10-Q 1 form_10-q.txt FORM 10-Q FOR 09-30-2010 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) |X| QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: September 30, 2010 |_| TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to __________ COMMISSION FILE NUMBER: 333-142907 WORLD MORTGAGE EXCHANGE GROUP, INC. ----------------------------------- (Exact name of small business issuer as specified in its charter) Florida 76-0835007 ------- ---------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 4470 Chamblee Dunwoody Road, Suite 250 Atlanta, Georgia 30338 ---------------------------------------- (Address of principal executive offices) 404-255-8800 ------------ (Issuer's telephone number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. |X| Yes |_| No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). |_| Yes |_| No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated file" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer |_| Accelerated filer |_| Non-accelerated filer |_| Smaller reporting company |X| (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). |X| Yes |_| No APPLICABLE ONLY TO CORPORATE ISSUERS As of September 30, 2010, the Company had authorized 100,000,000 shares of $.01 par value common stock of which 16,704,862 shares of common stock were issued and outstanding. WORLD MORTGAGE EXCHANGE GROUP, INC. INDEX PART I - FINANCIAL INFORMATION Item 1. Financial Statements .............................................. 3 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation ......................................... 11 Item 3. Quantitative and Qualitative Disclosure About Market Risk ......... 14 Item 4. Controls and Procedures ........................................... 14 Item 4T. The information required by Item 4t is contained in Item 4. PART II - OTHER INFORMATION Item 1. Legal Proceedings ................................................. 15 Item 1A. Risk Factors ...................................................... 15 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds ....... 22 Item 3. Defaults upon senior securities ................................... 22 Item 4. Submission of matters to a vote of security holders ............... 22 Item 5. Other information ................................................. 22 Item 6. Exhibits .......................................................... 23 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS WORLD MORTGAGE EXCHANGE GROUP, INC. (A DEVELOPMENT STAGE COMPANY) BALANCE SHEETS September 30, December 31, 2010 2009 ------------- ------------ (Unaudited) (Audited) ASSETS Current Assets: Cash and cash equivalents ...................... $ 786 $ -- ------------ ----------- Total Current Assets ......................... $ 786 $ -- ------------ ----------- Non-Current Assets: Inventory ...................................... $ 210,000 $ -- Loans, net of allowance for loan losses ........ $ 35,000 $ -- Goodwill ....................................... $ -- $ -- ------------ ----------- Total Non-Current Assets ..................... $ 245,000 $ -- ------------ ----------- Total Current and Non-Current Assets ......... $ 245,786 $ -- ============ =========== LIABILITIES AND STOCKHOLDERS' DEFICIT Current Liabilities: Accounts payable ............................... $ -- $ 16,096 Accrued compensation-related party ............. -- -- Due to related parties ......................... -- -- ------------ ----------- Total Current Liabilities .................... -- 16,096 ------------ ----------- Non-Current Liabilities: Bonds payable .................................. $ 371,000 $ -- ------------ ----------- Total Non-Current Liabilities ................ $ 371,000 $ -- ------------ ----------- Total Current and Non-Current Liabilities .... $ 371,000 $ 16,096 ------------ ----------- Commitments: ..................................... -- -- Stockholders' Deficit: Common stock, $.01 par value 100,000,000 shares authorized 16,704,862 and 14,154,243 shares issued and outstanding ........................ 167,048 167,048 Additional paid in capital ..................... 557,161 557,161 Deficit accumulated during the development stage (849,423) (740,305) ------------ ----------- Total Stockholders' Deficit .................. (125,214) (16,096) ------------ ----------- Total Liabilities and Stockholders' Deficit .. $ 245,786 $ -- ============ =========== See Accompanying Notes to the Unaudited Financial Statements 3 WORLD MORTGAGE EXCHANGE GROUP, INC. (A DEVELOPMENT STAGE COMPANY) UNAUDITED STATEMENTS OF OPERATIONS

WORLD MORTGAGE EXCHANGE GROUP, INC. (A DEVELOPMENT STAGE COMPANY) UNAUDITED STATEMENTS OF CASH FLOWS

World Mortgage Exchange Group, Inc. (A DEVELOPMENT STAGE COMPANY) NOTES TO UNAUDITED FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION ------------------------------ The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is management's opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation. The results for the interim period are not necessarily indicative of the results to be expected for the full year. Management has evaluated subsequent events, and the impact on the reported results and disclosures, through November 15, 2010 which is the date these financial statements were filed with the Securities and Exchange Commission. The unaudited interim financial statements should be read in conjunction with the Company's Annual Report on Form 10-K, which contains the audited financial statements and notes thereto, together with the Management's Discussion and Analysis, for the year ended December 31, 2009. The interim results for the period ended September 30, 2010 are not necessarily indicative of the results for the full fiscal year. NOTE 2 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ---------------------------------------------------------------------------- NATURE