject to further regulatory scrutiny
from both the state and federal governments. Securing these licenses and bonds
can be time consuming and costly.
EMPLOYEES:
We have four employees, our chief executive officer, chief financial
officer, vice president and treasurer/secretary. We also use the services of
several independent contractors.
ITEM 1A. RISK FACTORS
RISKS ASSOCIATED WITH THE COMPANY'S PROSPECTIVE BUSINESS AND OPERATIONS
IT IS UNLIKELY THAT WE WILL BE ABLE TO SUSTAIN PROFITABLE OPERATIONS IN THE NEAR
FUTURE.
We have had limited operations to date. We have incurred significant
start-up costs. There can be no assurance that we will be able to generate
sufficient revenues or cash flows to finance our operations and existing
obligations. Even if we are able to successfully expand our operations and
increase revenues, there can be no assurance that we will be able to operate
profitably.
It is critical to our success that we continue to devote financial
resources to implement our business plan. We expect that our operating expenses
will increase significantly, especially with respect to sales and marketing. As
we increase spending, there can be no assurance that we will be able to operate
on a profitable basis. As a result, we may not be able to sustain profitable
operations,
WE LACK ADEQUATE WORKING CAPITAL.
Our auditors have issued a going concern opinion. We do not currently
have adequate capital to implement our business plan. If our working capital
estimates prove wrong or if we are not successful in obtaining additional
financing, our business operations will suffer.
We may require both short-term financing for operations and long-term
capital to fund our expected growth if we want to fully implement our business
plan and take advantage of evolving market conditions. Additional financing may
not be available to us, or if available, then it may not be available upon terms
and conditions acceptable to us. Any equity financing may be dilutive to
shareholders, and debt financing, if available, would increase expenses and may
involve restrictive covenants.
4
We may be required to raise additional capital, at times and in
amounts, which are uncertain, especially under the current capital market
conditions. Under these circumstances, if we unable to acquire additional
capital or is required to raise it on terms that are less satisfactory than
desired, it may have a material adverse effect on its financial condition.
REAL ESTATE DEVELOPMENT AND MORTGAGE BANKING REQUIRE THE AVAILABILITY OF
SIGNIFICANT CAPITAL.
In order for us to purchase real estate or offer mortgage financing, we
will require a significant capital infusion. In addition, we may have to look to
more traditional lending sources in order to close our transactions. If we do
not have sufficient capital to self finance our operations, given our limited
operating history and lack of cash flow, obtaining additional funding sources
will be very difficult as financial institution lending practices have become
increasingly restrictive.
THE ONGOING DOWNTURN IN THE GENERAL ECONOMY AND THE REAL ESTATE MARKET COULD
NEGATIVELY IMPACT OUR BUSINESS AND FINANCIAL RESULTS.
Periods of economic slowdown or recession, significantly reduced access
to credit, declining employment levels, decreasing demand for real estate,
declining real estate values or the perception that any of these events may
occur can adversely impact our business model. The declining real estate market
in the United States, the availability and cost of credit, increased
unemployment, volatile oil prices, declining consumer confidence and the
instability of United States banking and financial institutions, have
contributed to increased volatility, an overall economic slowdown and diminished
expectations for the economy and markets going forward. The fragile state of the
credit markets, the fear of a global recession for an extended period and the
current economic environment will impact our planned business activities.
WE WILL OPERATE IN A HIGHLY COMPETITIVE BUSINESS WITH NUMEROUS COMPETITORS, MOST
OF WHOM WILL HAVE GREATER FINANCIAL AND OPERATIONAL RESOURCES THAN IT DOES.
We will compete in a variety of service disciplines. Each of these
business areas is highly competitive on a national as well as on a regional and
local level. We will experience competition not only from other national real
estate service providers, but also from global real estate service providers,
boutique real estate advisory firms, consulting and appraisal firms. Depending
on the product or service, we also face competition from other real estate
service providers, institutional lenders, insurance companies, investment
banking firms and investment managers.
OUR ABILITY TO ACCESS CREDIT AND CAPITAL MARKETS MAY BE ADVERSELY AFFECTED BY
FACTORS BEYOND OUR CONTROL, INCLUDING TURMOIL IN THE FINANCIAL SERVICES
INDUSTRY, VOLATILITY IN FINANCIAL MARKETS AND GENERAL ECONOMIC DOWNTURNS.
Market disruptions such as those currently being experienced in the
United States and other countries may increase our cost of borrowing or
adversely affect our ability to access sources of liquidity. These disruptions
include turmoil in the financial services and real estate industries, including
substantial uncertainty surrounding particular lending institutions and, and
general economic downturns. If we are unable to access credit at competitive
rates or at all, or if our short-term or long-term borrowing costs dramatically
increase, our ability to finance our operations, meet our short-term obligations
and implement our operating strategy could be adversely affected.
5
IF WE FAIL TO COMPLY WITH LAWS AND REGULATIONS APPLICABLE TO OUR PLANNED
BUSINESS OPERATIONS, WE MAY INCUR SIGNIFICANT FINANCIAL PENALTIES.
Our business operations will be subject to numerous federal, state and
local laws and regulations specific to the services performed. If we fail to
maintain our licenses or violate any of the regulations applicable to our
licenses, then we may be required to pay fines or our licenses suspended or
revoked.
SECURING REQUIRED LICENSING CAN BE COSTLY AND RESULT IN UNANTICIPATED DELAYS.
We will have to secure a number of business licenses in order for us to
commence operations and implement our business strategy. Securing proper
licensing can be costly and take long periods of time. If we cannot secure
proper licensing on a timely basis, our business will be adversely affected.
ILLIQUIDITY OF REAL ESTATE INVESTMENTS COULD SIGNIFICANTLY IMPEDE OUR ABILITY TO
RESPOND TO ADVERSE CHANGES IN THE PERFORMANCE OF OUR OPERATIONS ..
Because real estate is relatively illiquid, our ability to promptly
facilitate a sale of one or more properties or investments in our programs in
response to changing economic, financial and investment conditions may be
limited. In particular, these risks could arise from weakness in the market for
a property, changes in the financial condition or prospects of prospective
purchasers, changes in regional, national or international economic conditions,
and changes in laws, regulations or fiscal policies of jurisdictions in which
the property is located. Fees from the disposition of properties would be
materially affected if we are unable to facilitate a significant number of
property dispositions.
UNINSURED AND UNDERINSURED LOSSES MAY ADVERSELY AFFECT OPERATIONS.
We have not yet secured any type of insurance nor can we be assured
that any insurance that we obtain will provide adequate coverage. As a result,
we may incur losses due to insurance deductibles, co-payments on insured losses
or uninsured losses. In the event of a substantial property loss or personal
injury, the insurance coverage may not be sufficient to pay the full damages ...
Under these circumstances, the insurance proceeds we receive if any, might not
be adequate to restore the Company's economic position with respect to the
property. In the event of a significant loss at one or more of the properties in
the Company's operations. In this event, securing additional insurance, if
possible, could be significantly more expensive.
MORTGAGE LENDING PRACTICES HAVE BECOME MORE REGULATED.
Relaxed lending guidelines over the past few years have resulted in a
significant increase in foreclosures. As a result, lending policies have been
tightened. Even if we successfully implement a 49 year term mortgage, there can
be no assurance that prospective buyers will be able to qualify for the
mortgage.
PROSPECTIVE HOME BUYERS MAY NOT BE RECEPTIVE TO OUR 49 YEAR MORTGAGES.
Mortgages with longer terms will result in lower monthly payments and
greater affordability to home buyers. However, some home buyers may not
participate in the program as their equity interest in the property will
increase at a much slower rate than otherwise in a traditional 30 year mortgage.
Moreover, the interest payable over the loan term will be significantly greater
than the interest paid on a 30 year mortgage unless the borrower is current
after 84 payments when the interest adjusts to 0 and the equity buildup for the
borrower is enhanced and the total amount of interest the borrower pays is
significantly less than would be paid in a 30 year loan
6
ANY AGREEMENT WE ENTER INTO WITH MANAGEMENT WILL NOT BE NEGOTIATED AT ARM'S
LENGTH.
Some of our officers serve on our Board of Directors. The Board of
Directors will set the salary level for our officers. As a result, our officers
will be able to set their own compensation level. While we believe that the
compensation that we will pay our officers will be equivalent to salaries paid
to other executives in similarly situated developmental stage companies, there
will be an inherent conflict of interest in the compensation payable to our
officers and our working capital requirements.
COMPETITION
The purchase and sale of real estate and mortgage underwriting are
highly competitive, rapidly evolving and subject to constant change. We will
compete against large multi-national corporations as well as real estate
developers, banks and other financial institutions. We expect that as we
establish a market niche, competition will arise from a variety of sources, both
domestically and internationally.
