-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AH0Fh/7dQaGv7awJ33huTy7T9FY+UMrGJYti7rlqfQBqThs6Up+zMzpkMGNv/jJk HcO/VDTJ3H58dNlhbf2K2w== 0001213900-08-000754.txt : 20080423 0001213900-08-000754.hdr.sgml : 20080423 20080423170836 ACCESSION NUMBER: 0001213900-08-000754 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20071231 FILED AS OF DATE: 20080423 DATE AS OF CHANGE: 20080423 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORTGAGEBROKERS.COM HOLDINGS, INC. CENTRAL INDEX KEY: 0001222218 STANDARD INDUSTRIAL CLASSIFICATION: MORTGAGE BANKERS & LOAN CORRESPONDENTS [6162] IRS NUMBER: 020677052 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: 10KSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 333-105778 FILM NUMBER: 08772366 BUSINESS ADDRESS: STREET 1: 45 VOGELL ROAD STREET 2: SUITE 101 CITY: RICHMOND HILL STATE: A6 ZIP: L4B-3P6 BUSINESS PHONE: (416) 410-4848 MAIL ADDRESS: STREET 1: 45 VOGELL ROAD STREET 2: SUITE 101 CITY: RICHMOND HILL STATE: A6 ZIP: L4B-3P6 FORMER COMPANY: FORMER CONFORMED NAME: MAGNADATA INC DATE OF NAME CHANGE: 20030307 10KSB/A 1 f10ksb2007a1_mtgbrok.htm AMENDMENT NO. 1 TO 2007 ANNUAL YEAR END REPORT f10ksb2007a1_mtgbrok.htm


SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
_________________________________________
 
AMENDMENT NO. 1 TO FORM 10-KSB
_________________________________________
 
ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
 
For Fiscal Year Ended
December 31, 2007
 
Commission File #333-105778
 
MORTGAGEBROKERS.COM HOLDINGS, INC.
 (Exact name of registrant as specified in its charter)
 
Delaware
(State or other jurisdiction of incorporation or organization)
 
05-0554486
 (IRS Employer Identification Number)
 
11-260 Edgeley Boulevard, City of Vaughan, Ontario, L4K 3Y4
 (Address of principal executive offices)(Zip Code)
 
877-410-4848
(Registrant's telephone no. including area code)

Securities registered pursuant to Section 12(b) of the Act: None
 
Title of each class Name of each exchange on which registered
 
_____________________________________________________________
 
Securities registered pursuant to Section 12(g) of the Act:
 
Common Stock, $0.0001 par value
 
 (Title of class)
 
(Former name, former address and former fiscal year,
 
if changed since last report)
 
 

 
 
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           þ           No           o
 
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.
 
Yes           o           No           þ
 
Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B not contained in this form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB.
 
o
 
Revenues for year ended December 31, 2007: $ 10,251,113.
 
Aggregate market value of the voting common stock held by non-affiliates of the registrant as of December 31, 2007 is: $3,309,741.
 
Number of shares of the registrant's common stock outstanding as of April 15, 2008 is: 38,516,470
 
Transfer Agent as of April 15, 2008:
 
Securities Transfer Corporation
2591 Dallas Parkway, Suite 102
Frisco, TX, 75034
 
 


 

 

 
TABLE OF CONTENTS
 
PART I
 
   
ITEM 1.                       DESCRIPTION OF BUSINESS
1
ITEM 2.                       DESCRIPTION OF PROPERTY
6
ITEM 3.                       LEGAL PROCEEDINGS
6
ITEM 4.                       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
7
   
PART II
 
   
ITEM 5.                       MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
8
ITEM 6.                       MANAGEMENT S DISCUSSION AND ANALYSIS
10
ITEM 7.                       FINANCIAL STATEMENTS
14
14
ITEM 8A (T).             CONTROLS AND PROCEDURES
14
ITEM 8B.                    OTHER INFORMATION
14
   
PART III
 
   
15
ITEM 10.                     EXECUTIVE COMPENSATION
17
ITEM 11.                     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
19
ITEM 12.                     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
19
ITEM 13.                     EXHIBITS AND REPORTS ON FORM 8-K
19
ITEM 14.                     PRINCIPAL ACCOUNTANT FEES AND SERVICES
21
   
22

 

i

 
 
 
Corporate Background
 
MortgageBrokers.com Holdings, Inc. (the “Company”, “we”, “our” or “us”) was incorporated under the laws of Delaware on February 6, 2003 as MagnaData, Inc. and was initially established for the purposes of providing consulting and technical support to internet service providers to develop e-commerce market intelligence services.  On January 31, 2005, Alex Haditaghi, the Company’s current majority shareholder, chief executive officer and sole director, purchased 1,510,000 issued and outstanding shares from three shareholders of MagnaData Inc. for cash consideration ($692,813) in an arms length transaction.  This share purchase represented approximately 78% of MagnaData's common shares outstanding at the time of the transaction.  In February 2005, we filed articles of amendments with the State of Delaware changing the name of our company to MortgageBrokers.com Holdings, Inc.  On March 21, 2005, the Company entered into a Stock Purchase Agreement and Share Exchange with Mortgagebrokers.com, Inc. (“MBI”), an Ontario, Canada, corporation, whereby the Company purchased all 1,000 issued and outstanding common shares of MBI from Alex Haditaghi, the sole shareholder of MBI, in exchange for the issuance to Mr. Haditaghi of 4,000,000 shares of our stock.  Pursuant to this agreement, MBI became our subsidiary for operating as a mortgage broker in Ontario.  In October 2005, we incorporated, as a wholly-owned subsidiary, a Canadian federally incorporated operating company for the purpose of expanding our mortgage broker licensure and operations across Canada.  Currently, through our subsidiaries, we act as a mortgage brokerage firm serving the borrowing needs of real estate professionals and individual home buyers across Canada.
 
 
Overview
 
Background
 
During the first half of 2005, management developed our business model, business plans and strategic market plans that included: organization of the company and divisions; identification of our sales channels and associated supply chain; development of marketing strategic plans and sales execution strategies; preparation of a financial plan, risk and capital structure planning models, and mortgage origination ‘book of business’ recruitment models; developing cash flow forecasts and an operating budget; identifying markets to raise additional equity capital and debt financing; embarking on research and development activities; performing employment searches and preparing agent contracts; and, recruiting and hiring technicians, management and industry specialists.
 
We began to establish bookkeeping practices in mid-2005 to account for multiple subsidiaries, sales channels, and products and services with an initial focus on two profit center sales channels, namely: the mortgage broker sales channel - a national network of fully commissioned mortgage broker agent teams, who were both mobile agents and were operating store front retail branch locations; and, the real estate sales channel - servicing strategic real estate partner lead referrals regionally supported with our network of mortgage agents.
 
During the last half of 2005, we began to execute our business strategy and generate revenue.  These activities included the recruitment and licensing of mortgage brokers and mortgage sales agents within our mortgage broker sales channel.  We have also commenced discussions with strategic market referral alliances in our real estate sales channel.  We have incurred expenses in the establishment of sales management resources and the launch of our mortgage broker and real estate sales channels.  We received revenue from these operations.
 
In the first two quarters of 2006, we continued to execute, test and refine our business strategy of recruiting and licensing mortgage brokerage books of business across Canada and solidifying our first two real estate strategic alliances, namely: Maxwell Realty Inc. (“Maxwell”) and RE/MAX Ontario-Atlantic Canada Inc. (“RE/MAX”).  Our first two real estate strategic alliances provide us with added market access initially in Alberta, Ontario and Eastern Canada and eventually in the United States and the E.U.
 

1

 
During 2006, we announced that on January 31, 2006 and later amended on May 25, 2006, RE/MAX had executed a renewable 10-year strategic alliance marketing, referral and revenue sharing agreement with us.
 
The assets of Lending Source Canada Inc. in Alberta, Canada were acquired by our Company on March 10, 2006, from the owners of Maxwell in exchange for stock in our Company to provide a platform for servicing Maxwell and launching our business in western Canada.  A third owner of Lending Source Canada Inc. received no compensation but was hired by our Company as a sales executive servicing western Canada.  On April 12, 2006, our Company executed a three year renewable marketing, referral and revenue sharing agreement with Maxwell.

With the basic business model infrastructure in place, the Company’s focus through 2007 was towards recruitment of mortgage agents across Canada and growing our real estate referral relationships with RE/MAX and Maxwell.  In 2007, we had five full time senior sales executives strategically servicing sales territories across Canada, who divided their time between servicing existing agents in their territory, recruiting new books of business and promoting the Company.  Four of our senior sales executives were tasked in 2007 with expanding our penetration within our referral alliance franchise network, placing qualified mortgage agents within alliance franchise locations, and working towards making the referral relationship a success.  In 2007, our Company also commenced a pilot sales training program for our mortgage sales agency and commenced development of on-line www-based systems to support our national sales agency in the areas of Customer Relationship Management, Marketing, and training.
 
Products and Services
 
We are a mortgage origination company that has gained access to a full range of mortgage funding products from in excess of 40 banks, trusts and private lender sources.  The Company acts as broker only and is not a lender.  The Company has no ‘on balance sheet’ liabilities in case mortgage financing becomes default.  We are dedicated to finding the right loan, with the best rates, terms and costs, to meet each client's unique needs.  Our subsidiaries generate revenue by placing mortgages, on behalf of clients, with third party lenders who in return, pay the Company a commission fee.  The commission fee is a combination of finder's fees and volume bonus whose aggregate sum fee typically ranges between 75 to 150 basis points (0.75 to 1.5%) of the total mortgage volume.  We currently earn additional commission revenue through the referral and placement of creditor insurance with third party insurance providers.  In general, when a client takes creditor insurance related to the mortgage transaction originated by the Company, the Company earns a commission which is estimated to be 20 to 30 basis points of the funded insurance amount.
 
Markets Served
 
Operations are presently conducted through our subsidiaries in Canada only.  The Company is currently providing mortgage brokerage services in the Canadian provincial markets of Newfoundland, Nova Scotia, New Brunswick, Prince Edward Island, Ontario and Alberta.
 
Distribution Methods for our Services
 
The Company provides its services to the consumer through a national sales agency network that is exclusively licensed with the Company.  Our national agency sales force are independent contractors operating exclusively under the Company's mortgage brokerage licensure and brand who operate regionally as mobile sales professionals and teams; alternatively, they may establish regional retail offices from which they build sales teams leveraging the Company’s business model.  As at December 31, 2007, we had 320 licensed mortgage agents operating across Canada and our agents had established 27 retail office locations under the Company brand.
 
Market Conditions
 
The Canadian Association of Accredited Mortgage Professionals (“CAAMP”) Chief Economist reported in November 2007 that as of August 2007, there was CDN $787 billion of outstanding residential mortgage credit in Canada.  It is estimated that this figure would be $815 billion by the end of 2007.  It is estimated that the market is growing approximately 8.5% per year which represents an estimated 2008 mortgage origination market volume of CDN $70 billion.
 