OF OPERATIONS World Mortgage Exchange Group, Inc. (formerly Pop Starz Records, Inc.) (the "Company") is a Florida corporation incorporated on July 5, 2006. The Company's initial business purpose was to develop, produce, license, acquire and distribute recorded music, primarily in the Hip Hop and Pop genres which now has been abandoned. The Company business focus has been changed to real estate effective September 2009 to coincide with the change of management and board of directors. The Company's initial focus will be on the purchase and sale of real property. In order to assist buyers in securing financing, the Company has developed a 49 year mortgage payment program. To fully implement our business plan, the Company will require a significant capital infusion the extent of which cannot be reasonably forecast at this time. If we issue shares of our common stock, existing shareholders could experience significant dilution. Any debt financing may not be available or if available, may not be available on terms suitable for the Company. We currently have no commitment for funding. DEVELOPMENT STAGE The Company's financial statements are presented as those of a development stage enterprise. Activities during the development stage primarily include related party debt and equity-based financing, acquisition and creation of intellectual properties, infrastructure and human resource development and certain inquisitional research activities to prepare to acquire single family homes in our target areas. 6 World Mortgage Exchange Group, Inc. (A DEVELOPMENT STAGE COMPANY) NOTES TO UNAUDITED FINANCIAL STATEMENTS USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in 2010 and 2009 include, stock issued for services, stock issued to convert outstanding debt, estimated useful life of equipment, and a 100% valuation allowance for deferred taxes due to the Company's continuing and expected future losses. CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less and money market accounts to be cash equivalents. At September 30, 2010, the Company had cash and cash equivalents in the amount of $786, as compared to no cash and cash equivalents for the period ended December 31, 2009. EARNINGS PER SHARE Basic earnings/(loss) per share is computed by dividing net loss by weighted average number of shares of common stock outstanding during each period. Diluted earnings/(loss) per share is computed by dividing net income/(loss) by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. Diluted earnings/(loss) per common share is not presented because it is anti-dilutive. For the three and nine month ended September 30, 2010 and 2009, and for the period from July 5, 2006 (inception) to September 30, 2010, respectively, the Company did not have any outstanding dilutive securities. FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments," requires disclosures of information about the fair value of certain financial instruments for which it is practicable to estimate the value. For purpose of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. The carrying amount reported in the balance sheet for judgment receivable, accounts payable, accrued expenses, accrued compensation - related party, and amounts due to related parties approximates its fair market value based on the short-term maturity of these instruments. SEGMENT INFORMATION The Company follows Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information." During 2010, the Company only operated in one segment; therefore, segment information has not been presented. 7 World Mortgage Exchange Group, Inc. (A DEVELOPMENT STAGE COMPANY) NOTES TO UNAUDITED FINANCIAL STATEMENTS STOCK-BASED COMPENSATION Stock based compensation is accounted for under SFAS No. 123R, "Share-Based Payment." SFAS No. 123R requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively the vesting period). SFAS No. 123R also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award. The Company accounts for non-employee share-based awards in accordance with EITF No. 96-18, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquisition, or in Conjunction with Selling, Goods or Services." RECENT ACCOUNTING PRONOUNCEMENTS In April 2009, the FASB released FSP SFAS 157-4, Determining Fair Value When Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly ("SFAS No. 157-4"). SFAS No. 157-4 supersedes SFAS No. 157-3. SFAS No. 157-4 provides guidance on how to determine the fair value of assets and liabilities when the volume and level of activity for the asset/liability has significantly decreased. SFAS No. 157-4 also provides guidance on identifying circumstances that indicate a transaction is not orderly. In addition, SFAS No. 157-4 requires disclosure in interim and annual periods of the inputs and valuation techniques used to measure fair value and a discussion of changes in valuation techniques. SFAS No. 157-4 is effective for interim and annual periods ending after June 15, 2009 (June 30, 2009 for the Company) and shall be applied prospectively. SFAS No. 157-4 does not have a material impact on the preparation of and disclosures in the Company's financial statements. In May 2009, the FASB issued SFAS No. 165, Subsequent Events ("SFAS No. 165"). SFAS No. 165 establishes general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It requires entities to disclose the date through which it has evaluated subsequent events and the basis for that date. SFAS No. 165 is effective for interim and annual periods ending after June 15, 2009. The Company adopted SFAS No. 165 on June 30, 2009 (see note 10 in the notes to the financial statements included in this Report on Form 10-K). In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140 ("SFAS No. 166"). The objective of SFAS No. 166 is to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor's continuing involvement, if any, in transferred financial assets. SFAS No. 166 removes the concept of a qualifying special-purpose entity from Statement 140 and removes the exception from applying FASB Interpretation No. 46, Consolidation of Variable Interest Entities, to qualifying special-purpose entities. Additionally, SFAS No. 166 defines the term participating interest to establish specific conditions for reporting a transfer of a portion of a financial asset as a sale, and also requires that a transferor recognize and initially measure at fair value all assets obtained (including a transferor's beneficial interest) and liabilities incurred as a result of a transfer of financial assets accounted for as a sale. SFAS No. 166 is effective for fiscal periods ending after November 15, 2009 (January 1, 2010 for the Company). The Company is currently evaluating the impacts and disclosures related to SFAS No. 166. 8 World Mortgage Exchange Group, Inc. (A DEVELOPMENT STAGE COMPANY) NOTES TO UNAUDITED FINANCIAL STATEMENTS In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R) ("SFAS No. 167"). SFAS No. 167 amends guidance in Interpretation 46 (R) for determining whether an entity is a variable interest entity in addition to subjecting enterprises to a number of other requirements including, among other things: (i) requiring an enterprise to perform an analysis to determine whether the enterprise's variable interest or interests give it a controlling financial interest in a variable interest entity and specifies the characteristics the primary beneficiary of a variable interest entity must have to be designated as such; (ii) requiring an enterprise to assess whether it has an implicit financial responsibility to ensure that a variable interest entity operates as designed when determining whether it has the power to direct the activities of the variable interest entity that most significantly impact the entity's economic performance; (iii) requiring the ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity; (iv) the elimination of the quantitative approach previously required for determining the primary beneficiary of a variable interest entity, and (v) adding an additional reconsideration event for determining whether an entity is a variable interest entity when any changes in facts and circumstances occur such that investors of the equity investment at risk, as a group, lose the power from voting or similar rights of the investment to direct the activities of the entity that have the most significant impact on the entity's economic performance. SFAS No. 167 is effective for fiscal and interim periods ending after November 15, 2009 (January 1, 2010 for the Company). The Company is currently evaluating the impacts and disclosures related to SFAS No. 167. In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162 ("SFAS No. 168"). SFAS No. 168 establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. SFAS No. 168 is effective for fiscal and interim periods ending after September 15, 2009 (September 30, 2009 for the Company). The Company is currently evaluating the impacts and disclosures related to SFAS No. 168. NOTE 3 - GOING CONCERN ---------------------- As reflected in the accompanying financial statements, the Company has a net loss of $109,118, net cash used in operations of $125,214 for the nine months ended September 30, 2010, a working capital surplus of $786, a deficit accumulated during the development stage of $849,423 and a stockholders' deficit of $125,214 at September 30, 2010. In addition, the Company is in the development stage and has not yet generated any revenues. The ability of the Company to continue as a going concern is dependent upon the Company's ability to further implement its business plan and to continue to raise funds through debt or equity raises. The financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern. 9 NOTE 4 - STOCKHOLDERS' EQUITY (DEFICIT) --------------------------------------- At September 30, 2010, the authorized capital of the company consists of 100,000,000 shares of common stock with a par value of $.01. On September 30, 2010, there are 16,704,862 shares issued and outstanding. In March 2009, the Company issued 930,619 shares of common stock to a related party for repayment of advances made to the Company in the amount of $9,312. The Company also issued 600,000 shares of common stock to a related party for accrued rent and rent expense. In March 2009 the Company issued 50,000 shares of common stock for professional services. During March 2009, the Company issued 970,000 shares of common stock to officers and directors for services rendered. The shares were valued based on the closing trading price on the date the shares were earned, and ranged between $.01 and $.03. NOTE 5 - SUBSEQUENT EVENTS -------------------------- There is no subsequent event to disclose. 10 WORLD MORTGAGE EXCHANGE GROUP, INC. (A DEVELOPMENT STAGE COMPANY) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. FORWARD LOOKING STATEMENTS The statements contained in this report that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Forward-looking statements are made based upon management's current expectations and beliefs concerning future developments and their potential effects upon the Company. There can be no assurance that future developments affecting the Company will be those anticipated by management. Actual results may differ materially from those included in the forward-looking statements. Readers are also directed to other risks and uncertainties discussed herein and in other documents filed by the Company with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any forward-looking information, whether as a result of new information, future developments or otherwise. OVERVIEW AND HISTORY World Mortgage Exchange Group, Inc., formerly