Many of our potential competitors will have:
o greater financial, technical, personnel, promotional and marketing
resources;
o longer operating histories; and
o greater exposure to financial institutions.
We believe that existing industry competitors are likely to continue to
expand their offerings. Moreover, because there are few, if any, substantial
barriers to entry, we expect that new competitors are likely to enter the market
and attempt to market a similar product which would result in greater
competition. We cannot be certain that we will be able to compete successfully
in this extremely competitive market.
OUR SUCCESS WILL BE LARGELY DEPENDENT UPON OUR KEY EXECUTIVE OFFICERS AND OTHER
KEY PERSONNEL.
Our success will be largely dependent upon the continued employment of
our current officers. The loss of their services would have a material adverse
effect on us. We do not maintain key man insurance on their life. Although we
believe that we would be able to locate a suitable replacement, we cannot assure
you that we would be able to do so. In addition, our future operating results
will substantially depend upon our ability to attract and retain highly
qualified financial, technical, creative and administrative personnel.
OUR OPERATING RESULTS MAY PROVE UNPREDICTABLE.
Our operating results are likely to fluctuate significantly in the
future due to a variety of factors, many of which are outside of our control.
Factors that may affect our future operations include the condition of the real
estate market, mortgage rates, employment rate, market acceptance of our
products and services, unforeseen competition, limited working capital and
changing market dynamics.
7
REAL ESTATE INVESTMENTS ARE RISKY AND WILL INHIBIT OUR CASH FLOW.
We will be subject to risks associated with the direct ownership of
real estate, such as decreases in real estate values, overbuilding, increased
competition and other risks related to local or general economic conditions,
increases in operating costs and property taxes, changes in zoning laws,
casualty or condemnation losses, possible environmental liabilities, regulatory
limitations on rent and fluctuations in rental income. Our inability to gauge
these risks will adversely impact our operations.
DEPRECIATING PROPERTY VALUES WILL ADVERSELY AFFECT THE VALUE OF ANY MORTGAGES
THAT WE HOLD.
We may make loans that are collateralized, in whole or in part, by real
estate. Accordingly, the value of a loan may be detrimentally affected if the
real estate collateral declines in value. To that extent, we will be subject to
the risks generally incident to the ownership of real property, including:
uncertainty of cash flow to meet fixed and other obligations; adverse changes in
local market conditions, population trends, neighborhood values, community
conditions, general economic conditions, local employment conditions, interest
rates and real estate tax rates; changes in fiscal policies; changes in
applicable laws and regulations (including tax laws); and uninsured losses and
other risks that are beyond our control. In addition, to the extent that we
become the owner of real estate as a result of a foreclosure, we could be
exposed to significant carrying costs prior to the liquidation of the asset and
may be unable to realize the value assigned to the asset upon liquidation.
RISKS RELATED TO OUR COMMON STOCK
OUR STOCK PRICE MAY BE VOLATILE.
The market price of our common stock has historically been volatile. We
believe investors should expect continued volatility in our stock price as a
result of various factors, including:
1. Low daily trading volume,
2. Generally large spreads between quoted bid and offer prices,
3. Uncertainty of the company's future,
4. Sales of substantial amounts of our common stock by existing
tockholders, including short sales,
5. Company disclosures regarding the results of various stages of our
xploration operations.
Such volatility may make it difficult or impossible for you to obtain a
favorable selling price for our shares.
8
THERE IS A LIMITED MARKET FOR OUR COMMON STOCK.
Although the Company's common stock is listed for trading on the
Over-the-Counter Electronic Bulletin Board, the trading market in the common
stock has substantially less liquidity than the average trading market for
companies quoted on other national stock exchanges and our price may fluctuate
dramatically. A public trading market having the desired characteristics of
depth, liquidity and orderliness depends on the presence in the marketplace of
willing buyers and sellers of our common stock at any given time. This presence
depends on the individual decisions of investors and general economic and market
conditions over which we have no control. Due to limited trading volume, the
market price of the Company's common stock may fluctuate significantly in the
future, and these fluctuations may be unrelated to the Company's performance.
General market price declines or overall market volatility in the future could
adversely affect the price of the Company's common stock, and the current market
price may not be indicative of future market prices.
WE MAY ISSUE ADDITIONAL COMMON SHARES IN THE FUTURE WHICH WOULD DILUTE THE
OUTSTANDING SHARES.
The prices at which we sell these securities and other terms and
provisions will depend on prevailing market conditions and other factors in
effect at that time, all of which are beyond our control.
THE COMPANY DOES NOT EXPECT TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE.
The Company has never paid cash dividends on its common stock and has
no plans to do so in the foreseeable future. The Company intends to retain
earnings, if any, to develop and expand its business.
WE HAVE NOT VOLUNTARILY IMPLEMENTED VARIOUS CORPORATE GOVERNANCE MEASURES, IN
THE ABSENCE OF WHICH, SHAREHOLDERS MAY HAVE MORE LIMITED PROTECTIONS AGAINST
INTERESTED DIRECTOR TRANSACTIONS, CONFLICTS OF INTEREST AND SIMILAR MATTERS.
Recent federal legislation, including the Sarbanes-Oxley Act of 2002,
has resulted in the adoption of various corporate governance measures designed
to promote the integrity of the corporate management and the securities markets.
Some of these measures have been adopted in response to legal requirements.
Others have been adopted by companies in response to the requirements of
national securities exchanges, such as the NYSE or The NASDAQ Stock Market, on
which their securities are listed. Among the corporate governance measures that
are required under the rules of national securities exchanges and NASDAQ are
those that address board of directors' independence, audit committee oversight,
and the adoption of a code of ethics. While our board of directors has adopted a
Code of Ethics and Business Conduct, we have not yet adopted any of these
corporate governance measures. It is possible that if we were to adopt some or
all of these corporate governance measures, shareholders would benefit from
somewhat greater assurances that internal corporate decisions were being made by
disinterested directors and that policies had been implemented to define
responsible conduct. For example, in the absence of audit, nominating and
compensation committees comprised of at least a majority of independent
directors, decisions concerning matters such as compensation packages to our
senior officers and recommendations for director nominees may be made by a
majority of directors who have an interest in the outcome of the matters being
decided. Prospective investors should bear in mind our current lack of corporate
governance measures in formulating their investment decisions.
9
WE MAY BE EXPOSED TO POTENTIAL RISKS RELATING TO OUR INTERNAL CONTROLS OVER
FINANCIAL REPORTING AND OUR ABILITY TO HAVE THOSE CONTROLS ATTESTED TO BY OUR
INDEPENDENT AUDITORS.
As directed by Section 404 of the Sarbanes-Oxley Act of 2002 ("SOX
404"), the Securities and Exchange Commission adopted rules requiring public
companies to include a report of management on the company's internal controls
over financial reporting in their annual reports, including Form 10-K. In
addition, the independent registered public accounting firm auditing a company's
financial statements must also attest to and report on management's assessment
of the effectiveness of the company's internal controls over financial reporting
as well as the operating effectiveness of the company's internal controls ..
We expect to expend significant resources in developing the necessary
documentation and testing procedures required by SOX 404, there is a risk that
we will not comply with all of the requirements imposed thereby. At present,
there is no precedent available with which to measure compliance adequacy.
Accordingly, there can be no positive assurance that we will receive a positive
attestation from our independent auditors. In the event we identify significant
deficiencies or material weaknesses in our internal controls that we cannot
remediate in a timely manner or we are unable to receive a positive attestation
from our independent auditors with respect to our internal controls, investors
and others may lose confidence in the reliability of our financial statements
and our ability to obtain equity or debt financing could suffer.
"PENNY STOCK" RULES MAY MAKE BUYING OR SELLING THE COMMON STOCK DIFFICULT AND
SEVERELY LIMIT THEIR MARKET AND LIQUIDITY.
Trading in the Company's common stock is subject to certain regulations
adopted by the SEC commonly known as the "Penny Stock Rules". The Company's
common stock qualifies as penny stock and is covered by Section 15(g) of the
Securities and Exchange Act of 1934, as amended (the "1934 Act"), which imposes
additional sales practice requirements on broker/dealers who sell the Company's
common stock in the market. The "Penny Stock" rules govern how broker/dealers
can deal with their clients and "penny stock". For sales of the Company's common
stock, the broker/dealer must make a special suitability determination and
receive from clients a written agreement prior to making a sale. The additional
burdens imposed upon broker/dealers by the "penny stock" rules may discourage
broker/dealers from effecting transactions in the Company's common stock, which
could severely limit its market price and liquidity. This could prevent
investors from reselling our common stock and may cause the price of the common
stock to decline.
A SALE OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK MAY CAUSE THE PRICE
OF OUR COMMON STOCK TO DECLINE.
If our stockholders sell substantial amounts of our common stock in the
public market, the market price of our common stock could fall. These sales also
may make it more difficult for us to sell equity or equity-related securities in
the future at a time and price that we deem reasonable or appropriate.