According to CAAMP, mortgage brokers captured 30% of the annual mortgage origination market in 2007.  Most industry sales referral relationships have been established at the individual mortgage agent level.  It is conservatively estimated by the Company that there are in excess of 10,000 active mortgage agents operating in Canada (based on a reported 11,000 membership reported in the January 2008 Mortgage Journal published by Naylor Canada Inc. for CAAMP).
 
 
2

 
 
 
The Canadian mortgage origination market is fragmented, with an estimated 50% of the market captured by five large Canadian mortgage origination companies or “Super Brokers” who also lay claim to having more than two-thirds of the active mortgage agents licensed in Canada.  It is a growing trend to establish national corporate sales referral arrangements with strategic alliances, and there is significant market competition in the recruitment of mortgage agents and their associated ‘books of business’ amongst the mortgage originators.
 
There are two primary consolidation business models being executed in the Canadian market place:  the sales agency model and the franchise model.  The primary tools amongst brokerages for executing a competitive strategy in recruiting mortgage agents has been exercised through increasing commission splits (which currently ranges between 60 and 95% of the total commission fees received are paid out to the mortgage agent), the development of brand and the provision of administrative and marketing services.
 
We believe that the most significant long standing mortgage broker industry issues affecting fragmentation in the market place include the matters of ownership, career exit strategy and agent retention.
 
Competitive Business Conditions
 
Mortgage origination in Canada can be segmented into three broad categories and their relative market share: (i) bank branch networks - 48%; (ii) bank mobile mortgage sales teams - 22%; and (iii) mortgage brokers - 30%.  Over the past decade, the relative share for the bank branch networks had decreased as consumer demand for accessibility and specialization intensify.
 
It is conservatively estimated by the Company that there are in excess of 11,000 active mortgage agents operating in Canada (based on a reported 11,000 membership reported in the January 2008 Mortgage Journal published by Naylor Canada Inc. for CAAMP).  The Canadian mortgage origination market is very fragmented, with an estimated 50% of the market captured by five large Canadian mortgage origination companies or “Consolidating Brokerages” who also lay claim to having more than two-thirds of the active mortgage agents licensed in Canada.  There is significant market competition in the recruitment of mortgage agents and their associated ‘books of business’ amongst the mortgage originators.
 
Our Company’s direct competition in the Canadian marketplace are the major bank mobile mortgage sales teams and the consolidating mortgage brokerages.
 
The primary tools used by our competitor consolidating brokerages for executing a competitive strategy in recruiting mortgage agents has been increasing commission splits (which currently ranges between 60 and 100% of the total commission fees received are paid out to the mortgage agent), the development of brand and the provision of administrative and marketing services.
 
The competitor mobile sales teams of the major banks compete with us by leveraging bank brand appeal, exclusive mortgage products and leveraging captive bank customer base.  In an effort to compete with mortgage brokers who offer varying credit quality mortgage solutions of numerous lenders, the bank mortgage sales forces have begun allowing their sales teams to offer other lender products outside their credit parameters.
 
Our Business Model
 
Overview
 
We have designed our business model to incorporate two principal elements which we believe will attract those mortgage agents who value ownership and a career exit strategy within the Canadian mortgage market.  We also believe that mortgage brokerages have long suffered from their inability to retain their top loan originators, typically losing them to competing brokerages that offer increased commissions with very little sustainable value.  In addition, in today’s consolidating environment, we believe many sales agents have seen the companies they work with sold to large financial institutions or brokerages with nothing to show from the transaction when it is they who are responsible for creating much of the value associated with the transaction.  Therefore, management believes there is pent up demand within the industry for a mortgage brokerage model that will address what we believe to be the industry’s long- standing issues of agent retention and equity ownership.
 
 
3

 
 
 
As Canada’s first and, at present, only publicly-traded and independent (non-bank owned) mortgage brokerage, we have strategically positioned our Company as a consolidator attracting those mortgage agents who value ownership and a career exit strategy within the Canadian mortgage market.  We have developed what we believe to be a unique transparent business model that allows us to rapidly and sustainably develop our national sales agency and long term sales referral sources around which we can diversify our product offering and develop our brand for the consumer.
 
We have accordingly designed a business model to provide mortgage agents with the potential to earn equity in our Company based on their annual mortgage origination volume.  This form of equity participation is intended to provide our national sales agency network a transparent career exit strategy for retirement and a retention strategy for team building purposes.  It is our belief that the benefit to the Company is that we are able to build a sustainable long term operational margin contribution from Canadian operations and we are able to include our national agency sales force, responsible for executing the Company's sales strategy, into the ownership of the Company, theoretically allowing them to benefit from Company growth related directly to their contribution.
 
The Company has also developed strategic alliances with long-established and dominant real estate brands with a view to providing our affiliated agents access, on a volume basis, to mortgage referrals.  To this end, the Company has established long-term regional strategic alliances with RE/MAX in eastern Canada and Maxwell in western Canada.
 
The RE/MAX “Mortgage Solution Program” was launched on June 1, 2006 and, as of November 7, 2007, 76 RE/MAX franchises across Ontario and Atlantic Canada, representing in excess of 30% of the RE/MAX Franchise network sales force, were participating in the referral program.  RE/MAX is Canada's leading real estate organization with an estimated CDN $32 billion in sales and over 15,600 sales associates in more than 610 independently-owned and operated offices.
 
The Maxwell “Mortgage Solution Program” was launched on April 12, 2006.  Maxwell is the largest independent real estate company in Alberta, Canada.  According to the agreement, our mortgage agents will service the Maxwell network which, since its inception in 1999, has grown to over 20 offices with over 650 successful real estate agents throughout the province of Alberta.  In addition to Maxwell's six Calgary offices, franchises have been established in Canmore, Lethbridge, Edmonton, Fort McMurray, Stettler, Airdrie, Medicine Hat, Red Deer and Chestermere Lake, Alberta.
 
Incentives for Mortgage Brokers
 
Our business model provides an opportunity for our Canadian subsidiary's national agency sales force to earn stock warrants in the Company, generally based upon the future discounted cash flow margin contribution to our Company’s bottom line of mortgage volume origination by each exclusively contracted mortgage agent, pursuant to the execution of a stock warrant agreement.  The mortgage agents are not eligible to earn stock warrants until a minimum term sales period is completed in full, the first of which is three years following execution of an exclusive agency contract with the Company.  It is currently anticipated that the first Company stock warrants associated with this program will be executed by contracted sales mortgage agents in the fall of 2008 which may be monetized in 2009 at the earliest. As reported in the Company's Form 8K filing on June 9, 2006, Alex Haditaghi, the Company Chairman and Chief Executive Officer, agreed that commencing on January 31, 2006, the next 4,000,000 shares to be granted to the national sales agency network will be provided out of Mr. Haditaghi's personal holdings and be non-dilutionary on the Company's capital structure.
 
 

 
4

 
 
The Company’s Canadian subsidiary agency sales force consists of recruited independent contractors operating regionally under the Company's licensure.  Generally, in the MortgageBrokers.com model, our licensed agents earn at least 85% of received commission fees.  In addition to earned commission fees, the Company provides an opportunity for our Canadian subsidiary's national agency sales force to earn stock warrants in the Company based on annual sales volumes over a period of time.  In practice, recruited mortgage sales agents execute an exclusive agreement with a subsidiary of MortgageBrokers.com as a third party sales subcontractor. The mortgage agents agree to operate under the terms of the sales agreement and the mortgage broker licensure and brand of the Company and allow the Company to take typically 15% of the commission fees payable to the mortgage agent from a mortgage lender in exchange for payroll, revenue management (volume pooling), licensure, compliance, and marketing services.  No money is paid by the Company for purchase of any asset of the mortgage agent or their business including the agent’s book of business.  The Company does not take an equity ownership position in the independent business of the individual mortgage agent or mortgage agent team.
 
Incentives for Strategic Real Estate Brokerage Partners
 
In addition to issuing stock-based compensation to our referral market alliances, the Company compensates cash referral fees associated with funded mortgages, the bulk of which is directed to the real estate agent and their broker.  In the RE/MAX program, our referral fees are directed through the broker into a registered retirement fund administered by The Manufacturers Life Insurance Company (“Manulife Financial”).  In this way, the real estate agent get the benefit of the referral commission by leveraging their current customer base and the added benefit of receiving a tax benefit resulting from deposits automatically made into their Registered Retirement Savings Plan.
 
RE/MAX Agreements
 
Pursuant to a ten year licensing agreement dated January 30, 2006 and amended May 25, 2006, and pursuant to the execution of a one year renewable service level agreement by the RE/MAX Franchisee, the Company provides its expertise in respect of North American mortgage finance and origination business solutions to RE/MAX and its franchisees and their salespersons in the form of a program to be known as the “Mortgage Broker Solution.”  In return, RE/MAX agreed to refer to our Company all requests for mortgage financing that are received directly by RE/MAX whether received on the RE/MAX web site or otherwise.
 
In consideration for this alliance, the Company offers the RE/MAX franchises, associated sales associates and RE/MAX revenue sharing from mortgage referrals that result in a funded mortgage.  In addition to revenue sharing, RE/MAX and their network were provided the opportunity to be equity participants in the Company, through a one-time equity private placement offering of up to 6 million units at $1 per unit, each unit comprised of one share and one full warrant, each warrant convertible into one further share at an exercise price that is 30% below the 30 day moving average price of the Company shares preceding the date such warrants are exercised.  One-fifth (1/5) of such warrants were to be exercisable on each anniversary date of the closing of the offering in each of the first five years following the completion of the offering and if not so exercised would expire.  On June 1, 2006 this private placement was completed and 2,112,470 shares at $1.00 per share for the amount of $2,112,470 were issued.  A payment of $1,852,344.00 was received and promissory notes for the balance of $260,126 were executed.  Through the last quarter of 2005 and first quarter of 2006, we executed notes for unsecured debt to RE/MAX Ontario-Atlantic Canada Inc. which were convertible to stock at the same price as offered through the private placement ($1.00 per share).  These notes were converted to shares on June 12, 2006.  By December 31, 2007, the Company had collected $110,000 in promissory notes receivable associated with the private offering.  Based on non-payment of outstanding promissory notes, the Company commenced cancellation of issued shares having outstanding promissory notes totaling $125,000 with new replacement subscriptions resulting in a cash payment of $60,000 and a new promissory note of $65,000.  As at December 31, 2007, the cancellation of the 125,000 shares associated with the private placement was still in progress, which left the Company with a subscription receivable balance outstanding associated with the PPM of $220,000, which includes the promissory note of $65,000.  As at December 31, 2007, warrants associated with the PPM were exercised for 64,086 shares of our common stock for a purchase price of $64,086.  As at December 31, 2007, the Company had a subscription receivable balance associated with these warrant exercises of $7,540.
 
The Company agreed, on each anniversary of the commencement of the Re-MAX agreement, for so long as such agreement remains in force, commencing on June 1, 2007, to issue to the purchasers in the private offering, at no additional cost, a number of common shares of the Company that are equal in number to 25% of the total number of shares initially issued to purchaser (such right to additional shares being assignable at the discretion of the person entitled thereto).  The Company also agreed with Re/MAX that it would not, prior to June 1, 2010 and without the prior written consent of RE/MAX, issue any new shares, options or warrants or other instruments convertible into shares; and that, (ii) RE/MAX shall have a first right of refusal to purchase any shares proposed to be issued out of treasury during the term of this agreement for the purpose of capital investment and to advance funds pursuant to any instrument proposed to be issued by the Company that is convertible into shares.   Further, the Company agreed that, within 60 days following the closing of the private placement offering, to file an SB-2 Registration Statement with the United States Securities and Exchange Commission to register the shares subscribed for pursuant to such offering and the Amended Agreement.  This registration statement was not filed.
 
