EX-99.1 8 exhibit_991x10kx2013.htm EXHIBIT
Exhibit 99.1
Unaudited Financial Statements
of
MTH Mortgage, LLC
For the Periods Ended December 31, 2013
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MTH Mortgage, LLC
Contents

| Page
Unaudited Financial Statements |
Balance Sheet | 3 |
Statement of Income | 4 |
Statement of Members' Equity | 5 |
Statement of Cash Flows | 6 |
Notes to Unaudited Financial Statements | 7 |

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MTH MORTGAGE, LLC
UNAUDITED BALANCE SHEET
December 31, 2013

ASSETS
Current Assets: |  |
Cash in bank | $ | 4,233,525 |
Certificate of deposit |  | — |
Trust account |  | 150 |
Accounts receivable |  | 660,451 |
Prepaid expenses |  | 54,849 |
Total current assets |  | 4,948,975 |
Property and equipment, net |  | 48,754 |
Total assets | $ | 4,997,729 |
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities: |  |
Accounts payable | $ | — |
Accrued compensation and benefits |  | 440,018 |
Accrued expenses and other current liabilities |  | 41,918 |
Distributions payable |  | — |
Total current liabilities |  | 481,936 |
Members' Equity: |  |
Members' equity |  | 4,515,793 |
Total liabilities and members' equity | $ | 4,997,729 |

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MTH MORTGAGE, LLC
UNAUDITED STATEMENT OF INCOME
For the Year Ended December 31, 2013

Revenue | $ | 24,345,028 |
Expenses: |  |
Personnel expense | $ | 5,013,297 |
General and administrative expense |  | 1,331,078 |
Direct expense to broker loans |  | 666,776 |
Occupancy expense |  | 202,326 |
Depreciation expense |  | 20,168 |
Total operating expense |  | 7,233,645 |
Net operating income |  | 17,111,383 |
Other income and expense: |  |
Interest income |  | 135 |
Franchise tax expense |  | (29,340 | )
Other income |  | — |
Total other income and expense |  | (29,205 | )
Net income | $ | 17,082,178 |

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MTH MORTGAGE, LLC
UNAUDITED STATEMENT OF MEMBERS' EQUITY
For the Year Ended December 31, 2013

Members' equity, December 31, 2012 | $ | 265,434 |
Net income |  | 17,082,178 |
Distribution to members |  | (12,831,819 | )
Members' equity, December 31, 2013 | $ | 4,515,793 |

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MTH MORTGAGE, LLC
UNAUDITED STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2013

Cash flows from operating activities: |  |
Net income | $ | 17,082,178 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |
Depreciation |  | 20,168 |
Changes in current assets |  |
Accounts receivable |  | 453,254 |
Prepaid expenses and other current assets |  | (14,536 | )
Changes in current liabilities |  |
Accounts payable |  | (1,699 | )
Accrued compensation and benefits |  | 47,038 |
Accrued expenses and other current liabilities |  | 2,561 |
Total adjustments |  | 506,786 |
Net cash provided by operating activities |  | 17,588,964 |
Cash flows from investing activities: |  |
Acquisition of property and equipment |  | (31,967 | )
Certificate of deposit |  | 51,436 |
Net cash provided by investing activities |  | 19,469 |
Cash flows from financing activities: |  |
Distribution to members |  | (14,561,820 | )
Net cash used in financing activities |  | (14,561,820 | )
Net increase in cash |  | 3,046,613 |
Cash at beginning of period |  | 1,186,912 |
Cash at end of period | $ | 4,233,525 |
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES: |
Decrease in distributions payable | $ | (1,730,001 | )