10
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Various statements contained herein, including those that express a
belief, expectation, or intention, as well as those that are not statements of
historical fact, are forward-looking statements. We use words such as "believe,"
"intend," "expect," "anticipate," "plan," "may," "will," "should" and similar
expressions to identify forward-looking statements. The forward-looking
statements in this private placement memorandum speak only as of the date
hereof. We disclaim any obligation to update these statements unless required by
applicable securities laws, and we caution you not to rely on them unduly. You
are further cautioned that any forward-looking statements are not guarantees of
future performance. Our beliefs, expectations and intentions can change as a
result of many possible events or factors, not all of which are known to us or
are within our control, and a number of risks and uncertainties could cause
actual results to differ materially from those anticipated in the
forward-looking statements. Such factors, risks and uncertainties include, but
are not limited to:
o liquidity and availability of additional or continued sources of
financing;
o the continued weakening national economy in general and the
residential real estate market in particular;
o the continued global credit crisis and capital market disruption;
o changes in general economic and business conditions, including
interest rat3es and the availability of financing;
o our ability to compete effectively in markets that are material to
us;
o significant variability in our cash flow;
o our ability to retain current management and hire key employees;
o our ability to comply with laws and regulations;
o reliance on third parties to assist us in our developmental stages;
and
o trends in pricing for residential real estate.
THE RISKS SET FORTH ABOVE SHOULD NOT BE CONSTRUED AS A COMPLETE LIST OF THE
RISKS WHICH MAY AFFECT THE COMPANY'S BUSINESS, THE OFFERING OR THE RISKS WHICH
YOU FACE AS A PROSPECTIVE INVESTOR. THE SECURITIES OFFERED INVOLVE A HIGH DEGREE
OF RISK AND MAY RESULT IN THE LOSS OF YOUR ENTIRE INVESTMENT. ANY PERSON
CONSIDERING THE PURCHASE OF THESE SECURITIES SHOULD BE AWARE OF THESE AND OTHER
FACTORS SET FORTH IN THIS MEMORANDUM AND SHOULD CONSULT WITH HIS, HER OR ITS
LEGAL, TAX AND FINANCIAL ADVISORS PRIOR TO MAKING AN INVESTMENT IN SECURITIES.
THE SECURITIES SHOULD ONLY BE PURCHASED BY PERSONS WHO CAN AFFORD TO LOSE ALL OF
THEIR INVESTMENT.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our administrative office is located in Atlanta, Georgia. This space is
leased to the Company at a cost of $3,853.19 per month.
11
ITEM 3. LEGAL PROCEEDINGS
On September 15, 2009, an indictment was filed in the United States
District Court for the Northern District of Georgia, Atlanta Division (Case No.
1:09CR406) against Mr. Stanley and several other defendants. The indictment
alleges conspiracy and securities fraud in connection with the common stock of
Conversion Solutions Holdings Corporation, an entity in which Mr. Stanley served
as its chief operating officer. Mr. Stanley denies the allegations contained in
the indictment and has retained counsel to launch a vigorous defense.
As a result of the foregoing, Mr. Stanley tendered his resignation as
an officer and director.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
A. MARKET PRICE FOR COMMON STOCK.
Our common stock trades on the Over the Counter Bulletin Board under
the symbol "WMEG". There is a very limited market for our common stock, with
very limited trading activity.
Our common stock did not begin to trade on any exchange or electronic
quotation system until December 31, 2007. There was no bid or ask in 2007.
The following high and low bid information for each full quarterly
period for the year ended December 31, 2010 and 2009 is as follows:
2010
QUARTER ENDED HIGH LOW
------------- ------ -----
March 31 $0.025 $0.11
June 30 $0.11 $0.11
September 30 $0.20 $0.20
December 31 $0.64 $0.07
2009
QUARTER ENDED HIGH LOW
------------- ------ -----
March 31 $0.03 $0.01
June 30 $0.03 $0.03
September 30 $0.80 $0.17
December 31 $0.40 $0.30
Such market quotations reflect the high bid and low prices as reflected
by the OTCBB or by prices, without retail mark-up, markdown or commissions and
may not necessarily represent actual transactions. The market makers for our
common stock currently are Domestic Securities, Inc. and UBS Securities LLC. Our
shares are subject to the provisions of Section 15(g) and Rule 15g-9 of the
Securities Exchange Act of 1934, as amended (the Exchange Act"), commonly
referred to as the "penny stock" rule. Section 15(g) sets forth certain
requirements for transactions in penny stocks and Rule 15g9(d)(1) incorporates
the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.
12
The Commission generally defines penny stock to be any equity security
that has a market price less than $5.00 per share. Since our shares are deemed
to be "penny stocks", trading in the shares will be subject to additional sales
practice requirements on broker-dealers who sell penny stocks to persons other
than established customers and accredited investors.
For transactions covered by these rules, broker-dealers must make a
special suitability determination for the purchase of such securities and must
have received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the first transaction, of a
risk disclosure document relating to the penny stock market. Consequently, these
rules may restrict the ability of broker dealers to trade and/or maintain a
market in our Common Stock and may affect the ability of shareholders to sell
their shares.
B. HOLDERS:
As of December 31, 2010, there were 107 holders of record of our common
stock.
Our transfer agent is Pacific Stock Transfer Company. Their mailing
address is 4045 South Spencer Street, Suite 403, Las Vegas, NV and their phone
number is 702-361-3033
C. DIVIDEND POLICY:
Holders of our common stock are entitled to receive such dividends as
our board of directors may declare from time to time from any surplus that we
may have. We have not paid dividends on our common stock since the date of our
incorporation and we do not anticipate paying any common stock dividends in the
foreseeable future. We anticipate that any earnings will be retained for
development and expansion of our businesses and we do not anticipate paying any
cash dividends in the foreseeable future. Future dividend policy will depend
upon our earnings, financial condition, contractual restrictions and other
factors considered relevant by our Board of Directors and will be subject to
limitations imposed under Florida law.
D. EQUITY COMPENSATION PLAN:
None.
13
E: RECENT SALE OF UNREGISTERED SECURITIES:
During the years ended December 31, 2010 and 2009 we issued the
following unregistered shares of our common stock:
Number of
Date Shares Name Consideration
---------- --------- ------------------------ -------------
3/10/2009 20,000 Michelle Tucker (1)
3/10/2009 900,000 Michelle Tucker (1)
3/10/2009 1,480,619 TFST (2)
3/10/2009 20,000 Francisco Del (1)
3/27/2009 30,000 Adam Wasserman (1)
3/27/2009 50,000 TFST (3)
8/04/2010 357,000 Barbara Freid (5)
10/1/2010 150,000 Kenneth A. King (4)
10/1/2010 150,000 Randy Smith (4)
10/1/2010 150,000 Larry K. Lee (4)
8/1/2010 150,000 Wallace D. Peterson (4)
10/1/2010 2,058,824 Ron Reeser (1)
10/11/2010 3,334 Hunter Joffrion, IV (5)
10/11/2010 13,333 Gordon Joffrion, III (5)
12/15/2010 2,058,824 Ben Stanley (4)
* TFST: Tucker Family Spendthrift Trust
(1) Director and/or officer agreement for services.
(2) Debt Conversion.
(3) Debt Conversion and office space.
(4) Consultants
(5) Private Placement Offering
All issuances were pursuant to Section 4(2) of the Securities Act. Each
offering was limited and made to sophisticated investors. In each case, the
subscriber was required to represent that the shares were purchased for
investment purposes, and the certificates were legended to prevent transfer
except in compliance with applicable laws. In addition, each subscriber was
provided with access to the Registrant's officers, directors, books and records,
in order to obtain any required information.
At all times relevant the securities were offered subject to the
following terms and conditions:
EFFECT OF "SHELL" COMPANY STATUS":
Because we are a shell company as defined under the Rules of the
Securities and Exchange Commission, we are disqualified from using a short form
of registration statement (S-8) for the issuance of employee stock options.
Furthermore, holders of restricted securities issued while we were or are a
shell company may not re-sell the restricted securities pursuant to SEC Rule 144
for a period of one year after we cease to be a shell and have filed the
necessary report with the SEC to that effect.
ITEM 6. SELECTED FINANCIAL DATA
As a smaller reporting company, we are not required to provide the
information required by this item.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
14
FORWARD LOOKING STATEMENTS:
The statements contained in this report that are not historical facts
are forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. Forward-looking statements are made based upon
management's current expectations and beliefs concerning future developments and
their potential effects upon the Company. There can be no assurance that future
developments affecting the Company will be those anticipated by management.
Actual results may differ materially from those included in the forward-looking
statements.
Readers are also directed to other risks and uncertainties discussed
herein and in other documents filed by the Company with the Securities and
Exchange Commission. The Company undertakes no obligation to update or revise
any forward-looking information, whether as a result of new information, future
developments or otherwise.