 
5

 
Maxwell Agreement
 
Per a three year renewable agreement dated April 12, 2006 and pursuant to the execution of a service level agreement by the Maxwell Franchisee, the Company is committed to issuing to Maxwell, at no cost, warrants for common stock of the Company based on referrals leading to funded mortgage origination volume.
 
Trade Marks
 
We have made application in Canada to register the marks “MortgageBrokers.com” and “Security through Ownership” as being trade marks of our Company.  These applications are still in due process.  Both applications have been formalized and are currently awaiting examiner’s reports.
 
Government Licenses
 
In Canada, our services are governed under licenses granted by the respective provincial governments under various versions of a “Mortgage Brokers Act”.  Our subsidiaries are currently holding licenses in good standing in the provinces of Newfoundland, Nova Scotia, New Brunswick, Prince Edward Island, Ontario and Alberta.  Typically, our licensure is renewed annually.  The Mortgage Brokers Act is being updated and amended in many jurisdictions the Company operates in.  The biggest changes that might have an affect on the Company that are being considered are associated with new educational requirements for mortgage agents.  We see this as a very positive step to help ensure that our agents are as professional and educated as possible which should enhance the Consumer experience.
 
Employees
 
As at March 31, 2008, our Company had 15 full-time staff.
 
 
The Company negotiated and executed a 5 year lease agreement commencing July 31, 2007 for our corporate offices at 11-260 Edgeley Boulevard, City of Vaughan, Ontario, CANADA.  Our current contact information for our Ontario office is telephone number: (877) 410-4848 and fax number: (877) 410-4845.  Our internet website can be found under the domain name: www.mortgagebrokers.com.
 
The Company negotiated and executed a lease for its corporate office in Calgary, Alberta, Canada, and is party to a five (5) year lease commencing in May 1, 2007.
 
The Company is not party to any regional lease obligations associated with the 27 retail office locations of our sales agency.
 
 
Peter Doherty, a former employee, commenced an action against both of the Company’s subsidiaries, MortgageBrokers.com Inc. and MortgageBrokers.com Financial Group of Companies Inc on July 31, 2007 in the Ontario Superior Court of Justice for wrongful termination.  The statement of claim was for an aggregate payment of CDN $600,000 plus interest and costs.  The Company filed a statement of defense on September 5, 2007.   A mediation took place in this matter on February 11, 2008, and at that time a settlement was reached between the parties whereby MortgageBrokers.com Inc. would pay $23,500 to Peter Doherty.
 

6

 
On October 27, 2006, Trisan Equitable Corporation (“Trisan”) commenced an action in the Ontario Superior Court in Ontario, Canada against several parties, including the Company, MortgageBrokers.com Inc (“MBI”), our Ontario subsidiary, and Alex Haditaghi, our principal shareholder, sole director and chief executive officer, and several corporate affiliates of Mr. Haditaghi.  The statement of claim filed by Trisan asserted a number of claims in the aggregate amount of approximately CDN$1.4 million, arising out of a loan agreement with Trisan dated January 27, 2005 pursuant to which Trisan agreed to loan all of the defendants except the Company (such defendants referred to hereinafter as the “Borrowing Parties”) the sum of CDN$750,000, which funds were to be used by Mr. Haditaghi for the purpose of acquiring the shares of Magna Data, Inc. (the “Magna Data Shares”).  Trisan alleged in its statement of claim, among other things, that:
 
(i)
it ultimately loaned upwards of CDN$550,000 pursuant to the loan agreement,
 
(ii)
the Magna Data Shares were to be pledged as security for repayment of its loan to Haditaghi
 
(iii)
it was to have been issued, upon certain conditions, upwards of 500,000 shares of the Company’s common stock, and
 
(iv)
the funds advanced to Mr. Haditaghi and/or MBI were never repaid;
 
(v)
Trisan obtained security for such repayment of the loan from a number of the Borrowing Parties, but not from MBI.
 
In January 2007, the Company and the Borrowing Parties filed a statement of defense, cross-claim and counterclaim in response to Trisan’s statement of claim, in which the defendants alleged breach of the loan agreement by Trisan.
 
On October 3, 2007 a partial summary judgment from the Ontario Superior Court ordered that the Borrowing Parties pay Trisan the sum of CDN$598,636 within 90 days, along with interest in the amount of CDN$136,128 and legal expenses in the amount of CDN$8,907.  The court further ordered the dismissal of the counterclaim filed by the Company and the Borrowing Parties and ordered that the balance of Trisan’s claims contained in its statement of claim should proceed to trial. The Court further ordered that 500,000 unrestricted shares of the Company be deposited by the defendants with an escrow agent upon payment of the above ordered amounts, pending final disposition of Trisan’s other claims and that costs of the motion for summary judgment be fixed at CDN$5,000 payable to Trisan within 90 days.  Upon payment of the judgment amount, the security provided for the loan would be released.
 
The October 3, 2007 partial summary judgment was appealed by the Company and the Borrowing Parties, but the judgment was upheld on appeal by the Ontario Court of Appeal on March 31, 2008 with costs for the appeal fixed at $CDN5,000. 
 
No decision has yet been made as to allocation of liability for the judgment among the Borrowing Parties.
 
 
None.
 
 
7

 
 
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
Market Information
 
Our shares of common stock are approved for quotation on the OTC Bulletin Board under the symbol “MBKR”.
 
The following table represents the closing high and low bid information for our common stock during the last two fiscal years as reported by the OTC Bulletin Board. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. The market for our common stock is sporadic.
 
2007
 
High
   
Low
 
First Quarter
  $ 1.15     $ 0.59  
Second Quarter
  $ 2.27     $ 0.31  
Third Quarter
  $ 0.50     $ 0.35  
Fourth Quarter
  $ 0.43     $ 0.30  
                 
2006
 
High
   
Low
 
First Quarter
  $ 2.35     $ 1.25  
Second Quarter
  $ 1.70     $ 0.98  
Third Quarter
  $ 1.00     $ 0.54  
Fourth Quarter
  $ 1.01     $ 0.25  
                 
Holders
 
On December 31, 2007, there were 363 shareholders of record for our outstanding common stock.
 
Dividends
 
To date, we have paid no dividends on our shares of common stock and have no present intention of paying any dividends on our shares of common stock in the foreseeable future. The payment by us of dividends on the shares of common stock in the future, if any, rests solely within the discretion of our board of directors and will depend upon, among other things, our earnings, capital requirements and financial condition, as well as other factors deemed relevant by our board of directors. Although dividends are not limited currently by any agreements, it is anticipated that future agreements, if any, with institutional lenders or others may limit our ability to pay dividends on our shares of common stock.
 
Securities Authorized for Issuance under Equity Compensation Plan
 
The following table summarizes those securities authorized for issuance in 2007 in accordance to an equity compensation plan including individual compensation arrangements:
 
Plan Category
Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants & Rights
Weighted Average Exercise Price of Outstanding Options, Warrants & Rights
Number of Securities remaining Available for Future Issuance under Equity Compensation Plans (excluding Securities reflected in Column (a))
 
(a)
(b)
(c)
Equity Compensation Plans Approved by Security Holders
0
0
0
Equity Compensation Plans not Approved by Security Holders
0
0
19,500,000

 
8

 
 
On February 6, 2003 and as amended on February 14, 2003, the Company adopted the 2003 Equity Compensation Plan to attract and retain high quality personnel.  The adequacy of this plan is evaluated annually by Company management.  As of December 31, 2007, no options had been issued under this plan.  On July 23, 2007, the Company’s Board of Directors authorized the issuance 1,700,000 shares of restricted (Rule 144) Company stock to its senior management team pursuant to the plan.  These shares have not been released and the release is pending the finalizing and execution of management agreements.  The Company is currently in the process of amending the existing employment agreements which are expected to be executed in 2008.
 
On March 1, 2005 the Board of Directors approved a program (“Service Compensation Plan”) whereby Company stock would be issued for services, inaugurating its service compensation program which is embodied in its negotiated agreements with service providers.  The purpose of the Service Compensation Plan is to enhance the Company’s stockholder value and maximize the available capital resources of the Company through allowing non monetary transactions whereby the issuance of stock is granted for services rendered.  This program is expected to support the Company in building a long term sustainable revenue pipeline, a national sales agency and referral program as well as provide incentive to service providers to establish long term relationships with the Company and to encourage stock ownership by such individuals by providing them with a means to acquire a proprietary interest in the Company’s success through stock ownership.  Under the Service Plan, service providers, consultants, mortgage agents and strategic alliance partners who provide services to the Company may be granted options or warrants to acquire restricted stock of the Company.  The total number of shares currently authorized for issuance under the Service Compensation Plan is 5,000,000.
 
Recent Sales of Unregistered Securities
 
During 2007, the Company issued the following restricted shares of its common stock, in each case relying upon the exemption from registration afforded by Regulation S or Section 4(2) of the United States Securities Act of 1933:
 
On July 7, 2007, the Company issued 478,000 restricted common shares under the terms of its Mortgage Service License Agreement with RE/MAX Ontario-Atlantic Canada Inc, and its franchisee and broker owners that participated in the private placement offering which closed on June 9, 2006.  The shares were issued at $0.42 per share.
 
On July 23, 2007, the Company issued 40,000 restricted common shares to Alexander Gershtein in exchange for furniture and equipment valued at $45,416, under its Service Compensation Plan.
 
On July 23, 2007, the Company issued 25,000 restricted common shares at a price of $1.00 per share to Kalymon Consulting Ltd. in exchange for consulting services under its Service Compensation Plan.
 
On July 23, 2007, the Company issued 1,700,000 shares of restricted (Rule 144) Company stock to its senior management team based upon draft management agreements that are expected to be executed by December 31, 2007.  These shares have not been released and the release is pending the finalizing and execution of management agreements.  These shares were issued under the Company`s Equity Compensation Plan.
 
On November 2, 2007, the Company committed to issuing 50,000 shares to vFinance, Inc. and affiliates in exchange for investment banking services pursuant to the execution of an investment banking service agreement for services over the following 12 months.
 

9

 
MANAGEMENT'S DISCUSSION AND ANALYSIS
 
The following is management’s discussion and analysis of the consolidated financial condition and results of operations of MortgageBrokers.com Holdings, Inc for the fiscal years ended December 31, 2007 and 2006.  The following information should be read in conjunction with the audited consolidated financial statements for the period ending December 31, 2007 and notes thereto appearing elsewhere in this form 10-KSB.
 