known as Pop Starz Records, Inc. (the "Company", "WMEG", "we", or "our") was incorporated July 5, 2006, under the laws of the State of Florida. The Company's original business purpose was to develop, produce, license, acquire and distribute recorded music, primarily in the popular Hip Hop and Pop genres. We were not successful with this business venture. On September 8, 2009 shareholders owning a majority of our issued and outstanding shares of common stock were sold in a private transaction. In connection therewith, each of the Company's officers and directors tendered their resignation. Concurrently therewith, we appointed new officers and directors. The Company's new officers and directors were not familiar with the music or recording industry and changed the Company's business focus to real estate. CURRENT BUSINESS STRATEGY The Company's initial focus will be on the purchase and sale of real property. In order to assist buyers in securing financing, the Company has developed a 49 year mortgage payment program. To fully implement our business plan, the Company will require a significant capital infusion the extent of which cannot be reasonably forecast at this time. If we issue shares of our common stock, existing shareholders will experience significant dilution. Any debt financing may not be available or if available, may not be available on terms suitable for the Company. We currently have no commitment for funding. 11 WORLD MORTGAGE EXCHANGE GROUP, INC. (A DEVELOPMENT STAGE COMPANY) EFFECT OF STATUS AS A "SHELL" COMPANY Because we are a shell company as defined under the Rules of the Securities and Exchange Commission, we are disqualified from using a short form of registration statement (S-8) for the issuance of employee stock options. Furthermore, holders of restricted securities issued while we were or are a shell company may not re-sell the restricted securities pursuant to SEC Rule 144 for a period of one year after we cease to be a shell and have filed the necessary report with the SEC to that effect. RESULTS OF OPERATIONS THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 In March 2010 we closed on our first transaction as part of our new business plan. We purchased a single family detached home in Ackerman, Mississippi. The purchase price was financed by issuing the seller a convertible debenture for $35,000. In August 2010 we closed on a single family home building lot valued at $280,000 in the exclusive neighborhood of Oakton Pond in Marietta, Georgia. We purchased the lot at 75% of current appraisal for $210,000. We intend to market and sell this asset with our 49 year mortgage. In September 2010 we sold our Ackerman, Mississippi property with our 49 year mortgage. This closing completed the basic function of our business model. We generated revenues from continuing operations during the three and nine months ended September 30, 2010 of $1,125 and $2,250, respectively, from the Ackerman, Mississippi property. We did not generate any revenue from continuing operations during the three and nine months ended September 30, 2009. During the three months ended September 30, 2010 we incurred general and administrative expenses totaling $27,490, as compared to $3,441 for the same period in the prior year. The increase in the current year was due primarily to an increase in expenses to implement new business plan. During the nine months ended September 30, 2010 we incurred general and administrative expenses totaling $111,368, as compared to $44,028 for the same period in the prior year. The increase in the current year was due primarily to an increase in expenses to implement new business plan. LIQUIDITY AND CAPITAL RESOURCES At September 30, 2010, we have current assets in the amount of $786 and non-current assets in the form of inventory and loans in the amount of $245,000, as compared to no current or non-current assets on December 31, 2009. Our operations to date have been funded by loans and capital contributions made by our affiliates and private investors. We have no total current liabilities as compared to $16,096 at December 31, 2009. The primary reason for this decrease is the $16,096 we owed at December 31, 2009 was repaid. We have a working capital surplus of $786. Unless we secure additional financing, of which there can be no assurance, or begin to generate revenues in excess of expenses, we will not be able to meet our obligations beyond the current surplus. 12 WORLD MORTGAGE EXCHANGE GROUP, INC. (A DEVELOPMENT STAGE COMPANY) Due to our operating losses and deficits, our independent auditors in their financial statements have raised doubts about our ability to continue as a going concern. Despite these historical losses, management believes that due to the new business model it will be able to satisfy ongoing operating expenses through related party advances until such time as we are able to consummate a business combination or begin operations. There can be no assurance that any financing will be available, or if available, will be offered on terms that will not adversely impact our shareholders. For the nine months ended September 30, 2010, we used cash in operating activities of $125,214 as compared to $27,511 for the period ended September 30, 2009. For the nine months ended September 30, 2010 and 2009, we did not use any cash in investing activities. For the nine months ended September 30, 2010, we received net cash provided by financing activities of $126,000 as compared to $27,511 for the nine months ended September 30, 2009. During 2010, we received cash from affiliates and private investors of $126,000. During 2009, we received cash from related party loans and advances of $34,764. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The discussion and analysis of our financial condition and results of operations are based upon our condensed financial statements, which have been prepared pursuant to the rules and regulations of the SEC. Certain information related to our organization, significant accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. The preparation of the financial statements in accordance with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates related to (i) useful lives of depreciable lives of assets; (ii) income tax valuation allowances; (iii) valuation assumptions for share-based payments. We base our estimates on historic experience and various other factors related to each circumstance. Actual results could differ from those estimates based upon future events, which could include, among other risks, changes in the business environment in which we operate. There are several accounting policies that we believe are significant to the presentation of our financial statements and require management's most difficult, complex or subjective judgments about matters that are inherently uncertain. We believe our most critical accounting policies include (i) use of estimates, which is described more fully above and (ii) the carrying values of goodwill and other long-lived assets. Our significant accounting policies and critical accounting estimates are disclosed more fully in our Annual Report on Form 10-K for the year ended December 31, 2009. We do not believe there have been significant changes to our critical accounting policies and estimates subsequent to December 31, 2009. OFF BALANCE SHEET ARRANGEMENTS We have not entered into any off-balance sheet arrangements. We do not anticipate entering into any off-balance sheet arrangements during the next 12 months. 13 WORLD MORTGAGE EXCHANGE GROUP, INC. (A DEVELOPMENT STAGE COMPANY) ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not applicable. ITEM 4. CONTROLS AND PROCEDURES. DISCLOSURE CONTROLS AND PROCEDURES Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of the end of the period covered by this Annual Report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Annual Report, our disclosure controls and procedures were effective to ensure that the information we are required to disclose in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the l's rules and forms and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as the principal executive and financial officers, respectively, to allow timely decisions regarding required disclosure. It should be noted that any system of disclosure controls and procedures, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. We believe that the controls and procedures currently in place provide reasonable assurance of the effectiveness of the controls and procedures. CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING There was no change in the internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2010, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. 14 WORLD MORTGAGE EXCHANGE GROUP, INC. (A DEVELOPMENT STAGE COMPANY) PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. As of November 15, 2010, the Company is not involved in any legal proceedings. ITEM 1A. RISK FACTORS RISKS ASSOCIATED WITH THE COMPANY'S PROSPECTIVE BUSINESS AND OPERATIONS IT IS UNLIKELY THAT WE WILL BE ABLE TO SUSTAIN PROFITABLE OPERATIONS IN THE NEAR FUTURE. We have had limited operations to date. We have incurred significant start-up costs. There can be no assurance that we will be able to generate sufficient revenues or cash flows to finance our operations and existing obligations. Even if we are able to successfully expand our operations and increase revenues, there can be no assurance that we will be able to operate profitably. It is critical to our success that we continue to devote financial resources to implement our business plan. We expect that our operating expenses will increase significantly, especially with respect to sales and marketing. As we increase spending, there can be no assurance that we will be able to operate on a profitable basis. As a result, we may not be able to sustain profitable operations. WE LACK ADEQUATE WORKING CAPITAL. Our auditors have issued a going concern opinion. We do not currently have adequate capital to implement our business plan. If our working capital estimates prove wrong or if we are not successful in obtaining additional financing, our business operations will suffer. We may require both short-term financing for operations and long-term capital to fund our expected growth if we want to fully implement our business plan and take advantage of evolving market conditions. Additional financing may not be available to us, or if available, then it may not be available upon terms and conditions acceptable to us. Any equity financing may be dilutive to shareholders, and debt financing, if available, would increase expenses and may involve restrictive covenants. We may be required to raise additional capital, at times and in amounts, which are uncertain, especially under the current capital market conditions. Under these circumstances, if we unable to acquire additional capital or is required to raise it on terms that are less satisfactory than desired, it may have a material adverse effect on its financial condition. REAL ESTATE DEVELOPMENT AND MORTGAGE BANKING REQUIRE THE AVAILABILITY OF SIGNIFICANT CAPITAL. In order for us to purchase real estate or offer mortgage financing, we will require a significant capital infusion. In addition, we may have to look to more traditional lending sources in order to close our transactions. If we do not have sufficient capital to self finance our operations, given our limited operating history and lack of cash flow, obtaining additional funding sources will be very difficult as financial institution lending practices have become increasingly restrictive. 