GENERAL:
During the coming year our focus will be twofold:
o The implementation and marketing of our 49 year mortgage plan;
o The purchase of residential homes for rental income and sale.
Our 49 year payment term will enable home buyers to purchase a
residence with lower monthly payments. Initially, we will market this financial
tool to commercial banks. We will also purchase single family homes and other
types of residential properties for immediate sale or as rental properties for
the subsequent sale to the renter.
Once we secure additional financing, of which there can be no
assurance, our long term objective will be to underwrite our 49 year mortgage
and to develop real estate projects including land purchase, construction,
management and sales. We may also utilize a portion of our cash portfolio for
investment purposes. We may also establish a program whereby customers can
choose a brokerage account and deposit a portion of their monthly payments into
this account.
To implement our business strategy for the coming year, we will require
significant capital infusion, the extent of which cannot be reasonably forecast
at this time. If we issue shares of our common stock, existing shareholders will
experience significant dilution. Any debt financing may not be available or if
available, may not be available on terms suitable for the Company. We currently
have no commitment for funding. If we are not able to secure financing, we will
not be able to implement our business plan and you will lose your investment.
OFF-BALANCE SHEET ARRANGEMENTS.
We have not entered into any off-balance sheet arrangements. We do not
anticipate entering into any off-balance sheet arrangements during the next 12
months.
OPERATIONAL OVERVIEW:
During the next 12 months we anticipate incurring costs related to:
(i) Filing of Exchange Act reports;
(ii) Officer and director's salaries and rent; and
(iii) Consummating an acquisition.
15
We believe we will be able to meet these costs through amounts, as
necessary, to be loaned by or invested in us by our stockholders, management or
other investors. However, no assurance can be given that we will be able to
raise additional capital, when needed or at all, or that such capital, if
available, will be on acceptable terms. In the absence of obtaining additional
financing, we may be unable to fund our operations. Accordingly, our financial
condition could require us to seek the protection of applicable reorganization
laws in order to avoid or delay actions by third parties, which could materially
adversely affect, interrupt or cause the cessation of the Company's operations.
As a result, our independent registered public accounting firms have issued
going concern opinions on the consolidated financial statements of the Company
for the fiscal years ended December 31, 2010 and 2009.
SUBSEQUENT EVENTS:
No subsequent events to reports as of April 12, 2011.
RESULTS OF OPERATIONS:
Year Ended December 31, 2010 Compared to Year Ended December 31, 2009:
The Company recorded minimal revenue for the year ended December 31,
2010 but did not recorded revenue for the year ended December 31, 2009. We
incurred general and administrative expenses totaling $137,137 for the year
ended December 31, 2010 as compared to general and administrative expenses
totaling $60,107 during 2009, a increase of $77,030.
We incurred a net loss of $133,762 in fiscal 2010 as compared to a net
loss of $60,107 in fiscal 2009.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION:
The Company had assets for the year ended December 31, 2010 totaling
$326,142 compared to no assets for the year ended 2009, a increase of $326,142.
The primary reason for this increase is the company is in the process of
implementing the business plan and has started to accumulate assets.
Historically, our operations to date have been funded by loans and
capital contributions made by our affiliates. In 2010 we were able to obtain
financing from affiliates in the amount $418,085. This financing has and will be
used to accumulate assets as well as fund operating expenses.
Our total current liabilities are $7,000 as compared to $16,096 at
December 31, 2009. The primary reason for this decrease is the company had a
$16,096 related party owed at December 31, 2009 which was repaid in the first
quarter of 2010. We have a working capital of $80,767. Unless we secure
additional financing, of which there can be no assurance, or begin to generate
revenues in excess of expenses, we will not be able to meet our obligations as
they become due.
Due to our operating losses and deficits, our independent auditors in
their financial statements have raised doubts about our ability to continue as a
going concern. Despite these historical losses, management believes that due to
the new business model it will be able to satisfy ongoing operating expenses
through related party advances until such time as we are able to consummate a
business combination or begin operations. There can be no assurance that any
financing will be available, or if available, will be offered on terms that will
not adversely impact our shareholders.
16
For the year ended December 31, 2010, we used cash in operating
activities of $150,233 as compared to $27,511 for the year ended December 31,
2009. The primary reason for this increase is the company is in the process of
implementing the business plan and has started to operating expenses.
For the years ended December 31, 2010 and 2009 the company had no
investing activities.
For the year ended December 31, 2010, we received net cash from
financing activities of $231,000 as compared to $27,511 for the year ended
December 31, 2009. During 2009, we received net cash from related party advances
of $27,511.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MATERIAL MARKET RISKS
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Shareowners' Equity
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
17
STAN J.H. LEE, CPA
2160 North Central Rd Suite 203, Fort Lee, NJ 07024
P.O. Box 436402, San Ysidro, CA, 92143-9402
619-623-7799 Fax 619-564-3408 stan2u@gmail.com
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board Members of
World Mortgage Exchange Group, Inc.
We have audited the accompanying balance sheets of World Mortgage Exchange
Group, Inc. as of December 31, 2010 and 2009 and the related statements of
operation, changes in stockholders' deficiency and cash flows for the years then
ended.
These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. An audit includes consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for my opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of World Mortgage Exchange Group,
Inc. as of December 31, 2010 and 2009, and the results of its operations and its
cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
/s/ Stan J.H. Lee, CPA
----------------------
Stan J.H. Lee, CPA
April 12, 2011
Fort Lee, NJ 07024
18
WORLD MORTGAGE EXCHANGE GROUP, INC.
(A Development Stage Company)
Balance Sheets
December 31, December 31,
2010 2009
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents ....................... $ 80,767 $ --
--------- ---------
Total Current Assets .......................... $ 80,767 $ --
--------- ---------
Non-Current Assets:
Inventory ....................................... $ 210,000 $ --
Loans, net of allowance for loan losses ........... $ 35,000 $ --
Account Receivables ............................. $ 375 $ --
--------- ---------
Total Non-Current Assets ...................... $ 245,375 $ --
--------- ---------
Total Current and Non-Current Assets .......... $ 326,142 $ --
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable ................................ $ 7,000 $ 16,096
Accrued compensation-related party .............. -- --
Due to related parties .......................... -- --
--------- ---------
Total Current Liabilities ..................... 7,000 16,096
--------- ---------
Non-Current Liabilities:
Bonds payable ................................... $ 300,000 $ --
--------- ---------
Total Non-Current Liabilities ................. $ 300,000 $ --
--------- ---------
Total Current and Non-Current Liabilities ..... $ 307,000 $ 16,096
--------- ---------
Commitments: ...................................... -- --
Stockholders' Deficit:
Common stock, $.01 par value 100,000,000 shares
authorized 21,796,319 and 16,704,862 shares
issued and outstanding ......................... 217,963 167,048
Additional paid in capital ...................... 675,246 557,161
Deficit accumulated during the development stage (874,067) (740,305)
--------- ---------
Total Stockholders' Deficit ................... (19,142) (16,096)
--------- ---------
Total Liabilities and Stockholders' Deficit ... $ 326,142 $ --
========= =========
See Notes to Financial Statements
19
WORLD MORTGAGE EXCHANGE GROUP, INC.
(A Development Stage Company)
Statements of Operations
For the
period from
July 5, 2006
For the Years Ended (Inception)to
December 31, December 31,
2010 2009 2010
------------ ------------ ------------
Operating Revenue
Revenue ......................... $ 3,375 $ -- $ 3,375
------------ ------------ ------------
Total Revenue ..................... 3,375 -- 3,375
Operating expenses
General and administrative ...... $ 137,137 $ 60,107 $ 858,008
------------ ------------ ------------
Total operating expenses .......... 137,137 60,107 858,008
Other Expense
Equity in losses of investment .... -- -- (4,278)
Interest expense - related party .. -- -- (10,456)
------------ ------------ ------------
Total other expenses .............. -- -- (14,734)
------------ ------------ ------------
Net Loss from continuing operations (133,762) (60,107) (869,367)
Discontinuing operations .......... -- -- (65,791)
------------ ------------ ------------
Net Loss .......................... (133,762) $ (60,107) (935,158)
============ ============ ============
Net Loss per Share-
Basic and Diluted ................ $ (0.01) $ (0.00) $ (0.07)
============ ============ ============
Weighted Average Number of Shares
Outstanding during the Period-
Basic and Diluted ............. 16,704,862 15,719,569 13,008,017
============ ============ ============
See Notes to Financial Statements
20
WORLD MORTGAGE EXCHANGE GROUP, INC.