Overview
 
In operation since 2005, our Company is a mortgage brokerage operation whose national agency sales force service the borrowing and refinancing needs of individual home buyers.  We have access to a full range of mortgage lenders and our agents’ source and negotiate the loan with the best rates, terms and costs to meet each customer's unique needs.  The company acts as broker only and is not a lender.  The company has no ‘on balance sheet’ liabilities in case mortgage financing becomes default.  The Company has established what it believes to be unique strategic alliances within the real estate industry for mortgage origination referrals.  Our national agency sales force consists of independent contractors operating exclusively under the Company's licensure who may operate regionally as individual businesses or they may establish regional retail offices from which they build agency sales teams leveraging the Company’s business model.  The primary services that the Company provides to our national agency sales network is mortgage brokerage licensure; a national brand and related marketing initiatives; a regulatory compliance service associated with our agents transactions; a payroll and commission service reconciling commission fees paid by lenders and insurers and accurate and timely payroll to our agents; revenue optimization for our agents through deal flow aggregation; the establishment of market partnerships to allow our agency sales network to access a greater portion of the mortgage and refinance market; and, information technology services.
 
In 2007, operations were conducted through our subsidiaries in Canada only.  The Company is currently providing mortgage brokerage services in the Canadian provincial markets of Newfoundland, Nova Scotia, New Brunswick, Prince Edward Island, Ontario and Alberta.
 
As at December 31, 2007, we had 320 licensed mortgage agents operating across Canada and our agents had established 27 retail office locations under the Company brand.  The number of mortgage agents in our national sales agency at the end of the reporting period represents a 66% increase over that of 2006.
 
Results of Operations
 
Gross revenue in 2007 increased by 155% from 2006 to $10,251,113, which management believes was directly related to increasing the number of sales agency mortgage agents by 67% and having a significant portion of our sales agency’s book of business mature early in the year so that mortgage origination volumes were maximized during typical summer and fall seasonal business peak periods.
 
The following summarize material trends and outlooks related to our comparative income statement:
 
1. 
operating expenses increased in 2007 by 105% over 2006
 
2. 
Gross revenue increased by 155% from 2006 to $10,251,113
 
3.
The Company’s operating expenses increased in 2007 by 105% over 2006. The primary components that make up this increase are agent commissions, salaries and benefits, general and administrative expenses, occupancy costs and stock-based compensation:
 
·  
73% of the operating expenses in 2007 were associated with agent commissions.  Agent commission fees as a percent of revenues increased by 15% from 2006 to 2007.  This is primarily related to an increase in the volume of mortgage origination that was sourced from referral alliances (from which the Company receives a marginally smaller portion of the commission fees) and the introduction of higher commission fees paid out to very large agent teams (in excess of $100 million in mortgage origination annually);
 
·  
11% of the operating expenses in 2007 were associated with salaries and benefits.  Salaries and benefits as a percent of total operating expenses decreased by 31% from 2006 to 2007.
 
·  
General and administrative expenses as a percent of total operating expenses decreased by 41% from 2006 to 2007.
 
·  
Occupancy costs increased 33% from 2006 to $126,886 and is primarily related to moving into the Company’s current corporate office space which will meet corporate growth needs for the near future.
 

10

 

 
·  
Stock-based compensation decreased by 12% from 2006 to $852,015 and represented less than 10% of total operating expenses in 2007.
 
Liquidity and Capital Resources
 
As at December 31, 2007, we had $830,852 in cash; $44,936 of Referral Fees held in trust (which are awaiting completion of administrative agreements prior to being transferred to a Manulife administered RRSP account owned by RE/MAX sales agents), $148,611 in prepaid expenses, $153,474 in equipment and recognized $4,278 in equipment under capital leases for a total of $1,182,151 in assets.  Comparatively as at December 31, 2006, we had $1,238,357 in cash and a total of $1,450,891 in total assets.
 
As at December 31, 2007, we had $791,419 in accounts payable, $149,601 in accrued liabilities related to services received but not invoiced yet and employee vacation accrual, $170,691 in loans payable to a related party, $434,584 in employee tax deductions payable, $989,145 in accrued stock-based compensation, $151,316 in bank indebtedness related to an unsecured line of credit, $44,936 in trust liability associated with RE/MAX agent referral commissions payable awaiting transfer to the agent’s Manulife RRSP account, and $773,658 in accrued expenses associated with a legal judgment for a total of $3,509,994 in liabilities.  Comparatively as at December 31, 2006, the Company had $149,911 in accounts payable, $178,276 in accrued liabilities, $204,868 in loans payable to a related party, $ 292,706 in employee tax deductions payable, $30,320 payable in a trust liability associated with RE/MAX agent referral commissions payable awaiting transfer to the agent’s Manulife RRSP account, $5,589 in obligations under capital leases, $1,155,066 in stock-based compensation accrual and $98,682 in bank indebtedness related to an unsecured line of credit for a total of $2,115,418 in liabilities.
 
Management makes the following comments regarding the most significant factors affecting Company liquidity and capital resources and their measured trends over the reporting period as compared to 2006:
 
·  
Cash and cash equivalents decreased by 33% from 2006 to $830,852.  This trend was primarily due to a reduction in working capital reserves.
 
·  
Prepaid expenses increased by 89% from 2006 to $148,611.  The trend was primarily related to funding growth and expansion through 2007 where increases were seen in the recruitment of mortgage agents whose registration fees were incurred as a prepaid expense in the fall of 2007 for the following year but had not been collected yet from the agent; and, increases were incurred in prepaid rent over the same period in 2006 related to the leasing of our current corporate offices.  We do not expect that the rate of increase experienced through 2007 over 2006 will continue through 2008 due, in part, to the Company implementing a new policy to obtain receipt of agent registration expenses in advance of such registration and due, in part to the fact that the company doesn’t expect the remaining existing prepaid expenses to increase during 2008.
 
·  
Bank indebtedness increased by 53% over 2006 to $151,316.  The Company continues to make full use of all available credit to supplant working capital.  Management expects to commence principal payments to eliminate bank indebtedness when it achieves operational profitability.
 
·  
Accounts payable increased 428% over 2006 to $791,419.  This is a direct result of mortgage agent recruitment program success, as the bulk of this payable amount is Work in Progress payable following completion of mortgage agent origination compliance procedures.  The company expects that this trend will continue through 2008 assuming our mortgage agent recruitment program continues the pace in 2008 as experienced in 2007.
 
·  
The Company has accrued in 2007 for the liability of a partial summary judgment to a claim to which the Company is a party.  The calculated judgment liability is $773,658.  While the full amount of the judgment was accrued, it is the expectation of management that only a portion, if any, of the liability will be satisfied by the Company in this multi-party judgment.  See discussion below.
 
·  
Employee tax deductions payable increased by 48% from 2006 to $434,584.  Company management has meet with the government agency to whom the amount is payable and has established a working agreement whereby it is expected that this amount will be paid in full in 2008.  See discussion below.
 
·  
Stock-based compensation accruals vary widely year over year.  The accrual is valued based on stock prices at the end of the period, for which the Company has no direct influence, therefore it is difficult to analyze related trends.  The Company anticipates that it will continue to negotiate stock-based compensation arrangements to maximize working capital resources.
 
Unless and until the Company increases its revenue and profitability from operations, we will continue to rely upon the issuance of common stock and additional capital contributions from shareholders and/or loans from shareholders and third-party lenders.
 
 
11

 
 
Employee Tax Deductions Payable
 
The Company is in arrears on the tax withholdings due to Canada Revenue Agency (“CRA”) related to employee salaries.  The Company has negotiated agreement with CRA which, if certain conditions are met, allows the Company to pay down the balance in monthly payments of $10,000 beginning February 28, 2008 with the remaining balance due on September 30, 2008.  In the event that the Company secures funding, the balance is to be paid off in full shortly after receipt of the funds. In addition, CRA has registered a Certificate in the Canadian Federal Court for the amount owing to CRA.  The liability currently bears interest at 9% annually.
 
Judgment in Lawsuit
 
On October 3, 2007 a partial summary judgment from the Ontario Superior Court ordered MBI, the Company’s subsidiary, and other parties to pay the sum of CDN$598,636 within 90 days, along with interest in the amount of CDN$136,128 and legal expenses in the amount of CDN$8,907.  See Item 3 above.  This judgment was appealed, but the judgment was upheld on appeal by the Ontario Court of Appeal on March 31, 2008 with costs for the appeal fixed at $CDN5,000.   No decision has yet been made as to allocation of liability for the judgment among the parties, who are currently in settlement negotiations with a view to settling payment of the judgment as well as resolving all other claims outstanding between the parties.
 
Critical Accounting Policies
 
Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.
 
Revenue Recognition

Revenue consists of mortgage brokerage fees and finders fees. The revenue is recognized upon the funding of a customer’s mortgage and when the collection is reasonably assured which occurs when the brokerage fee from the bank has been advanced.
 
Share-based Payment
 
The Company adopted the disclosure requirements of SFAS No. 123R, "Share-Based Payment" ("SFAS No. 123R") for stock options and similar equity instruments (collectively, "options") issued to employees. The Company applies the fair value base method of accounting as prescribed by SFAS No. 123R. Under the fair value based method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. For stock options, the fair value is determined using an option-pricing model that takes into account the stock price at the grant date, the exercise price, the expected life of the option, the volatility of the underlying stock and the expected dividends on it, and the risk-free interest rate over the expected life of the option. SFAS No. 123R also applies to transactions in which an entity issues its equity instruments to acquire goods or services from non-employees. Those transactions must be accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable, as described in note 12.

Going Concern
 
The Company’s consolidated financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the year ended December 31, 2007, the Company incurred a loss of $2,843,781 (2006 - $2,008,677).  Certain conditions noted below raise substantial doubt about the Company’s ability to continue as a going concern.
 
The Company’s ability to continue as a going concern is contingent upon its ability to secure additional debt or equity financing, continue to grow sales of its services and achieve profitable operations.  Management’s plan is to secure additional funds through future debt or equity financings.  Such financings may not be available or may not be available on reasonable terms to the Company.  The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
 
 
12

 
The Company has devoted substantially all of its efforts to establishing its current business. Management developed its business model, business plans and strategic marketing plans that included: organization of the Company and divisions; identification of the Company’s sales channels and associated supply chain; development of marketing strategic plans and sales execution strategies; preparation of a financial plan, risk and capital structure planning models, and mortgage origination ‘book of business’ models; hiring mortgage sales agents to build its national sales force and continuing to develop our referral relationship; developing cash flow forecasts and an operating budget; identifying markets to raise additional equity capital and debt financing; embarking on research and development activities; performing employment searches and preparing agent contracts; and, recruiting and hiring technicians, management and industry specialists.
 
The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.
 
Off-Balance Sheet Arrangements
 
None.
 
13

 
 
ITEM 7. FINANCIAL STATEMENTS
 
The financial statements of the Company appear at the end of this report beginning with the Index to Financial Statements on page F-1.
 
 
On February 8, 2008, the board of directors of the Company approved the engagement of DNTW Chartered Accountants, LLP (“DNTW”), as its new independent accountant.  
 