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MTH Mortgage, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
December 31, 2013
NOTE 1 - NATURE OF OPERATIONS
MTH Mortgage, LLC (the “Company” or “MTH”) was incorporated in Arizona on October 23, 2000, as an Arizona limited liability company (“LLC”). The Company was created through a joint-venture between imortgage.com, Inc. (“imortgage”) and Meritage Homes Corporation (“Meritage Homes”) whereby imortgage and Meritage Homes each own 45% and 55% of the Company, respectively. Effective September 30, 2013, there was a change in ownership in which imortgage transferred its 45% ownership in MTH to loanDepot.com, LLC dba imortgage (“loanDepot dba imortgage”) in conjunction with the acquisition of imortgage by loanDepot.com, LLC.
The Company is a mortgage loan broker providing loan origination services to lenders and derives income from fees paid by lenders for the successful funding and closing of a loan for a consumer that originated through MTH.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates.
Cash and cash equivalents
For purposes of the statements of cash flows, cash equivalents include time deposits, certificates of deposit, and all highly liquid debt instruments with original maturities of 3 months or less. As of December 31, 2013 the Company did not have any cash equivalents. Cash includes amounts restricted under the line of credit agreement disclosed in Note 8.
Escrow funds held in trust
Funds received by the Company in connection with open escrows are deposited in separate trust bank accounts. These trust funds are not available for operating purposes. The Company did not receive funds in connection with new open escrows during the year ended December 31, 2013.
Recognition of revenue
The Company’s revenues are derived from fees paid by lenders for the closing of a loan originated through the Company. The Company recognizes revenue on lender fees upon the closing of the related escrow for a loan.
Accounts receivable
Accounts receivable are stated amounts due from lenders for lender fees earned upon the closing of a loan. The Company determines the allowance for doubtful accounts by considering the length of time accounts receivable are past due, previous loss history and the specific customer’s ability to pay its obligation. The Company writes off accounts receivable when management deems them uncollectible. There were no write-offs during the year ended December 31, 2013. There was no allowance for doubtful accounts as of December 31, 2013.
Property and equipment
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over useful lives of 5 to 7 years. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation or amortization are
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NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
removed from the accounts, and any resulting gain or loss is reflected in earnings for the period. Repairs and maintenance are charged to expense as incurred.
Income taxes
Under federal and applicable state laws, taxes based on income of an LLC treated as a partnership are payable by the LLC’s members individually. MTH Mortgage, LLC is not subject to income taxes but is, however, subject to annual LLC franchise taxes and LLC fees. These taxes and fees are included in other income and expense in the statements of income.
NOTE 3 - CONCENTRATION OF CREDIT RISK
The Company maintains its cash in bank depository accounts with financial institutions, which may at times exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk to cash.
Because of the nature of the mortgage business, MTH is marketing to builders, primarily Meritage Homes (a related party), within the States of Arizona, California, Colorado, Texas, North Carolina, and Florida. In the event of a major downturn within these markets, the operations of MTH Mortgage, LLC could be adversely affected.
The Company had accounts receivable due from loanDepot dba imortgage (a related party) totaling $648,944 as of December 31, 2013, which represents substantially all of the total outstanding accounts receivable.
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31, 2013:

Furniture and fixtures | $ | 45,736 |
Equipment |  | 118,984 |
Leasehold improvements |  | 102,012 |
|  | 266,732 |
Less: accumulated depreciation |  | (217,978 | )
| $ | 48,754 |

The Company recognized $20,168 of depreciation expense for the year ended December 31, 2013.
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company entered into a software licensing agreement with imortgage on August 24, 2000. The terms of the agreement allow the Company to use the software of imortgage to help in the origination of mortgage applications. There is no fee for this agreement. Effective September 30, 2013, the software licensing agreement with imortgage was assigned to loanDepot dba imortgage in conjunction with the acquisition of imortgage by loanDepot.com, LLC.
The Company entered into a service agreement with imortgage on August 24, 2000. Under the terms of the agreement, imortgage will process all loan applications taken by the Company, provide accounting services and support, coordinate legal services, and provide any other administrative support needed by the Company. The cost to the Company is on a per loan basis of $600, calculated as: $225 processing fee and $375 administration fee. Effective September 30, 2013, the service agreement with imortgage was assigned to loanDepot dba imortgage in conjunction with the acquisition of imortgage by loanDepot.com, LLC.
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NOTE 5 - RELATED PARTY TRANSACTIONS - Continued
Total processing fee expense for the year ended December 31, 2013 was $599,400 and is recorded in direct expense to broker loans in the statements of income. Total administration fee expense for the years ended December 31, 2013 was $999,000, and is recorded in general and administrative expense in the statement of income.
The Company provides loan origination services to imortgage (January 1, 2013 to September 30, 2013) and loanDepot dba imortgage (October 1, 2013 to December 31, 2013) which generated $24,345,028 in revenue from lender fees from imortgage and loanDepot dba imortgage for the year ended December 31, 2013. Accounts receivable due from imortgage and loanDepot dba imortgage are noted in Note 3 above.
The Company also sub-leases several facilities from Meritage Homes and its subsidiaries (see Note 6).
NOTE 6 - COMMITMENTS AND CONTINGENCIES
Operating leases
The Company leases office space in Fort Mill, South Carolina from a non-related party under an agreement expiring on September, 30 2014. At December 31, 2013, the monthly base rent under the agreement is $375.
The Company sub-leases its corporate headquarters from Meritage Homes (a related party) and eight offices from subsidiaries of Meritage Homes (related parties), under both month-to-month and non-cancellable lease agreements. For the year ended December 31, 2013, the Company paid approximately $189,257 in base rent under these agreements. At December 31, 2013, the average monthly base rent per office space was $1,753.
Future minimum lease payments, under non-cancellable leases, are summarized in the table below.
Year Ending December 31,