(A Development Stage Company)
Statement of Changes in Shareholders' Equity
Deficit
Accumulated
in the Total
Common Paid in Development Stockholders'
Stock Amount Capital Stage Equity
----------- ----------- ----------- ----------- -------------
Balances, July 5, 2006 (Date of Inception) ........... 6,000,000 $ 60,000 $ -- $ -- $ 60,000
Common stock issued to Parent ($0.01 per share) ...... 58,779 588 -- -- 588
Common stock issued for acquisition ($0.01 per share) 30,000 300 -- -- 300
Net loss for the period ended December 31, 2006 ...... -- -- -- (26,638) (26,638)
----------- ----------- ----------- ----------- -------------
Balance December 31, 2006 ............................ 6,088,779 60,888 -- (26,638) 34,250
Common stock issued for debt and accrued interest -
related parties ($0.10 per share) .................. 1,883,339 18,833 169,501 -- 188,334
Common stock issued for accrued compensation -
related parties ($0.01 and $0.10 per share) ........ 1,970,000 19,700 15,300 -- 35,000
Common stock issued for accrued rent - related party
($0.10 per share) .................................. 150,000 1,500 13,500 -- 15,000
Common stock issued for services ($0.01 and $0.10 per
share) ............................................. 67,806 678 234 -- 912
Common stock issued for services - related parties
($0.01 and $0.10 per share) ........................ 218,100 2,181 15,129 -- 17,310
Net loss for the year ended December 31, 2007 ........ -- -- -- (447,356) (447,356)
----------- ----------- ----------- ----------- -------------
Balance December 31, 2007 ............................ 10,378,024 103,780 213,664 (473,994) (156,550)
Common stock issued for services - related parties
($.35 per share) ................................... 45,000 450 15,300 -- 15,750
Common stock issued for services - related parties
($.25 per share) ................................... 60,000 600 14,400 -- 15,000
Common stock cancelled - related party ............... (200,000) (2,000) 2,000 --
Common stock issued for services - related parties
($.15 per share) ................................... 60,000 600 8,400 -- 9,000
Common stock issued for debt and services - related
party ($.15 per share) ............................. 1,357,790 13,578 190,091 -- 203,669
Common stock issued for services related parties
($.10 per share) ................................... 30,000 300 2,700 -- 3,000
Common stock issued for services ($.05 per share) .... 25,000 250 1,000 -- 1,250
Common stock issued for services - related parties
($.05 per share) ................................... 240,000 2,400 9,600 -- 12,000
Common stock issued for expenses and debt -
related party ($.05 per share) ..................... 1,663,429 16,634 66,537 -- 83,171
Common stock issued for services ($.03 per share) .... 25,000 250 500 -- 750
Common stock issued for services - related party
($.03 per share) ................................... 220,000 2,200 4,400 -- 6,600
Common stock issued for expenses and debt -
related party ($.03 per share) ..................... 250,000 2,500 5,000 -- 7,500
Net Liabilities distributed in spin-off .............. -- -- -- 60,852 60,852
Net Loss ............................................. -- -- -- (267,056) (267,056)
----------- ----------- ----------- ----------- -------------
Balance December 31, 2008 ............................ 14,154,243 $ 141,542 $ 533,592 $ (680,198) $ (5,064)
Common stock issued for services ($.02 per share) .... 900,000 9,000 9,000 -- 18,000
Common stock issued for services ($.01 per share) .... 20,000 200 -- -- 200
Common stock issued for services ($.01 per share) .... 20,000 200 -- -- 200
Common stock issued for services ($.01 per share) .... 30,000 300 -- -- 300
Common stock issued for expenses and debt -
related party ($.02 per share) ..................... 1,480,619 14,806 14,569 -- 29,375
Common stock issued for services ($.01 per share) .... 50,000 500 -- -- 500
Common stock issued for services ($.01 per share) .... 50,000 500 -- -- 500
Net Loss ............................................. -- -- -- (60,107) (60,107)
----------- ----------- ----------- ----------- -------------
Balance December 31, 2009 ............................ 16,704,862 $ 167,048 $ 557,161 $ (740,305) $ (16,096)
Common stock issued for services ($.01 per share) .... 4,717,648 47,176 118,085 -- 165,261
Common stock issued Private Placement ($.07 per share) 357,142 3,571 -- -- 3,571
Common stock issued private placement ($.30 per share) 16,667 166 -- -- 166
Net Loss ............................................. -- -- -- (133,762) (133,762)
----------- ----------- ----------- ----------- -------------
Balance December 31, 2010 ............................ 21,796,319 $ 217,961 $ 675,246 $ (874,067) $ 19,142
=========== =========== =========== =========== =============
See Notes to Financial Statements
21
WORLD MORTGAGE EXCHANGE GROUP, INC.
(A Development Stage Company)
Statements of Cash Flows
For the Period
July 5, 2006
(Date of
For the Years Ended Inception) to
December 31, December 31,
2010 2009 2010
---------- --------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss ...................................................................... $ (133,762) $ (60,107) $ (935,158)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization ................................................................ -- -- 5,294
Depreciation ................................................................ (375) -- 756
Account Receivables ......................................................... -- -- (375)
Impairment loss ............................................................. -- -- 5,294
Stock issued for services ................................................... -- 500 3,412
Stock issued for services-related parties ................................... -- 10,000 159,966
Amortization of stock issued for prepaid expenses ........................... -- -- 100
Rent expense paid through issuance of common stock .......................... -- 6,000 43,500
Equity in loss of investment in affiliate ................................... -- -- 4,278
Loss on disposal of fixed assets ............................................ -- -- 1,763
Changes in Operating Assets and Liabilities
Judgement receivable ........................................................ -- -- --
Prepaid expenses ............................................................ -- -- --
Accounts payable ............................................................ (16,096) 16,096 --
Accrued expenses ............................................................ -- -- --
Accrued compensation-related parties ........................................ -- -- --
Accrued interest-related party .............................................. -- -- --
---------- --------- ----------
Net Cash Used in Operating Activities .................................. (150,233) (27,511) (711,170)
---------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment ....................................................... -- -- (2,519)
Investment in subsidiaries .................................................. -- -- (50,239)
Cash paid for acquisition of intangible asset ............................... -- -- (10,000)
---------- --------- ----------
Net Cash Used in Investing Activities .................................. -- -- (62,758)
---------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related party advances ........................................ -- 34,764 307,204
Repayments of related party advances ........................................ -- (7,253) (15,269)
Proceeds from notes payable-related party ................................... -- -- 162,109
Proceeds from convertible notes payable - related party ..................... -- -- 45,300
Proceeds from sale of common stock-related party ............................ -- -- 64,700
Proceeds from sale of long term bonds ....................................... 231,000 -- 231,000
Net Liabilities distributed in spin off ..................................... -- -- 59,652
---------- --------- ----------
Net Cash Provided by Financing Activities .............................. 231,000 27,511 854,696
---------- --------- ----------
Net Increase (Decrease) in Cash and Cash Equivalents .......................... 80,767 -- 80,767
---------- --------- ----------
Cash at Beginning of Period ................................................... -- -- --
---------- --------- ----------
Cash at End of Period ......................................................... $ 80,767 $ -- $ 80,767
========== ========= ==========
Supplementary Cash Flow Information:
Cash paid for income taxes .................................................. $ -- $ -- $ --
========== ========= ==========
Cash paid for interest ...................................................... $ -- $ -- $ 2,111
========== ========= ==========
Non Cash Investing and Financing Activities
Common stock issued in connection with acquisition of intangible asset ...... $ -- $ -- $ 588
========== ========= ==========
Common stock issued for prepaid expenses - related party .................... $ -- $ -- $ 15,000
========== ========= ==========
Common stock issued for debt and accrued compensation - related party ....... $ -- $ -- $ 35,000
========== ========= ==========
Stock Issued for debt and accrued compensation related party ($.05 per share) $ -- $ -- $ 205,882
========== ========= ==========
Common stock issued for debt and accrued interest - related party ........... $ -- $ -- $ 411,667
========== ========= ==========
See Notes to Financial Statements
22
WORLD MORTGAGE EXCHANGE GROUP, INC.
(A Development Stage Company)
Notes to the Financial Statements
NOTE 1 NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------------
World Mortgage Exchange Group, Inc. (formerly Pop Starz Records, Inc.) (the
"Company") is a Florida corporation incorporated on July 5, 2006. The Company's
business purpose is to develop, produce, license, acquire and distribute
recorded music, primarily in the Hip Hop and Pop genres which now has been
abandoned. The Company business focus has been changed to real estate effective
September 2009 to coincide with the change of management and board of directors
members.
The Company's initial focus will be on the purchase and sale of real property.
In order to assist buyers in securing financing, the Company has developed a 49
year mortgage payment program. To fully implement our business plan, the Company
will require a significant capital infusion the extent of which cannot be
reasonably forecast at this time. If we issue shares of our common stock,
existing shareholders will experience significant dilution. Any debt financing
may not be available or if available, may not be available on terms suitable for
the Company. We currently have no commitment for funding.