On January 23, 2008, Jewett, Schwartz, Wolfe & Associates (the “Accountant”), resigned as the Company’s independent auditor.  The Accountant was engaged on May 16, 2007, and, therefore, served as the Company’s independent accountant for just over eight months.  During that limited period of service, the Accountant did not issue any audit report on the Company’s financial statements because it did not conduct any audit of the financial statements of the Company, there were no disagreements with the Accountant on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to the Accountant’s satisfaction, would have caused it to make reference to the subject matter of the disagreement(s) in connection with any report it might have issued on the financial statements of the Company, and there were no reportable events described in Item 304(a)(1)(iv) of Regulation S-B.

On May 16, 2007, SF Partnership LLP (“SF Partnership”) resigned as our independent registered public accounting firm.  SF Partnership’s audit report for the years ended December 31, 2006 and 2005 contained no adverse opinion or disclaimer of opinion and was not qualified or modified as to audit scope or accounting principles.
 
ITEM 8A(T). CONTROLS AND PROCEDURES
 
(a)  Management’s Annual Report on Internal Control Over Financial Reporting.
 
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting.  The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
 
In the fourth calendar quarter of 2007 and as of December 31, 2007, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934 and based on the criteria for effective internal control described in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Based on this evaluation, management concluded that our financial disclosure controls and procedures were not effective so as to timely identify, correct and disclose information required to be included in our Securities and Exchange Commission (“SEC”) reports due to the Company’s limited internal resources and lack of ability to have multiple levels of transaction review.  Through the use of external consultants and the review process, management believes that the financial statements and other information presented herewith are materially correct.
 
The Company’s management, including its Chief Executive Officer and Chief Financial Officer, does not expect that its disclosure controls and procedures, or its internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefit 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, within the Company have been detected.
 
This Annual Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this Annual Report.
 
This report shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that section, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
 
(b) Changes in Internal Controls.
 
There have been no changes in the Company’s internal control over financial reporting during the period ended December 31, 2007 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
 
ITEM 8B. OTHER INFORMATION
 
None.
 
 
14

 
 
 
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS: COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
 
The following table sets forth, as of March 31, 2008, the name and age of our sole director and executive officers.  The director will hold such office until the next annual meeting of shareholders and until his successor has been elected and qualified.
 
Name
Age
Position
     
Alex Haditaghi
35
President, CEO, CFO and Chairman of the Board
Dong Lee
34
Vice President of Operations
Robert Hyde
44
Vice President of Finance & Administration
Davindra Persaud
36
Corporate Controller
Matthew Laverty
36
Vice President of Sales - Eastern Canada
Dave Mercer
47
Vice President of Sales - Western Canada
 
Business Experience
 
The following summarizes the occupation and business experience of our sole director and executive officers:
 
Alex Haditaghi, President, Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Directors
 
Alex Haditaghi has been working in the mortgage industry in Canada since 1999 and has extensive experience in both residential and commercial mortgages.  Mr. Haditaghi formed Lending Tree Canada Inc., a private mortgage brokerage operating in Canada, in 2000.  He served as President for five years until he founded MortgageBrokers.com in January 2005.  Since then, Mr. Haditaghi has been the CEO, CFO and sole director of MortgageBrokers.com Holdings, Inc. and President of its two subsidiaries.  Mr. Haditaghi is responsible for the business vision, expansion, capital resources, hiring, establishing corporate policy and providing overall leadership to the organization.
 
Dong Lee, Vice President of Operations
 
Dong Lee has been vice president of operations at our Company since joining us in April, 2005.  Mr. Lee is responsible for establishing, managing and expanding our mortgage agent and referral commission and compliance operations, lender relations, and responsible for overall business model development.
 
Prior to joining MortgageBrokers.com, Mr. Lee was Senior Manager-Alternate Delivery Channels, for Scotiabank where he oversaw the strategic development of both Scotiabank's mobile mortgage sales team and mortgage broker delivery channels.  In this position, Lee was responsible for the strategic marketing and development of sales programs.  Mr. Lee worked at Scotiabank from January 2001 to April 2005.  Before joining Scotiabank, Mr. Lee spent several years as the Business Development Officer for Canada Mortgage & Housing Corporation (“CMHC”), where he managed and grew the market share of CMHC's largest lender portfolio. Before specializing in the mortgage sector, Lee spent several years with TD Bank Financial group as Manager of Korean banking.  Under that position, Lee envisioned, launched and managed the Korean Banking Centre, establishing a multi million dollar referral network with several of the largest banks in Korea.
 
Mr. Lee is a graduate from Queen's University's undergraduate business program.  During his time at Queen's, Mr. Lee studied international business at Herstmonceux Castle in Hailsham, England.  Mr. Lee completed his MBA in 2007 through Dalhousie University.
 
Robert Hyde, Vice President of Finance & Administration
 
Mr. Hyde joined MortgageBrokers.com in April of 2005.  His responsibilities include corporate development, finance, agreement preparation and administration, administration of warrant, option and other capital structure programs, regulatory and legal liaison, private placement memorandum and registration statement preparation, and accounting system oversight and support.
 
 
15

 
 
Prior to joining MortgageBrokers.com, Mr. Hyde had a 17 year career in the engineering, software and management consulting industries servicing the real estate, financial services and petrochemical industries with significant business building experience and leadership roles in Canada, the US, and the EU.  Most recently, Robert was Managing Director of Paladin Capital Ventures. Paladin Capital Ventures provides early stage technology based companies/divisions/ entrepreneurial subsidiaries with business model development, strategic planning, finance and capital planning, facilitating Venture Capital and Private Placement, and providing strategic market planning services.  From 1998 to 2004, Robert was the founder and managing director of eRealVantage Incorporated, a real estate investment portfolio securitization technology company servicing the REIT and pension fund portfolio market place.  From 1992 to 1998, he was President of Enviro Cheq Corporation and Vice President of the knowledge-based environmental risk management company, Trillium Environmental Corporation.
 
Mr. Hyde graduated from the Richard Ivey School of Business, University of Western Ontario (MBA) in 2003 and received his Masters of Engineering degree from University of Windsor in 1990.  He is a Professional Engineer in the Province of Ontario and has completed numerous executive training courses including the Art of Negotiation.  He is currently completing his CFA designation.
 
Davindra Persaud, Corporate Controller
 
Mr. Persaud joined MortgageBrokers.com in June 2007 after having spent the last 9 years working with various large and medium sized public accounting firms where he specialized in accounting, audit, tax and financial reporting for publicly traded companies listed in Canada and the United States.  As a public accountant, Mr. Persaud had the opportunity to audit and work with multi-national public companies in various industries including the financial services sector supporting them with their accounting and reporting needs.
 
Mr. Persaud earned his Bachelor of Arts in Economics from the University of Western Ontario in 1995 and received his Chartered Accountants license and designation from the Institute of Chartered Accountants of Ontario in 2002.  Mr. Persaud is currently in the process of obtaining his Certified Public Accountant designation in the United States.
 
Matthew Laverty, Vice President of Sales - Eastern Canada
 
Since joining our company in September, 2005, Mr. Laverty's role at MortgageBrokers.com has been to lead the execution of our Mortgage Broker Channel Sales plan across Eastern Canada.  He leads our acquisition strategy and establishes our national network of mortgage broker managing partners.
 
Prior to joining MortgageBrokers.com, Mr. Laverty was based in Ottawa as Regional Sales Director, Eastern Ontario and Atlantic Canada for Mortgage Intelligence Inc., a GMAC company.  As Regional Director at Mortgage Intelligence, Mr. Laverty was responsible for the recruitment, management and revenue generation of over 130 mortgage consultants.  Prior to that, Mr. Laverty spent 10 years in various sales, marketing and management roles at Americredit Financial Services, Canadian Imperial Bank of Commerce (CIBC) and The Associates Financial Services of Canada.
 
Dave Mercer, Vice President of Sales - Western Canada
 
Since joining our Company in September of 2005, Mr. Mercer has been responsible for introducing MortgageBroker.com's value proposition to mortgage agents across the country through executing the company's `Broker Channel Acquisition Program'.  Through this program, MortgageBrokers.com will be offering mortgage agents equity ownership in a public company in exchange for their origination volume.  In addition, Mr. Mercer will be focusing on expanding the company's product offering to strengthen the sustainability of MortgageBroker.com's business model, while further legitimizing the broker channel as a first choice for financing.  Through ongoing diversification of the company's product offerings and associated revenue streams, Mr. Mercer will help the executive management team build sustainable Mortgage Broker Partner commissionable earnings.
 
Prior to joining MortgageBrokers.com, Mr. Mercer, a 23 year veteran of the real estate and mortgage broker industry, was President of Lending Source Canada Inc.  Previously, Mr. Mercer spent 4 years as a top producing regional manager for The Mortgage Alliance Company of Canada, who today claims to be the largest independent mortgage originator in Canada.  Through his career in the industry, Mr. Mercer has been responsible for the recruitment, training and mentorship of over 300 Mortgage Brokers across Canada.
 
 
16

 
 
Mr. Mercer has also served as President of the Alberta Mortgage Brokers Association (AMBA), and for many years served as the Chair for the Communications and Ethics committees. Mr. Mercer also currently teaches for the Alberta Real Estate Association (AREA) through Mt. Royal College.
 
Directors; Committees
 
The Company currently has only one director and, as such, has no nominating, audit or other committees of its board of directors.  The sole director of the Company does not qualify as an “audit committee financial expert.”
 
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
 
Mr. Haditaghi has not filed a Form 5 for 2007, but intends to complete such filing in the near future.  None of the Company’s executive officers other than Mr. Haditaghi have filed a Form 3 or a Form 5 but intend to complete such filing in the near future.
 
CODE OF ETHICS
 
The Company has adopted a Code of Ethics applicable to its Chief Executive Officer and Chief Financial Officer and has filed a copy of this Code of Ethics as an exhibit hereto.
 
ITEM 10. EXECUTIVE COMPENSATION
 
The following summarizes the Companies named executive officers compensation:
 
SUMMARY COMPENSATION TABLE
Name and principal position
(a)
Year
(b)
Salary ($)
(c)1
Bonus ($)
(d)
Stock Awards ($)2
Option Awards ($)
Non-Equity Incentive Plan Compensation ($)
Nonqualified Deferred Compensation Earnings
($)
All Other Compensation ($)
Total
($)
Alex Haditaghi, Chairman and CEO
2007
2006
$120,930
$87,449
0
0
259,459
0
0
0
0
0
0
0
0
0
$380,389
$87,449
Dong Lee, VP, Operations
2007
2006
$120,930
$ 113,159
0
0
107,040
180,000
0
0
0
0
0
0
0
0
$227,970
$293,159
Robert Hyde, VP, Finance
2007
2006
$120,930
$107,775
0
0
278,320
42,500
0
0
0
0
0
0
0
0
$399,250
$150,275
Dave Mercer, VP-Sales
2007
2006
$118,604
$ 77,160
0
0
154,247
56,940
0
0
0
0
0
0
0
0
$272,851
$134,100
Matthew Laverty, VP-Sales
2007
2006
$120,155
$ 97,002
0
0
105,126
68,328
0
0
0
0
0
0
0
0
$225,281
$165,330
 
Footnotes:
 
1:  The executive’s base salary was paid in Canadian dollars.  In Canadian dollars, the base salary was $130,000 in 2007 for each executive.  It was converted to USD for presentation in the table as required using the conversion factor (USD $1.0 = CDN $1.075), the annual average exchange rate for 2007 as reported by the Bank of Canada.  The annual average exchange rate for 2006 as reported by the Bank of Canada was USD $1.0 = CDN $1.134.
 