15 WORLD MORTGAGE EXCHANGE GROUP, INC. (A DEVELOPMENT STAGE COMPANY) THE ONGOING DOWNTURN IN THE GENERAL ECONOMY AND THE REAL ESTATE MARKET COULD NEGATIVELY IMPACT OUR BUSINESS AND FINANCIAL RESULTS. Periods of economic slowdown or recession, significantly reduced access to credit, declining employment levels, decreasing demand for real estate, declining real estate values or the perception that any of these events may occur can adversely impact our business model. The declining real estate market in the United States, the availability and cost of credit, increased unemployment, volatile oil prices, declining consumer confidence and the instability of United States banking and financial institutions, have contributed to increased volatility, an overall economic slowdown and diminished expectations for the economy and markets going forward. The fragile state of the credit markets, the fear of a global recession for an extended period and the current economic environment will impact our planned business activities. WE WILL OPERATE IN A HIGHLY COMPETITIVE BUSINESS WITH NUMEROUS COMPETITORS, MOST OF WHOM WILL HAVE GREATER FINANCIAL AND OPERATIONAL RESOURCES THAN IT DOES. We will compete in a variety of service disciplines. Each of these business areas is highly competitive on a national as well as on a regional and local level. We will experience competition not only from other national real estate service providers, but also from global real estate service providers, boutique real estate advisory firms, consulting and appraisal firms. Depending on the product or service, we also face competition from other real estate service providers, institutional lenders, insurance companies, investment banking firms and investment managers. OUR ABILITY TO ACCESS CREDIT AND CAPITAL MARKETS MAY BE ADVERSELY AFFECTED BY FACTORS BEYOND OUR CONTROL, INCLUDING TURMOIL IN THE FINANCIAL SERVICES INDUSTRY, VOLATILITY IN FINANCIAL MARKETS AND GENERAL ECONOMIC DOWNTURNS. Market disruptions such as those currently being experienced in the United States and other countries may increase our cost of borrowing or adversely affect our ability to access sources of liquidity. These disruptions include turmoil in the financial services and real estate industries, including substantial uncertainty surrounding particular lending institutions and, and general economic downturns. If we are unable to access credit at competitive rates or at all, or if our short-term or long-term borrowing costs dramatically increase, our ability to finance our operations, meet our short-term obligations and implement our operating strategy could be adversely affected. IF WE FAIL TO COMPLY WITH LAWS AND REGULATIONS APPLICABLE TO OUR PLANNED BUSINESS OPERATIONS, WE MAY INCUR SIGNIFICANT FINANCIAL PENALTIES. Our business operations will be subject to numerous federal, state and local laws and regulations specific to the services performed. If we fail to maintain our licenses or violate any of the regulations applicable to our licenses, then we may be required to pay fines or our licenses suspended or revoked. SECURING REQUIRED LICENSING CAN BE COSTLY AND RESULT IN UNANTICIPATED DELAYS. We will have to secure a number of business licenses in order for us to commence operations and implement our business strategy. Securing proper licensing can be costly and take long periods of time. If we cannot secure proper licensing on a timely basis, our business will be adversely affected. 16 WORLD MORTGAGE EXCHANGE GROUP, INC. (A DEVELOPMENT STAGE COMPANY) ILLIQUIDITY OF REAL ESTATE INVESTMENTS COULD SIGNIFICANTLY IMPEDE OUR ABILITY TO RESPOND TO ADVERSE CHANGES IN THE PERFORMANCE OF OUR OPERATIONS. Because real estate is relatively illiquid, our ability to promptly facilitate a sale of one or more properties or investments in our programs in response to changing economic, financial and investment conditions may be limited. In particular, these risks could arise from weakness in the market for a property, changes in the financial condition or prospects of prospective purchasers, changes in regional, national or international economic conditions, and changes in laws, regulations or fiscal policies of jurisdictions in which the property is located. Fees from the disposition of properties would be materially affected if we are unable to facilitate a significant number of property dispositions. UNINSURED AND UNDERINSURED LOSSES MAY ADVERSELY AFFECT OPERATIONS. We have not yet secured any type of insurance nor can we be assured that any insurance that we obtain will provide adequate coverage. As a result, we may incur losses due to insurance deductibles, co-payments on insured losses or uninsured losses. In the event of a substantial property loss or personal injury, the insurance coverage may not be sufficient to pay the full damages ... Under these circumstances, the insurance proceeds we receive if any, might not be adequate to restore the Company's economic position with respect to the property. In the event of a significant loss at one or more of the properties in the Company's operations. In this event, securing additional insurance, if possible, could be significantly more expensive. MORTGAGE LENDING PRACTICES HAVE BECOME MORE REGULATED. Relaxed lending guidelines over the past few years have resulted in a significant increase in foreclosures. As a result, lending policies have been tightened. Even if we successfully implement a 49 year term mortgage, there can be no assurance that prospective buyers will be able to qualify for the mortgage. PROSPECTIVE HOME BUYERS MAY NOT BE RECEPTIVE TO OUR 49 YEAR MORTGAGES. Mortgages with longer terms will result in lower monthly payments and greater affordability to home buyers. However, some home buyers may not participate in the program as their equity interest in the property will increase at a much slower rate than otherwise in a traditional 30 year mortgage. Moreover, the interest payable over the loan term will be significantly greater than the interest paid on a 30 year mortgage. ANY AGREEMENT WE ENTER INTO WITH MANAGEMENT WILL NOT BE NEGOTIATED AT ARM'S LENGTH. Some of our officers serve on our Board of Directors. The Board of Directors will set the salary level for our officers. As a result, our officers will be able to set their own compensation level. While we believe that the compensation that we will pay our officers will be equivalent to salaries paid to other executives in similarly situated developmental stage companies, there will be an inherent conflict of interest in the compensation payable to our officers and our working capital requirements. 