Through June 29, 2007, the Company was a wholly owned subsidiary of Pop Starz,
Inc., also a Florida corporation. Effective June 29, 2007, Pop Starz, Inc.
distributed 4,905,200 shares of common stock (61.5%) of the Company to all Pop
Starz, Inc. common shareholders and those entitled to dividends as if a common
shareholder on the basis of one registered share for every ten (10) shares of
Pop Starz, Inc. beneficially owned on the Record Date, June 29, 2007.
In April 25, 2007 we formed a subsidiary, Pop Starz Publishing Corp. a Florida
corporation. On June 24, 2008, we changed the name of the subsidiary to Apollo
Entertainment Group, Inc. ("Apollo"). On June 24, 2008, Apollo formed a
subsidiary Alpha Music Mfg Corp. ("Alpha") a Florida corporation. The principal
business purpose of Alpha is to offer the services of Audio CD/CD Rom
duplication and replication, audio cassette duplication, DVD duplication, and
vinyl record pressing.
On October 3, 2008, the Company distributed 4,553,081 shares of its subsidiary
Apollo through a stock dividend at the rate of one registered share of Apollo
for each three shares of Pop Starz Records, Inc. beneficially owned on the
Record Date of October 3, 2008.
On September 10, 2009 the Board of Directors of Pop Starz Records, Inc. passed a
resolution authorization the change of the name of the corporation to World
Mortgage Exchange Group, Inc. "WMEG" and enacts new business model. The required
amendment has been filed with the Secretary of State of Florida.
DEVELOPMENT STAGE
The Company is a development stage company as defined by ASC 915-10-05,
"Development Stage Entity". The Company is still devoting substantially all of
its efforts on establishing the business and its planned principal operations
have not commenced. All losses accumulated, since inception, have been
considered as part of the Company's development stage activities.
23
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
Significant estimates in 2010 and 2009 include stock issued for services, stock
issued to convert outstanding debt, estimated useful life of equipment, and a
100% valuation allowance for deferred taxes due to the Company's continuing and
expected future losses.
CASH
For purposes of the statement of cash flows, the Company considers all highly
liquid instruments purchased with a maturity of three months or less and money
market accounts to be cash equivalents. At December 31, 2010 the Company had
cash equivalents totaling $80,767 compared to no cash equivalents as of December
31, 2009.
EQUIPMENT
Equipment is stated at cost, less accumulated depreciation on a straight-line
basis over the estimated useful life, which is five years.
NET LOSS PER SHARE
Basic loss per share is computed by dividing net loss by weighted average number
of shares of common stock outstanding during each period. Diluted loss per share
is computed by dividing net loss by the weighted average number of shares of
common stock, common stock equivalents and potentially dilutive securities
outstanding during each period. Dilutive securities are not included in the
weighted average number of shares when inclusion would increase the income per
share or decrease the loss per share. At December 31, 2010 and 2009,
respectively, the Company did not have any outstanding common stock equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
ASC 820, "Fair Value Measurements and Disclosures", defines fair value,
establishes a three-level valuation hierarchy for disclosures of fair value
measurement and enhances disclosure requirements for fair value measures. The
carrying amounts reported in the balance sheets for current payables qualify as
financial instruments. Management concluded the carrying values are a reasonable
estimate of fair value because of the short period of time between the
origination of such instruments and their expected realization and if
applicable, their stated interest rate approximates current rates available. The
three levels are defined as follows:
o Level 1 - inputs to the valuation methodology are quoted prices
(unadjusted) for identical assets or liabilities in active markets.
o Level 2 - inputs to the valuation methodology include quoted prices for
similar assets and liabilities in active markets, and inputs that are
observable for the assets or liability, either directly or indirectly, for
substantially the full term of the financial instruments.
o Level 3 - inputs to the valuation methodology are unobservable and
significant to the fair value.
24
It is management's opinion that the estimated fair values of the financial
instruments were not materially different from their carrying values as
presented on the balance sheet. The Company's financial instruments include
account payables and accrued expenses. Management has estimated that the fair
value of these financial instruments approximate their carrying amounts due to
the short-term nature.
INCOME TAXES
The Company accounts for income taxes in accordance with the accounting standard
for income taxes. Deferred income taxes are recognized for the tax consequences
of temporary differences by applying enacted statutory tax rates applicable to
future years to differences between the financial statement carrying amounts and
the tax bases of existing assets and liabilities. Under this accounting
standard, the effect on deferred income taxes of a change in tax rates is
recognized in income in the period that includes the enactment date. A valuation
allowance is recognized if it is more likely than not that some portion, or all
of, a deferred tax asset will not be realized.
The Company accounts for uncertainties related to income taxes in accordance
with relevant accounting pronouncements. Uncertain income tax positions is
assessed and recognize based on the more-likely-than-not criteria using 50
percent as a threshold. The Company did not have any uncertain tax position as
of December 31, 2010 and 2009
RECENT ACCOUNTING PRONOUNCEMENTS - IMPACT OF NEW ACCOUNTING STANDARDS
The Company does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on the Company's results of
operations, financial position, or cash flow.
NOTE 2 RELATED PARTY TRANSACTIONS
---------------------------------
(A) NOTES PAYABLE - RELATED PARTY
For the years ended December 31, 2010 and 2009 the company had no related party
notes payables.
(B) LOANS PAYABLE - RELATED PARTIES
During 2009, the Company received $69,915, from the then Chief Executive Officer
and affiliates of the Company's Chief Executive Officer. The loans were
non-interest bearing, unsecured and due on demand. During 2009, the Company
repaid $6,020 in cash. In 2008 the Company also issued 929,029 shares of common
stock, having a fair value of $63,471 based on the quoted market price on the
dates of conversion of $.05 and $.03 per share. as repayment towards the
advances made to the Company.
These related party notes and loans have represented a 100% concentration of
debt financing since inception.
25
NOTE 3 STOCKHOLDERS' DEFICIT
----------------------------
(A) COMMON STOCK ISSUANCES FOR THE YEAR ENDED DECEMBER 31, 2006
(1) STOCK ISSUED FOR CASH
On July 5, 2006, the Company issued 6,000,000 shares of common stock to Pop
Starz, Inc. for $60,000 ($0.01/ share).
(2) STOCK ISSUED FOR SERVICES - RELATED PARTY
On December 31, 2006, the Company issued 30,000 shares of common stock, having a
fair value of $300 ($0.01/share), based upon the recent cash-offering price at
that time. The shares were issued for director's fees.
(B) COMMON STOCK ISSUANCES FOR THE YEAR ENDED DECEMBER 31, 2007
(1) STOCK ISSUED FOR SERVICES
During May 2007, the Company issued 65,200 shares of common stock for
professional fees, having a fair value of $652 ($0.01/share), based upon the
Company's recent cash offering price.
During July 2007, the Company issued 2,606 shares of common stock for
professional fees, having a fair value of $260 ($0.10/share), based upon the
fair value of services rendered.
(2) STOCK ISSUED FOR SERVICES - RELATED PARTIES
During May and June 2007, the Company issued 50,000 shares of common stock for
services provided by the Company's officers and directors, having a fair $500
($0.01/share), based upon the Company's recent cash offering price.
During the period from July 2007 - December 2007, the Company issued 168,100
shares of common stock for services provided by the Company's officers and
directors, having a fair $16,810 ($0.10/share), based upon stock issued to third
parties based upon the fair value of the provider's services.
(C) COMMON STOCK ISSUANCES FOR THE YEAR ENDED DECEMBER 31, 2008
During January 2008, the Company issued 45,000 shares of common stock to
officers and directors for services rendered, having a fair value of $15,750
($0.35/share), based upon the quoted closing trading price.
During February 2008, the Company issued 45,000 shares of common stock to
officers and directors for services rendered, having a fair value of
$6,750($0.15/share), based upon the quoted closing trading price.
During February 2008, the Company issued 1,357,790 shares of common stock,
having a fair value of $203,669 ($0.15/share), based upon the quoted closing
trading price. The stock was issued to Pop Starz, Inc. in connection with the
conversion of non-interest bearing debt for $135,779. The additional $67,890 was
recorded as compensation.
During May 2008, the Company issued 45,000 shares of common stock to officers
and directors for services rendered, having a fair value of $5,250($0.15 and
$.10 per share), based upon the quoted closing trading price at the time the
services were rendered.
26
During September and October 2008, the Company issued 50,000 shares of common
stock for services. The shares were valued at $2,000 based on the trading price
at the time the services were provided.
During September 2008, the Company issued 60,000 shares of common stock to
officers and directors for services rendered, having a fair value of
$15,000($0.25/share), based upon the quoted closing trading price at the time
the services were rendered.
During September 2008, the Company issued 1,903,429 shares of common stock as
repayment of accrued salaries, related party advances and note payable, having a
fair value of $95,171, based upon the quoted trading price at the time of the
conversion.