 
17

 
 
2:  The equity-awards were earned by the identified executive management and are pending release upon completion of employment agreements.  The employment agreements are expected to be completed in 2008.  The equity awards are based on verbal agreements between Company management and the Company CEO as disclosed in past filings.  The portion of the stock-based compensation that were registered in 2007 were issued at a price of $0.43.  The portion of stock-based compensation that was owing to the employee at year end was valued at $0.30.  All stock-based compensation earned in 2006 were owing at December 31, 2006 and therefore valued at $0.80.
 
 
Narrative Disclosure to the Summary Compensation Table
 
The employment agreements for all of executive officers are presently being prepared.  The disclosures made in the 2005 Audited Financial Statements (10-KSB - Item 10. Executive Compensation) and the `Amendment to License Agreement between RE/MAX and Mortgagebrokers.com Holding Inc.' dated May 25, 2006 (8-K - Schedule `A' 1. Outstanding Options) documenting the equity compensation of employees has not been implemented as of April 16, 2008.  The company is currently in the process of preparing employment agreements which are expected to be executed in 2008.
 

 
OUTSTANDING EQUITY AWARDS AT 2007 FISCAL YEAR END TABLE
 
OPTION AWARDS
STOCK AWARDS
Name and principal position
(a)
Number of Securities Underlying Unexercised Options
(#)
Exercisable
(b)
Number of Securities Underlying Unexercised Options
(#)
Unexercisable
(c)1
Equity Incentive Plan Awards:
Number of Securities Underlying Unexercised Unearned Options
(#)
(d)
Option Exercise Price
($)2
(e)
Option Expiration
Date
(f)
Number of Shares or units of Stock that have not Vested
(#)
(g)
Market Value of Shares or Units of Stock that have not Vested
($)
(h)
Equity
Incentive Plan Awards:
Number of Unearned shares, Units or other rights that have not Vested
($)
(i)
Equity Incentive Plan Awards:
Market or Payout Value of Unearned shares, Units or other rights that have not Vested
($)
(j)
Alex Haditaghi, Chairman and CEO
0
0
0
0
0
0
0
0
0
Dong Lee, VP, Operations
0
0
0
0
0
0
0
0
0
Robert Hyde, VP, Finance
0
0
0
0
0
0
0
0
0
Dave Mercer, VP-Sales
0
0
0
0
0
0
0
0
0
Matthew Laverty, VP-Sales
0
0
0
0
0
0
0
0
0
Compensation of Directors
 
No additional compensation is paid to Alex Haditaghi, our sole director.
 

18

 
Stock Option Grants In The Past Fiscal Year
 
We have not issued any grants of stock options in the past fiscal year to any officer or director.  As at April 15, 2008, no options to Company employees, officers or directors are outstanding.
 
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
 
 
Name of Beneficial Owner (2)
Number of Total Shares
Percent of class (1)
     
Alex Haditaghi
25,734,000
66.9%
     
All executive officers
 
and directors as a group
25,734,000
66.9%
     
 (1) Based on 38,466,470 shares of common stock issued and outstanding as of December 31, 2007.
 
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
 
For the period of September 2006 to March 2007, the Company operated from a property owned by a related party and did not incur any rent expenses during this period.
 
On August 1, 2007, the Company’s current office space was sold to a related party of the Chief Executive Officer, the Company’s majority shareholder.  The Company’s lease agreement obligation was extended from two to five years.
 
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
 
The following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-B.
 
 
Exhibit No.
Description
3.1
Certificate of Incorporation (1)
3.2
First Amendment to Certificate of Incorporation (1)
3.3
Certificate of Amendment to Certificate of Incorporation filed February 1, 2005
3.4
Bylaws (1)
10.1
2003 Equity Compensation Plan (1)
10.2
Stock Purchase Agreement and Share Exchange dated March 21, 2005 by and among Mortgagebrokers.com Holdings, Inc., Mortgagebrokers.com, Inc., and Alex Haditaghi (2)
10.3
License Agreement dated January 30, 2006 between RE/MAX Ontario-Atlantic Canada Inc. and Mortgagebrokers.com Holdings, Inc. (3)
10.4
Amendment to License Agreement dated May 25, 2006 by and among Mortgagebrokers.com Holdings, Inc., RE/MAX Ontario-Atlantic Canada Inc, and Alex Haditaghi, (4)
10.5
Service Agreement dated April 12, 2006 between Mortgagebrokers.com Financial Group of Companies, Inc. and Maxwell Realty Inc.
10.6
Service Level Agreement between Mortgagebrokers.com Financial Group of Companies, Inc. and RE/MAX Franchisees
10.7
Lease between Mark Pharmaceutical Services Inc. and Mortgagebrokers.com, Inc.
 
   
 
19

 
10.8
Financial Advisory and Investment Banking Agreement dated November 2, 2007 between vFinance Investments, Inc. and Mortgagebrokers.com Holdings, Inc.
10.9
Form of Subscription Agreement entered into between the Company and investors in the Company’s 2006 Private Offering
14.1
Code of Ethics (5)
21.1
List of Subsidiaries
31.1
Certifications of Chief Executive Officer and Chief Financial Officer
32.1
Certifications of Chief Executive Officer and Chief Financial Officer
 
___________________________
Footnotes:
 
 
(1)
This exhibit was filed with our Registration Statement on Form SB-2 filed on June 2, 2003 (SEC Filed No. 333-117718) and is incorporated herein by this reference.
 
 
(2)
This exhibit was filed with our Current Report on Form 8-K filed on March 22, 2005 and is incorporated herein by this reference.
 
 
(3)
This exhibit was filed with our Current Report on Form 8-K filed on February 1, 2006 and is incorporated herein by this reference.
 
 
(4)
This exhibit was filed with our Current Report on Form 8-K filed on June 13, 2006 and is incorporated herein by this reference.
 
 
(5)
This exhibit was filed with our Annual Report on Form 10-KSB on March 31, 2005 and is incorporated herein by this reference.
 

 
20

 
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
Audit Fees
 
For the Company's fiscal year ended December 31, 2007 and 2006, we were billed approximately $54,000 and $70,000, respectively for professional services rendered for the audit and reviews of our financial statements.  The current year fees include $24,000 related to quarterly review fees paid to our previous auditors.
 
Tax Fees
 
For the Company's fiscal year ended December 31, 2007 and 2006, we did not incur any fees for professional services rendered for tax compliance, tax advice, and tax planning.
 
All Other Fees
 
The Company was billed approximately $5,000 in fees related to accounting and audit services rendered by our principal accountant for the fiscal year ended December 31 st , 2007 to restate our financials for the 2006 first, second and third quarters.
 
 
21

 
 
 
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized.
 
 
 
MORTGAGEBROKERS.COM HOLDINGS, INC.

 
 
By:    /s/ Alex Haditaghi                            
           Alex Haditaghi
           Principal Executive Officer,
           Principal Accounting Officer,
           President, Secretary and Director
 
 
Dated: April 23, 2008
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
 
NAME
 
        TITLE
DATE
       
 /s/ Alex Haditaghi
 
        President, Secretary and Director
April 23, 2008
Alex Haditaghi
     

 
 
22

 
 
 
 
 
 
 
 
 
 
 
 
 
MORTGAGEBROKERS.COM HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY MAGNADATA, INC.)
 
 
 
DECEMBER 31, 2007 AND 2006
 
 
 
 
 
 
 
 
 
 
 

 

 
 
 
MORTGAGEBROKERS.COM HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY MAGNADATA, INC.)
 
CONSOLIDATED FINANCIAL STATEMENTS
 
DECEMBER 31, 2007 AND 2006
 
CONTENTS
 

Report of Independent Registered Public Accounting Firm DNTW Chartered Accountants, LLP
F1
   
Report of Independent Registered Public Accounting Firm SF Partnership, LLP F2
   
Consolidated Balance Sheets
F3
   
Consolidated Statements of Operations and Comprehensive Loss
F4
   
Consolidated Statements of Stockholders' Deficit
F5 - F6
   
Consolidated Statements of Cash Flows
F7
   
Notes to Consolidated Financial Statements
F8 - F26
 
 

 


 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Stockholders of
Mortgagebrokers.com Holdings, Inc.
(Formerly MagnaData, Inc.)
 
We have audited the accompanying consolidated balance sheet of Mortgagebrokers.com Holdings, Inc. and Subsidiaries (Formerly MagnaData, Inc.) (a Delaware corporation) as of December 31, 2007 and the related statements of operations, changes in stockholders’ equity, and cash flows for the year 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.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit 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 provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Mortgagebrokers.com Holdings, Inc. and Subsidiaries (Formerly MagnaData, Inc.) as of December 31, 2007, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 1 to the consolidated financial statements, the Company’s operating losses, negative working capital, and total capital deficiency raise substantial doubt about its ability to continue as a going concern.  Note 1 also describes management’s plans to address these financial matters.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ DNTW Chartered Accountants, LLP
Licensed Public Accountants

Markham, Canada
March 17, 2008 except for notes 8, 18 and 19 b) which are dated April 14, 2008

 
F1

 
 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Stockholders of
Mortgagebrokers.com Holdings, Inc. and Subsidiaries
(Formerly MagnaData, Inc.)
 
We have audited the accompanying consolidated balance sheets of Mortgagebrokers.com Holdings, Inc. and Subsidiaries   (Formerly MagnaData, Inc.)  (a Delaware corporation) as of December 31, 2006 and 2005, and the related statements of operations and comprehensive loss, stockholders' deficit, and cash flows for each of the years in the two-year period ended December 31, 2006. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
 
We conducted our audits 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. Our audit included 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, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of  Mortgagebrokers.com Holdings, Inc. and Subsidiaries  as of December 31, 2006 and 2005, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America.
 