17 WORLD MORTGAGE EXCHANGE GROUP, INC. (A DEVELOPMENT STAGE COMPANY) COMPETITION The purchase and sale of real estate and mortgage underwriting are highly competitive, rapidly evolving and subject to constant change. We will compete against large multi-national corporations as well as real estate developers, banks and other financial institutions. We expect that as we establish a market niche, competition will arise from a variety of sources, both domestically and internationally. Many of our potential competitors will have: o greater financial, technical, personnel, promotional and marketing resources; o longer operating histories; and o greater exposure to financial institutions. We believe that existing industry competitors are likely to continue to expand their offerings. Moreover, because there are few, if any, substantial barriers to entry, we expect that new competitors are likely to enter the market and attempt to market a similar product which would result in greater competition. We cannot be certain that we will be able to compete successfully in this extremely competitive market. OUR SUCCESS WILL BE LARGELY DEPENDENT UPON OUR KEY EXECUTIVE OFFICERS AND OTHER KEY PERSONNEL. Our success will be largely dependent upon the continued employment of our current officers. The loss of their services would have a material adverse effect on us. We do not maintain key man insurance on their life. Although we believe that we would be able to locate a suitable replacement, we cannot assure you that we would be able to do so. In addition, our future operating results will substantially depend upon our ability to attract and retain highly qualified financial, technical, creative and administrative personnel. OUR OPERATING RESULTS MAY PROVE UNPREDICTABLE. Our operating results are likely to fluctuate significantly in the future due to a variety of factors, many of which are outside of our control. Factors that may affect our future operations include the condition of the real estate market, mortgage rates, employment rate, market acceptance of our products and services, unforeseen competition, limited working capital and changing market dynamics. REAL ESTATE INVESTMENTS ARE RISKY AND WILL INHIBIT OUR CASH FLOW. We will be subject to risks associated with the direct ownership of real estate, such as decreases in real estate values, overbuilding, increased competition and other risks related to local or general economic conditions, increases in operating costs and property taxes, changes in zoning laws, casualty or condemnation losses, possible environmental liabilities, regulatory limitations on rent and fluctuations in rental income. Our inability to gauge these risks will adversely impact our operations. 18 WORLD MORTGAGE EXCHANGE GROUP, INC. (A DEVELOPMENT STAGE COMPANY) DEPRECIATING PROPERTY VALUES WILL ADVERSELY AFFECT THE VALUE OF ANY MORTGAGES THAT WE HOLD. We may make loans that are collateralized, in whole or in part, by real estate. Accordingly, the value of a loan may be detrimentally affected if the real estate collateral declines in value. To that extent, we will be subject to the risks generally incident to the ownership of real property, including: uncertainty of cash flow to meet fixed and other obligations; adverse changes in local market conditions, population trends, neighborhood values, community conditions, general economic conditions, local employment conditions, interest rates and real estate tax rates; changes in fiscal policies; changes in applicable laws and regulations (including tax laws); and uninsured losses and other risks that are beyond our control. In addition, to the extent that we become the owner of real estate as a result of a foreclosure, we could be exposed to significant carrying costs prior to the liquidation of the asset and may be unable to realize the value assigned to the asset upon liquidation. RISKS RELATED TO OUR COMMON STOCK OUR STOCK PRICE MAY BE VOLATILE. The market price of our common stock has historically been volatile. We believe investors should expect continued volatility in our stock price as a result of various factors, including: 1. Low daily trading volume, 2. Generally large spreads between quoted bid and offer prices, 3. Uncertainty of the company's future, 4. Sales of substantial amounts of our common stock by existing stockholders, including short sales, 5. Company disclosures regarding the results of various stages of our xploration operations. Such volatility may make it difficult or impossible for you to obtain a favorable selling price for our shares. THERE IS A LIMITED MARKET FOR OUR COMMON STOCK. Although the Company's common stock is listed for trading on the Over-the-Counter Electronic Bulletin Board, the trading market in the common stock has substantially less liquidity than the average trading market for companies quoted on other national stock exchanges and our price may fluctuate dramatically. A public trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the marketplace of willing buyers and sellers of our common stock at any given time. This presence depends on the individual decisions of investors and general economic and market conditions over which we have no control. Due to limited trading volume, the market price of the Company's common stock may fluctuate significantly in the future, and these fluctuations may be unrelated to the Company's performance. General market price declines or overall market volatility in the future could adversely affect the price of the Company's common stock, and the current market price may not be indicative of future market prices. 