During October, 2008, the Company issued 220,000 shares of common stock to
officers and directors for services rendered having a fair value of $6,600 ($.03
per share), based on the quoted closing trading price at the time the services
were rendered.
In December 2008, the Company issued 250,000 shares of common stock to an
affiliate for repayment of advances and accrued expenses having a fair value of
$7,500, based on the quoted closing trading price at the time of the conversion.
(C) COMMON STOCK ISSUANCES FOR THE YEAR ENDED DECEMBER 31, 2009
During 2009, a total of 2,505,619 shares of common stock for service at $ .05
per share.
(C) COMMON STOCK ISSUANCES FOR THE YEAR ENDED DECEMBER 31, 2010
During 2010, a total of 4,717,648 shares of common stock were issued for
service, repayment of advances, and expenses having a fair market value of
$235,882.
NOTE 4 INCOME TAXES
--------------------
SFAS 109 requires the recognition of deferred tax assets and liabilities for
both the expected impact of differences between the financial statements and the
tax basis of assets and liabilities, and for the expected future tax benefit to
be derived from tax losses and tax credit carryforwards. SFAS 109 additionally
requires the establishment of a valuation allowance to reflect the likelihood of
realization of deferred tax assets.
The Company has net operating loss carryforwards at December 31, 2010 and 2009
for tax purposes totaling $935,158 and $800,099, expiring through the year 2030.
Internal Revenue Code Section 382 places a limitation on the amount of taxable
income that can be offset by carryforwards after a change in control (generally
greater than a 50% change in ownership). Temporary differences, which give rise
to a net deferred tax asset, are as follows:
27
Significant deferred tax assets at December 31, 2010 and 2009 are as follows:
December 31,
2010 2009
---------- ----------
Net operating loss carryforwards ................. $ 327,305 $ 280,035
---------- ----------
327,305 280,035
Less: valuation allowance ........................ (327,305) (280,035)
---------- ----------
$ -- $ --
========== ==========
The valuation allowance at December 31, 2010 was $327,305. The net change in
valuation allowance during the year ended December 31, 2010, was an increase of
$47,270. In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred income tax assets will not be realized. The ultimate realization of
deferred income tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of deferred income tax
liabilities, projected future taxable income, and tax planning strategies in
making this assessment. Based on consideration of these items, management has
determined that enough uncertainty exists relative to the realization of the
deferred income tax asset balances to warrant the application of a full
valuation allowance as of December 31, 2010.
NOTE 5 COMMITMENTS AND CONTINGENCIES
------------------------------------
(A) EMPLOYMENT AGREEMENTS - OFFICERS
Currently, we do not have employment agreements with any of our officers or
directors. We have four employees, our chief executive officer, chief financial
officer, vice president and treasurer/secretary. We also use the services of
several independent contractors.
(B) LITIGATION
The Company has no threatened, pending or unsettled legal matter to disclose as
of April 12, 2011, the date the audited financial statement would be available
for issuance.
NOTE 6 SUBSEQUENT EVENTS
------------------------
The Company has performed an evaluation of subsequent events in accordance with
ASC Topic 855 and the Company is not aware of any subsequent events which would
require recognition or disclosure in the financial statements.
28
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The Company has nothing disclose and has used the current auditor for
years ended December 31 2009 and 2010.
ITEM 9A. CONTROLS AND PROCEDURES.
Our management, with the participation of our Chief Executive Officer
and Chief Financial Officer, evaluated the effectiveness of our disclosure
controls and procedures, as defined in Rule 13a-15(e) promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of the end
of the period covered by this Annual Report. Based on that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that, as of the end of
the period covered by this Annual Report, our disclosure controls and procedures
were effective to ensure that the information we are required to disclose in the
reports that we file or submit under the Exchange Act is (i) recorded,
processed, summarized and reported within the time periods specified in the l's
rules and forms and (ii) accumulated and communicated to our management,
including the Chief Executive Officer and Chief Financial Officer, as the
principal executive and financial officers, respectively, to allow timely
decisions regarding required disclosure.
It should be noted that any system of disclosure controls and
procedures, however well designed and operated, can provide only reasonable, and
not absolute, assurance that the objectives of the system will be met. In
addition, the design of any control system is based in part upon certain
assumptions about the likelihood of future events. We believe that the controls
and procedures currently in place provide reasonable assurance of the
effectiveness of the controls and procedures.
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting, as defined in Exchange Act Rule
13a-15(f).
Our management evaluated, with the participation of our Chief Executive
Officer and Chief Financial Officer, the effectiveness of our internal control
over financial reporting as of December 31, 2009. In conducting this evaluation,
management used the framework established by the Committee of Sponsoring
Organizations of the Treadway Commission as set forth in Internal Control -
Integrated Framework. Based on our evaluation under the framework in Internal
Control - Integrated Framework, our management concluded that our internal
control over financial reporting was effective as of December 31, 2010.
This Annual Report does not include an attestation report of our
registered public accounting firm regarding our internal control over financial
reporting. Our management's report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the SEC that
permit us to provide only management's report in this Annual Report.
Because of its inherent limitations, a system of internal control over
financial reporting may not prevent or detect misstatements. A control system,
no matter how well designed and operated, can provide only reasonable, not
absolute, assurance that the control system's objectives will be met. Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, have been detected. These inherent limitations include the
29
realities that judgments in decision-making can be faulty, and that breakdowns
can occur because of simple error or mistake. The design of any system of
controls is based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions. Also,
projections of any evaluation of effectiveness to future periods are subject to
risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
EVALUATION OF CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There was no change in the internal control over financial reporting
that occurred during the year ended December 31, 2010, that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.
ITEM 9B. OTHER INFORMATION.
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following information sets forth the names of our officers and
directors, their present positions, and some brief information about their
background.
RON REESER, 59, serves as the Chairman of our Board of Directors and as
chief executive officer. He currently serves as the chairman of The Eagle Group,
an Atlanta based residential and commercial land development company with
operations throughout the Southeast. Mr. Reeser has been in the real estate
industry for over 30 years. He began his real estate career with Land Data
Corporation before forming his own company, The Probe Corporation, which
published feasibility and market studies for regional and national real estate
developers and investment groups. Mr. Reeser has also focused on research based
land acquisitions in the metropolitan Atlanta and southeastern markets working
with many of the real estate industry's preeminent land planners, developers and
financiers. Mr. Reeser received his education at the University of Georgia
majoring in real estate.
BRIAN JAMES, 49, serves as our chief financial officer. He has been in
banking field for more than 25 years. Presently, he is the principal
shareholder, Director, and Senior Officer of The Bank of Bonifay, Florida's
oldest community bank. He is CEO and President of Bonifay Holding Company, the
holding company of The Bank of Bonifay. His career began at a family owned
community bank. He has held varied line lending and senior management posts with
two regional bank holding companies. He helped charter and manage a de novo
community bank in the Florida that operated for 6 years before being sold. In
2001, he led a purchase group to acquire the Bank of Bonifay. Mr. James
graduated Summa Cum Laude with a Bachelor of Science in Business, with Finance
Concentration, from Auburn University. He holds an MBA from The University of
South Alabama and a Graduate Degree from the School of Banking at Louisiana
State University.
LOYD SKIDMORE, 62, serves as our executive vice president and as a
member of our Board of Directors. He has been in the mortgage, real estate,
management and marking fields over the last 30 years. Mr. Skidmore will manage
and coordinate the marketing, servicing and management of our residential and
commercial loan programs including joint ventures with builders and developers.
His duties will also include managing the Company's human resources department.
30
ADAM POWELL, 29, serves as treasurer and secretary and directs the
Georgia operations for The Eagle Group and oversees the acquisition, development
and sale of the company's multiple residential and commercial properties in
Georgia. He facilitates the execution and completion of all rezoning
applications and obtaining development permits. He also assists in the
acquisition and development of the company's community developments throughout
the Southeast. Mr. Powell is a graduate of the University of Georgia from the
Terry College of Business with a major in Real Estate.
FAMILY RELATIONSHIPS.
There are no family relationships among the Registrant's directors and
executive officers.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS.
On September 15, 2009, an indictment was filed in the United States
District Court for the Northern District of Georgia, Atlanta Division (Case No.
1:09CR406) against Mr. Stanley and several other defendants. The indictment
alleges conspiracy and securities fraud in connection with the common stock of
Conversion Solutions Holdings Corporation, an entity in which Mr. Stanley served
as its chief operating officer. Mr. Stanley denies the allegations contained in
the indictment and has retained counsel to launch a vigorous defense.
As a result of the foregoing, Mr. Stanley tendered his resignation as
an officer and director.