|  | Related Party | Non-related Party | Total
2014 |  | 88,879 |  | 3,375 |  | 92,254 |
2015 |  | 53,684 |  | — |  | 53,684 |
2016 |  | 19,103 |  | — |  | 19,103 |
2017 |  | 19,676 |  | — |  | 19,676 |
Thereafter |  | 10,755 |  | — |  | 10,755 |
|  | $ | 192,097 |  | $ | 3,375 |  | $ | 195,472 |

Rent expense for operating leases was $190,382 during the year ended December 31, 2013.
Legal matters
The Company is subject to claims and/or threatened legal actions, which arise out of the normal course of business. In the opinion of management, based on discussions with legal counsel, the disposition of these actions and other such matters are not expected to have a material effect on the Company’s financial statements.
NOTE 7 - MEMBERS’ EQUITY
Capital contributions
Under the Operating Agreement for MTH Mortgage, LLC, the Company’s capital account shall never be less than 110% of the amount required to obtain and maintain a license as a broker under the laws of any state where the Company does business (“Minimum Amount”). Members shall contribute additional capital to the Company in order to maintain the Minimum Amount
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NOTE 7 - MEMBERS’ EQUITY - Continued
of capital in proportion to their respective ownership interest percentage. For the year ended December 31, 2013, no additional capital contributions were required from members.
Liability of members
The Operating Agreement establishes limitations of members’ liability for each member. No member shall be liable for the debts, liabilities, contracts, or any other obligations of the Company, except as agreed upon in writing signed by the members. Members shall be liable only to make their initial and Minimum Amount capital contributions required by the Operating Agreement and no member shall be required to make any other capital contributions or to loan
any amounts to the Company. In addition, no member shall have any personal liability for the repayment of capital contributions or loans of the other member or be obligated to restore any negative balance in such member’s capital account, whether upon liquidation of the Company or otherwise.
Distribution of net profits
Under the Operating Agreement, distributions to members shall be made no less than quarterly, to the extent the Company has distributable net profits after creating adequate reserves for operating expenses and capital improvements, and provided that no distribution shall be made which will reduce the Company’s capital below the Minimum Amount. For the year ended December 31, 2013, distributions to members totaled $12,831,819. At December 31, 2013, there were no distributions payable to members.
NOTE 8 - LINE OF CREDIT
On December 27, 2013, the Company entered into a collateralized line of credit agreement with Bank of America for $1,000,000 that matures on December 26, 2014. As of December 31, 2013, no amounts were outstanding under the line of credit. Interest shall accrue at the Base Rate, which represents the higher of the Federal Funds Rate plus .50% or the prime rate, or the Eurodollar Rate plus 3% per annum. The outstanding principal and accrued interest is due and payable on the maturity date. Collateral for the line of credit consists of a bank account at Bank of America with a minimum balance requirement of $1,050,000, which is included in cash and cash equivalents on the balance sheet as of December 31, 2013.
Effective January 29, 2014, the aforementioned line of credit and bank account was closed by the Company.
NOTE 9 - SUBSEQUENT EVENTS
Management has evaluated subsequent events through February 11, 2014, the date the financial statements were available to be issued.
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