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in note 1 to the financial statements, the Company has suffered recurring losses and negative working capital from operations, which raises substantial doubt about its ability to continue as a going concern. Management’s plan in regard to these matters are also described in note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
"SF PARTNERSHIP, LLP"
CHARTERED ACCOUNTANTS
 
Toronto, Canada 
April 12, 2007

 
 
 
 
 

 
F2


 
MORTGAGEBROKERS.COM HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY MAGNADATA, INC.)
Consolidated Balance Sheets
December 31, 2007 and 2006
 
             
             
   
2007
   
2006
 
ASSETS
           
Current Assets
           
Cash and cash equivalents
  $ 830,852     $ 1,238,357  
Referral fees held in trust (note 3)
    44,936       30,320  
Prepaid expenses
    148,611       78,445  
                 
Total Current Assets
    1,024,399       1,347,122  
Equipment, net (note 4)
    153,474       98,571  
Equipment Under Capital Leases (note 5)
    4,278       5,198  
                 
Total Assets
  $ 1,182,151     $ 1,450,891  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
Current Liabilities
               
Bank indebtedness (note 6)
  $ 151,316     $ 98,682  
Accounts payable
    791,419       149,911  
Accrued liabilities
    149,601       178,276  
Employee tax deductions payable (note 7)
    434,584       292,706  
Accrued legal judgment (note 8)
    773,658       -  
Advances from related party (note 9)
    170,691       204,868  
Trust liability (note 3)
    44,936       30,320  
Obligation under capital leases - current portion (note 10)
    2,602       1,674  
Stock-based compensation accrual - current portion (note 11a)
    102,066       232,082  
Employee stock-based compensation accrual (note 11b)
    657,260       813,850  
                 
Total Current Liabilities
    3,278,133       2,002,369  
Obligation Under Capital Leases (note 10)
    2,042       3,915  
Stock-based Compensation Accrual (note 11c)
    229,819       109,134  
                 
Total Liabilities
    3,509,994       2,115,418  
                 
Commitments and Contingencies (note 18)
               
STOCKHOLDERS' DEFICIT
               
Capital Stock
               
Preferred stock, $0.0001 par value; 5,000,000 shares
  authorized, none issued
    -       -  
Capital stock, $0.0001 par value; 100,000,000 shares
  authorized; 38,466,470 (2006: 36,088,470) issued and
  outstanding (note 12)
    3,847       3,609  
Additional Paid-in Capital
    3,424,264       2,179,443  
Additional Paid-in Capital - Warrants (note 13)
    622,211       732,605  
Subscription for Stock
    64,086       -  
Subscription Receivable (note 14)
    (227,540 )     (242,301
Treasury Stock (note 15)
    (25,234     (17,779 )  
Accumulated Other Comprehensive Loss
    (33,009     (7,417
Accumulated Deficit
    (6,156,468 )     (3,312,687 )
                 
Total Stockholders' Deficit
    (2,327,843     (664,527
                 
Total Liabilities and Stockholders' Deficit
  $ 1,182,151     $ 1,450,891  
                 
 
(The accompanying notes are an integral part of these consolidated financial statements.)


F3

 

MORTGAGEBROKERS.COM HOLDINGS, INC. AND SUBSIDIARIES 
(FORMERLY MAGNADATA, INC.)
Consolidated Statement of Operations and Comprehensive Loss
Years Ended December 31, 2007, and 2006
 
   
2007
   
2006
 
             
Revenue
    10,251,113       4,023,281  
                 
Expenses
               
Commission and agent fees
    8,998,410       3,067,143  
Salaries and benefits
    1,320,600       931,260  
General and administrative expenses
    968,296       800,134  
Employee stock-based compensation (note 11b)
    574,410       187,939  
Stock-based compensation (note 18a, 18b, and 18c(i))
    120,685       109,134  
Stock-based compensation (note 18c(ii))
    70,744       232,082  
Stock-based compensation for services (note 12)
    86,451       441,000  
Interest expense - beneficial conversion feature
    -       108,840  
Occupancy costs (note 16)
    126,886       95,212  
Depreciation expense
    31,707       26,408  
                 
Total Operating Expenses
    12,298,189       5,999,152  
                 
Loss from Operations
    (2,047,076 )     (1,975,871 )
                 
Other Expenses
               
Interest, Finance and Other Expenses
    (83,285 )     (32,806 )
                 
                 
Loss Before Income Taxes
    (2,130,361 )     (2,008,677 )
                 
Provision for income taxes (note 17)
    -       -  
                 
Net Loss Before Extraordinary Item
    (2,130,361 )     (2,008,677 )
                 
Extraordinary Item
               
Legal judgment – net of tax (note 8)
    (713,420 )     -  
                 
Net Loss
    (2,842,781 )     (2,008,677 )
                 
Foreign Currency Translation Adjustment
    (25,592 )     (10,630
                 
Total Comprehensive Loss
    (2,869,373 )     (2,019,307
                 
Net Loss per Share - Basic and Diluted During the Year
    (0.08 )     (0.06 )
Net Loss per Share - Basic and Diluted During the Year – net of extraordinary item
    (0.06 )     (0.06 )
                 
Weighted Average Number of Shares Outstanding - Basic and Diluted During the Year
    37,174,199       35,693,625  
                 
 
(The accompanying notes are an integral part of these consolidated financial statements.)
 
 

F4



 
MORTGAGEBROKERS.COM HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY MAGNADATA, INC.)
Consolidated Statements of Stockholders' Deficit
Years Ended December 31, 2007 and 2006
 
 
   
Common
Shares
   
Stock
Amount
   
Accumulated
Additional
Paid-In
Capital
   
Additional
Paid-In
Capital -
Warrants
   
Subscription
for Stock
   
Subscription
Receivable
   
Treasury
Stock
   
Accumulated
Other
Comprehensive
(Loss) Income
   
Accumulated
Deficit
   
Total
Stockholders'
Deficit
 
                                                             
Balances at December 31, 2005
    33,935,000     $ 3,394     $ 760,111     $ -     $ 100,000     $ (630,000 )   $ -     $ 3,213     $ (1,304,010 )   $ (1,067,292 )
                                                                                 
Shares issued for cash:
                                                                               
March 14, 2006 - Issued for $1.00 per share
(note 12)
    100,000       10       99,990       -       (100,000 )     -       -       -       -       -  
June 12, 2006- Issued for $1.00 per share (note 12)
    2,112,470       211       2,112,259       -       -       -       -       -       -       2,112,470  
Issuance of warrants (note 13)
                    (732,605 )     732,605                                                  
Shares issued for services:
                                                                               
March 14, 2006 - Issued for $1.80 per share (note 12)
    245,000       24       440,977       -       -       -       -       -       -       441,001  
April 25, 2006- Issued for $0.5 per share
(note 12)
    1,000,000       100       499,900       -       -       -       -       -       -       500,000  
October 30, 2006 - Issued for $0.53 per share (note 12)
    96,000       10       50,870       -       -       -       -       -       -       50,880  
Shares issued for equipment:
                                                                               
March 14, 2006- Issued for $0.59 per share (note 12)
    100,000       10       58,791       -       -       -       -       -       -       58,801  
Cancelled shares:
                                                                               
August 8, 2006  (note 12)
    (500,000 )     (50 )     (499,950 )     -       -       -       -       -       -       (500,000 )
September 8, 2006 (note 12)
    (1,000,000 )     (100 )     (629,900 )     -       -       -       -       -       -       (630,000 )
Subscription receivable (note 14)
                                            630,000                               630,000  
Subscription receivable (note 14)
    -       -       -       -       -       (242,301 )     -       -       -       (242,301 )
Purchase of treasury stock (note 15)
    -       -       -       -       -       -       (17,779 )     -       -       (17,779 )
Reduction in legal fees
    -       -       (58,000 )     -       -       -       -       -       -       (58,000 )
Beneficial conversion feature of
convertible debenture
    -       -       77,000       -       -       -       -       -       -       77,000  
Foreign currency translation adjustment
    -       -       -       -       -       -       -       (10,630 )     -       (10,630 )
Net loss for the year
    -       -       -       -       -       -       -       -       (2,008,677 )     (2,008,677 )
                                                                                 
Balances at December 31, 2006
    36,088,470     $ 3,609     $ 2,179,443     $ 732,605     $ -     $ (242,301 )   $ (17,779 )   $ (7,417 )   $ (3,312,687 )   $ (664,527 )
                                                                                 
 
(The accompanying notes are an integral part of these consolidated financial statements.)
 

F5




 

MORTGAGEBROKERS.COM HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY MAGNADATA, INC.)
Consolidated Statements of Stockholders' Deficit (Continued)
Years Ended December 31, 2007 and 2006
 

   
Common
Shares
   
Stock
Amount
   
Accumulated
Additional
Paid-In
Capital
   
Additional
Paid-In
Capital -
Warrants
   
Subscription
for Stock
   
Subscription
Receivable
   
Treasury
Stock
   
Accumulated
Other
Comprehensive
(Loss) Income
   
Accumulated
Deficit
   
Total
Stockholders'
Deficit
 
                                                             
Balances at December 31, 2006
    36,088,470     $ 3,609     $ 2,179,443     $ 732,605     $ 0     $ (242,301 )   $ (17,779 )   $ (7,417 )   $ (3,312,687 )   $ (664,527 )
                                                                                 
Shares issued for cash:
                                                                               
July 7, 2007 - Issued for $1 per share (note 12)
    125,000       12       124,988       -       -       -       -       -       -       125,000  
Shares issued for services:
                                                                               
January 3, 2007 - Issued for $0.75 per share (note 12)
    10,000       1       7,499       -       -       -       -       -       -       7,500  
July 7, 2007- Issued for $0.42 per share (note 12)
    478,000       48       200,712       -       -       -       -       -       -       200,760  
July 23, 2007 – Issued for $1 per share (note 12)
    25,000       3       24,997       -       -       -       -       -       -       25,000  
July 23, 2007 – Issued at $0.43 per share (note 12)
    1,700,000       170       730,830       -       -       -       -       -       -       731,000  
Shares issued for equipment:
                                                                               
July 23, 2007 - Issued for $1.14 per share (note 12)
    40,000       4       45,412       -       -       -       -       -       -       45,416  
Exercise and expiry of Warrants:
                                                                               
September  30, 2007, (note 12)
    -       -       110,394       (110,394 )     -       -       -       -       -       -  
Subscription for stock (note 14)
    -       -       -       -       64,086       -       -       -       -       64,086  
Subscription receivable (note 14)
    -       -       -       -       -       14,761       -       -       -       14,761  
Adjustments
    -       -       (11 )     -       -       -       -       -       -       (11 )
Purchase of treasury stock (note 15)
    -       -       -       -       -       -       (7,455 )     -       -       (7,455 )
Foreign currency translation adjustment
    -       -       -       -       -       -       -       (25,592 )     -       (25,592 )
Net loss for the year
    -       -       -       -       -       -       -       -       (2,843,781 )     (2,843,781 )
                                                                                 
Balances at December 31, 2007
    38,466,470     $ 3,847     $ 3,424,264     $ 622,211     $ 64,086     $ (227,540 )   $ (25,234 )   $ (33,009 )   $ (6,156,468 )   $ (2,327,843 )
                                                                                 
                                                                                 
                                                                                 
 
 
(The accompanying notes are an integral part of these consolidated financial statements.)
 