Outside of this incident, during the past five years, no director,
executive officer, promoter or control person of the Registrant has been
involved in any bankruptcy proceeding; been convicted in or is subject to any
criminal proceeding; is subject to any order, judgment or decree in any way
limiting his or her involvement in any type of business, in securities or
banking activities; or been found by a court of competent jurisdiction (in a
civil action), the Securities & Exchange Commission or the Commodity Futures
Trading Commission to have violated a federal or state securities or commodities
law.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934.
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires our directors and executive officers, as well as persons beneficially
owning more than 10% of our outstanding common stock, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC") within specified time periods. Such officers, directors and
shareholders are also required to furnish us with copies of all Section 16(a)
forms they file.
Based solely on its review of such forms received by us, or written
representations from certain reporting persons, we believe that all Section
16(a) filing requirements applicable to our officers, directors and 10%
shareholders were complied with during the fiscal year ended December 31, 2010.
CODE OF ETHICS:
The Company has adopted a Code of Ethics that meets the requirements of
Section 406 of the Sarbanes-Oxley Act of 2002 which was filed as an exhibit to
the Form 10-KSB filed on March 31, 2008. We will provide to any person without
charge, upon request, a copy of such Code of Ethics. Persons wishing to make
such a request should contact Ron Reeser, our chief executive officer.
31
CORPORATE GOVERNANCE:
We have two directors. We do not have an audit committee, compensation
committee or nominating committee. We do not have sufficient funds to secure
officer and directors insurance and we do not believe that we will be able to
retain an independent Board of Directors in the immediate future. We do not
believe that we will be able to attract independent board members until such
time as we commence our primary operations. All matters which would otherwise be
considered by the various committees are handled by the Board of Directors.
ITEM 11. EXECUTIVE COMPENSATION.
The following table discloses compensation paid during the fiscal years
ended December 31, 2010 and 2009 to (i) the Company's Chief Executive Officer,
and (ii) individual(s) who were the only executive officers, other than the
Chief Executive Officer, serving as executive officers at the end of 2009 and
2008 whose total compensation exceeded $100,000 (the "Named Executive
Officers"). No restricted stock awards, long-term incentive plan payouts or
other types of compensation, other than the compensation identified in the chart
below, were paid to these executive officers during these fiscal years.
STOCK
AWARDS OPTION
SALARY BONUS ($) AWARDS TOTAL
NAME AND PRINCIPAL POSITION YEAR ($) ($) (1) ($) ($)
--------------------------- ---- ------ ------ -------- ------ ------
Ron Reeser, CEO 2010 0 10,000 8,000 - 18,000
2009 3,700 - - - 3,700
Michelle Tucker former CEO 2009 - - 9,200(1) - 9,200
(1) Reflect the dollar amount recognized for financial statement reporting
purposes for the fiscal years indicated in accordance with SFAS No. 123(R).
These amounts reflect the Company's accounting expense for these awards, and
do not correspond to the actual value that will be recognized by the named
executives. The shares of common stock were issued as consideration for
serving as an officer and/or director.
EMPLOYMENT AGREEMENTS AND COMPENSATION PROGRAM:
Currently, we do not have employment agreements with any of our
officers or directors. As of December 31, 2010, Mr. Reeser, our CEO and Chairman
of the Board of Directors, has received $10,000 in compensation. Mr. Skidmore,
our VP and Director, has received $10,000 in compensation.
Our compensation philosophy will be based on our belief that our
compensation programs should: be aligned with stockholders' interests and
business objectives; reward performance; and be externally competitive and
internally equitable. We will seek to achieve three objectives, which serve as
guidelines in making compensation decisions:
(1) Providing a total compensation package which is competitive and
therefore enables us to attract and retain, high-caliber executive
personnel;
(2) Integrating compensation programs with our short-term and long-term
strategic plan and business objectives; and
(3) Encouraging achievement of business objectives and enhancement of
stockholder value by providing executive management long-term
incentive through equity ownership.
32
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The following table sets forth certain information as of December 31,
2010 with respect to the beneficial ownership of the Company's common stock by:
(i) all persons known by the Company to be beneficial owners of more than 5% of
the Company's common stock, (ii) each director and Named Executive Officer, and
(iii) by all executive officers and directors as a group. (The foregoing
calculations are based on 21,796,319 shares of common stock issued and
outstanding.)
Shares
Title of Name and Address Beneficially Percent
Class Of Beneficial Owner Owned (1) of Class
------------ -------------------------------- ------------ --------
Common Stock BAR Trust DTD 9/1/09 4,075,966 18.7%
Ron Reeser TTEE
4470 Chamblee Dunwoody Rd., #250
Atlanta, GA 30338
Common Stock LTR Trust DTD 9/1/09 4,075,966 18.7%
Loyd Skidmore TTEE
4470 Chamblee Dunwoody Rd., #250
Atlanta, GA 30338
Common Stock Stanley Holdings Business Trust 4,075,967 18.7%
II DTD 9/1/09 Ben Stanley TTEE
4470 Chamblee Dunwoody Rd., #250
Atlanta, GA 30338
Common Stock Ron Reeser 2,058,824 9.45%
4470 Chamblee Dunwoody Rd. #250
Atlanta, GA 30338
Common Stock Ben Stanley 2,058,824 9.45%
4470 Chamblee Dunwoody Rd. #250
Atlanta, GA 30338
Common Stock All Directors and Officers
as a Group (2) 10,210,756 46.85%
(1) As of December 31, 2010, BAR Trust holds approximately 19% of World Mortgage
Exchange Group, Inc.'s outstanding shares, for which Mr. Reeser is trustee.
(2) As of December 31, 2010, LTR Trust holds approximately 19% of World Mortgage
Exchange Group, Inc.'s outstanding shares, for which Mr. Skidmore is
trustee.
33
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
Except as described below, none of the following persons has any direct
or indirect material interest in any transaction to which we are a party during
the past fiscal year or in any proposed transaction to which the Company is
proposed to be a party:
(A) any director or officer;
(B) any proposed nominee for election as a director;
(C) any person who beneficially owns, directly or indirectly, shares carrying
more than 5% of the voting rights attached to our common stock ; or
(D) any relative or spouse of any of the foregoing persons, or any relative of
such spouse, who has the same house as such person or who is a director or
officer of any parent or subsidiary.
Until November 2009, the Company leased our offices for $1,500 from an
affiliated entity of Michelle Tucker, our former president.
Beginning in November 2009, the Company leased our current
administrative office in Atlanta, Georgia. This space is leased to the Company
at a cost of $3,853.19 per month by an unrelated party.
DIRECTOR INDEPENDENCE.
Our directors are Ron Reeser and Loyd Skidmore. Mr. Reeser is also our
Chief Executive and is therefore not considered independent. Loyd Skidmore is
also our Executive Vice President and is therefore not considered independent.
ITEM 14. PRINCIPAL ACCOUNTANT FESS AND SERVICES.
AUDIT FEES. The aggregate fees billed for professional services rendered was
$10,600 and $6,500 for the audit of our annual financial statements for the
fiscal years ended December 31, 2010 and 2009, respectively, and the reviews of
the financial statements included in our Forms 10-Q for those fiscal years.
AUDIT-RELATED FEES. The aggregate fees billed in each of the last two fiscal
years for assurance and related services by the principal accountant that are
reasonably related to the performance of the audit or review of our financial
statements and not reported under the caption "Audit Fee."
TAX FEES. No fees were billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax compliance,
tax advice and tax planning services.
ALL OTHER FEES. Other than the services described above, there were no other
services provided by our principal accountants for the fiscal years ended
December 31, 2010 and 2009.
34
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibit
Number Description
------- --------------------------------------------------------------------
3(i).1 Articles of Incorporation (1)
3(i).2 Amended Articles of Incorporation (1)
3(ii).1 By-Laws of the Company (1)
10.1 Employment Agreement with Jonathon Green
10.2 Employment Agreement with Francisco Del
10.3 Independent Contractor agreement with Michelle Tucker
10.4 Lease Agreement
10.5 Standard director agreement
10.6 Exclusive recording agreement
14 Code of Business Conduct and Ethics
23.1 * Consent of Stan J.H. Lee, CPA
31.1 * Certification of the Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31.2 * Certification of the Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
32.1 * Certification of the Chief Executive Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
32.2 * Certification of the Chief Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
----------
(1) Filed as an exhibit to the Registrant's Form SB-2, filed on May 14, 2007
(2) Filed as an exhibit to the Registrants Form 10Q for the period ended
June 30, 2008, filed on August 14, 2008
* Filed Herewith
35
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
WORLD MORTGAGE EXCHANGE GROUP, INC.
Date: April 15, 2011 By: /s/ Ron Reeser
------------------
Ron Reeser
Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Date: April 15, 2011 By: /s/ Ron Reeser
------------------
Ron Reeser
Chief Executive Officer
Date: April 15, 2011 By: /s/ Brian James
-------------------
Brian James
Chief Financial Officer
36