 
F6

 
 
MORTGAGEBROKERS.COM HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY MAGNADATA, INC.)
Consolidated Statement of Cash Flows
Year Ended December 31, 2007 and 2006
 
 
   
2007
   
2006
 
Cash Flows from Operating Activities
           
Net loss
  $ (2,843,781 )   $ (2,008,677 )
Adjustments to reconcile net loss to net cash used in operating activities:
               
 Depreciation
    31,707       26,408  
 Loss on disposal of assets
    -       25,578  
 Interest expense - beneficial conversion feature
    -       108,840  
 Stock issued for services
    86,451       441,000  
 Employee stock-based compensation
    (156,590 )     187,939  
             Stock-based compensation accrual
    1,022,912       341,216  
(Increase) decrease in net assets:
               
 Referral fees held in trust
    (14,616 )     (30,320
 Prepaid expense
    (102,617 )     (17,677 )
 Accounts payable
    641,508       312,673  
 Accrued liabilities
    (28,675     213,547  
 Employee tax deduction payable
    141,878       -  
 Accrued legal judgment
    773,658       -  
 Trust liability
    14,616       30,320  
                 
Net Cash Used in Operating Activities
    (433,549 )     (369,153 )
                 
Cash Flows from Investing Activities
               
Purchase of equipment, net
    (37,268 )     (29,094 )
Disposal of equipment
    -       25,578  
Equipment under capital leases
    -       (5,198
                 
Net Cash Used in Investing Activities
    (37,268 )     (8,714 )
                 
Cash Flows from Financing Activities
               
Deferred offering costs
    -       8,598  
Proceeds from notes payable
    -       23,000  
(Repayments of) obligation under capital leases
    (945     5,589  
Repayment of advances from related party
    (34,177 )     (127,997 )
 Proceeds from issuance of common stock
    14,761       829,634  
Purchase of treasury stock
    (7,455 )     (17,779
Proceeds from issuance of warrants
    -       732,605  
Subscription for stock
    64,086       -  
Increase in bank indebtedness
    52,634       4,104  
                 
Net Cash Provided by Financing Activities
    88,904       1,457,754  
                 
Net (Decrease) Increase in Cash and Cash Equivalents
    (381,913     1,079,887  
                 
Foreign Exchange on Balances
    (25,592 )     (10,623
                 
Cash and Cash Equivalents - Beginning of Year
    1,238,357       169,093  
                 
Cash and Cash Equivalents - End of Year
  $ 830,852     $ 1,238,357  
                 
Supplemental Cash Flow Information
               
Interest paid
  $ 18,679     $ 4,944  
                 
Income taxes paid
  $ -     $ -  
                 
Stock issued for equipment
  $ 45,416     $ -  
                 
(The accompanying notes are an integral part of these consolidated financial statements.)
 

F7




 

MORTGAGEBROKERS.COM HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY MAGNADATA, INC.)
Notes to Consolidated Financial Statements
December 31, 2007 and 2006
 
1.          Nature of Business and Going Concern
 
Nature of Business
 
MortgageBrokers.com Holdings, Inc., which registered a change of name with the state of Delaware in February 2005 and  Subsidiaries (the “Company”) was formerly known as MagnaData, Inc. and organized under the laws of the State of Delaware on February 6, 2003.
 
The planned operations of the Company consists of becoming a financial services company centered around mortgage finance, brokerage, sales and consulting in Canada, the United States and the European Union (“E.U.”). Operations are presently conducted through the Company’s subsidiaries, Mortgagebrokers.com Inc. (an Ontario, Canada company) and MortgageBrokers.com Financial Group of Companies, Inc. (Canadian federal company), in Canada only. 

Change of Control
 
On January 31, 2005, the Company’s majority shareholder, Alex Haditaghi, purchased 1,510,000 common stock from three shareholders of MagnaData Inc. for cash consideration ($692,813) in an arm’s length transaction. This share purchase represented approximately 78% of MagnaData’s common stock outstanding at the time of the transaction, based on the Company’s December 2004, Form 10-KSB. On February 11, 2005 MagnaData Inc.’s name was changed to MortgageBrokers.com Holdings, Inc.
 
As part of the sale, $74,727 of the Company’s debt was forgiven by a third party and $5,698 of the Company’s debt and accrued interest was forgiven by a shareholder which resulted in a gain on forgiveness of debt of $80,425 for the year ended December 31, 2005.
 
Going Concern
 
The Company’s consolidated financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the year ended December 31, 2007, the Company incurred a loss of $2,843,781 (2006 - $2,008,677).  Certain conditions noted below raise substantial doubt about the Company’s ability to continue as a going concern.
 
The Company’s ability to continue as a going concern is contingent upon its ability to secure additional debt or equity financing, continue to grow sales of its services and achieve profitable operations.  Management’s plan is to secure additional funds through future debt or equity financings.  Such financings may not be available or may not be available on reasonable terms to the Company.  The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.


F8


MORTGAGEBROKERS.COM HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY MAGNADATA, INC.)
Notes to Consolidated Financial Statements
December 31, 2007 and 2006
 

 
1.          Nature of Business and Going Concern (cont'd)
 
Going Concern (cont'd)
 
The Company has devoted substantially all of its efforts to establishing its current business. Management developed its business model, business plans and strategic marketing plans that included: organization of the Company and divisions; identification of the Company’s sales channels and associated supply chain; development of marketing strategic plans and sales execution strategies; preparation of a financial plan, risk and capital structure planning models, and mortgage origination ‘book of business’ models; hiring mortgage sales agents to build its national sales force and continuing to develop our referral relationship; developing cash flow forecasts and an operating budget; identifying markets to raise additional equity capital and debt financing; embarking on research and development activities; performing employment searches and preparing agent contracts; and, recruiting and hiring technicians, management and industry specialists.
 
The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.
 
2.          Summary of Significant Accounting Policies
 
The accounting policies of the Company are in accordance with accounting principles generally accepted in the United States of America, and their basis of application is consistent. Outlined below are those policies considered particularly significant:
 
a)    Basis of Consolidation and Presentation
 
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include the accounts of the Company, its wholly-owned subsidiaries Mortgagebrokers.com Inc. and Mortgagebrokers.com Financial Group of Companies, Inc.  All significant inter-company transactions and balances have been eliminated upon consolidation.
 
b)    Cash and Cash Equivalents
 
Cash and cash equivalents consist of cash on account and short-term investments with remaining maturities at acquisition of three months or less.
 
c)    Equipment, net
 
Equipment is stated at cost. Depreciation is calculated using the following annual rates and methods base on the estimated useful lives of the assets:
 
 
Furniture and equipment
20% declining
 
Computer equipment
30% declining
 
Computer software
30% declining
 
Leasehold improvements
20% straight line
 
F9





 
MORTGAGEBROKERS.COM HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY MAGNADATA, INC.)
Notes to Consolidated Financial Statements
December 31, 2007 and 2006
 
2.          Summary of Significant Accounting Policies (cont'd)
 
 
d)    Revenue Recognition
 
Revenue consists of mortgage brokerage fees and finders fees. The revenue is recognized upon the funding of a customer’s mortgage and when the collection is reasonably assured which occurs when the brokerage fee from the bank has been advanced.
 
e)    Use of Estimates
 
Preparation of financial statements in accordance 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 related notes to financial statements. These estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future. Actual results may ultimately differ from estimates, although management does not believe such changes will materially affect the consolidated financial statements in any individual year.
 
f)    Financial Instruments
 
In accordance with Statement of Financial Accounting Standards ("SFAS") SFAS No. 107, "Disclosures About Fair Value of Financial Instruments" ("SFAS No. 107"), the estimated fair value of financial instruments has been determined by the Company using available market information and valuation methodologies. Considerable judgment is required in estimating fair value. Accordingly, the estimates may not be indicative of the amounts the Company could realize in a current market exchange. As of December 31, 2007, the carrying value of accounts payable and accrued liabilities, advances from related party, and all other current liabilities and long term debt approximate their fair value.  The Company is exposed to interest rate risk on its bank loan as the interest charged on the loan fluctuates with the bank’s prime rate.
 
 

F10




 
MORTGAGEBROKERS.COM HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY MAGNADATA, INC.)
Notes to Consolidated Financial Statements
December 31, 2007 and 2006

 
2.          Summary of Significant Accounting Policies (cont'd)
 
 
g)    Impairment of Long-lived Assets
 
In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company evaluates whether events and circumstances have occurred that indicate possible impairment. If there are indications of impairment, the Company uses future undiscounted cash flows of the related asset or asset grouping over the remaining life in measuring whether the assets are recoverable. In the event such cash flows are not expected to be sufficient to recover the recorded asset values, the assets are written down to their estimated fair value. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value of asset less cost to sell. As described in note 1, the long-lived assets have been valued on a going concern basis, however, substantial doubt exists as to the ability of the Company to continue as a going concern. If the Company ceases operations, the asset values may be materially impaired.
 
h)    Share-based Payment
 
The Company adopted the disclosure requirements of SFAS No. 123R, "Share-Based Payment" ("SFAS No. 123R") for stock options and similar equity instruments (collectively, "options") issued to employees. The Company applies the fair value base method of accounting as prescribed by SFAS No. 123R. Under the fair value based method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. For stock options, the fair value is determined using an option-pricing model that takes into account the stock price at the grant date, the exercise price, the expected life of the option, the volatility of the underlying stock and the expected dividends on it, and the risk-free interest rate over the expected life of the option. SFAS No. 123R also applies to transactions in which an entity issues its equity instruments to acquire goods or services from non-employees. Those transactions must be accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable, as described in note 12.
 
  

F11




 
MORTGAGEBROKERS.COM HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY MAGNADATA, INC.)
Notes to Consolidated Financial Statements
December 31, 20076 and 2006

2.          Summary of Significant Accounting Policies (cont'd)
 
i)    Income Taxes
 
The Company accounts for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes”. Deferred tax assets and liabilities are recorded for differences between the consolidated financial statement and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is recorded for the amount of income tax payable or refundable for the period increased or decreased by the change in deferred tax assets and liabilities during the period.
 
j)    Earnings or Loss Per Share
 
The Company accounts for earnings per share pursuant to SFAS No. 128, Earnings per Share, which requires disclosure in the financial statements of basic and diluted earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the year.  Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to stock options and warrants for each year.
 
There were no dilutive financial instruments for the years ended 31 December 2007 and 2006.  The Company had stock options and warrants which, due to the losses incurred, are considered anti-dilutive equity instruments, accordingly, the effect of these instruments have not been reflected in loss per share for the years ended 31 December 2007 and 2006. 
 
k)    Foreign Currency Translation
 
The Company accounts for foreign currency translation pursuant to SFAS No. 52, “Foreign Currency Translation”. The Company’s functional currency is the Canadian dollar. All assets and liabilities are translated into United States dollars using the exchange rates prevailing at the end of the year. Revenues and expenses are translated using the average exchange rates prevailing throughout the year.
 
Unrealized foreign exchange amounts resulting from translations at different rates according to their nature are included in accumulated other comprehensive income.
 
Realized foreign currency transaction gains and losses are recognized in operations.
 
l)    Comprehensive Income or Loss
 
The Company adopted SFAS No. 130, “Reporting Comprehensive Income.” SFAS No. 130 establishes standards for reporting and presentation of comprehensive income and its components in a full set of financial statements. Comprehensive income is presented in the statements of stockholders’ deficit, and consists of net loss and unrealized gains (loss) on available for sale marketable securities; foreign currency translation adjustments and changes in market value of future contracts that qualify as a hedge; and negative equity adjustments recognized in accordance with SFAS No. 87. SFAS No. 130 requires only additional disclosures in the financial statements and does not affect the Company’s financial position or results of operations.
 


F12



 
MORTGAGEBROKERS.COM HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY MAGNADATA, INC.)
Notes to Consolidated Financial Statements
December 31, 2007 and 2006
 
 
2.          Summary of Significant Accounting Policies (cont'd)