19 WORLD MORTGAGE EXCHANGE GROUP, INC. (A DEVELOPMENT STAGE COMPANY) WE MAY ISSUE ADDITIONAL COMMON SHARES IN THE FUTURE WHICH WOULD DILUTE THE OUTSTANDING SHARES. The prices at which we sell these securities and other terms and provisions will depend on prevailing market conditions and other factors in effect at that time, all of which are beyond our control. THE COMPANY DOES NOT EXPECT TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE. The Company has never paid cash dividends on its common stock and has no plans to do so in the foreseeable future. The Company intends to retain earnings, if any, to develop and expand its business. WE HAVE NOT VOLUNTARILY IMPLEMENTED VARIOUS CORPORATE GOVERNANCE MEASURES, IN THE ABSENCE OF WHICH, SHAREHOLDERS MAY HAVE MORE LIMITED PROTECTIONS AGAINST INTERESTED DIRECTOR TRANSACTIONS, CONFLICTS OF INTEREST AND SIMILAR MATTERS. Recent federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE or The NASDAQ Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges and NASDAQ are those that address board of directors' independence, audit committee oversight, and the adoption of a code of ethics. While our board of directors has adopted a Code of Ethics and Business Conduct, we have not yet adopted any of these corporate governance measures. It is possible that if we were to adopt some or all of these corporate governance measures, shareholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. For example, in the absence of audit, nominating and compensation committees comprised of at least a majority of independent directors, decisions concerning matters such as compensation packages to our senior officers and recommendations for director nominees may be made by a majority of directors who have an interest in the outcome of the matters being decided. Prospective investors should bear in mind our current lack of corporate governance measures in formulating their investment decisions. WE MAY BE EXPOSED TO POTENTIAL RISKS RELATING TO OUR INTERNAL CONTROLS OVER FINANCIAL REPORTING AND OUR ABILITY TO HAVE THOSE CONTROLS ATTESTED TO BY OUR INDEPENDENT AUDITORS. As directed by Section 404 of the Sarbanes-Oxley Act of 2002 ("SOX 404"), the Securities and Exchange Commission adopted rules requiring public companies to include a report of management on the company's internal controls over financial reporting in their annual reports, including Form 10-K. In addition, the independent registered public accounting firm auditing a company's financial statements must also attest to and report on management's assessment of the effectiveness of the company's internal controls over financial reporting as well as the operating effectiveness of the company's internal controls .. 20 WORLD MORTGAGE EXCHANGE GROUP, INC. (A DEVELOPMENT STAGE COMPANY) We expect to expend significant resources in developing the necessary documentation and testing procedures required by SOX 404, there is a risk that we will not comply with all of the requirements imposed thereby. At present, there is no precedent available with which to measure compliance adequacy. Accordingly, there can be no positive assurance that we will receive a positive attestation from our independent auditors. In the event we identify significant deficiencies or material weaknesses in our internal controls that we cannot remediate in a timely manner or we are unable to receive a positive attestation from our independent auditors with respect to our internal controls, investors and others may lose confidence in the reliability of our financial statements and our ability to obtain equity or debt financing could suffer. "PENNY STOCK" RULES MAY MAKE BUYING OR SELLING THE COMMON STOCK DIFFICULT AND SEVERELY LIMIT THEIR MARKET AND LIQUIDITY. Trading in the Company's common stock is subject to certain regulations adopted by the SEC commonly known as the "Penny Stock Rules". The Company's common stock qualifies as penny stock and is covered by Section 15(g) of the Securities and Exchange Act of 1934, as amended (the "1934 Act"), which imposes additional sales practice requirements on broker/dealers who sell the Company's common stock in the market. The "Penny Stock" rules govern how broker/dealers can deal with their clients and "penny stock". For sales of the Company's common stock, the broker/dealer must make a special suitability determination and receive from clients a written agreement prior to making a sale. The additional burdens imposed upon broker/dealers by the "penny stock" rules may discourage broker/dealers from effecting transactions in the Company's common stock, which could severely limit its market price and liquidity. This could prevent investors from reselling our common stock and may cause the price of the common stock to decline. A SALE OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK MAY CAUSE THE PRICE OF OUR COMMON STOCK TO DECLINE. If our stockholders sell substantial amounts of our common stock in the public market, the market price of our common stock could fall. These sales also may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate. CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS Various statements contained herein, including those that express a belief, expectation, or intention, as well as those that are not statements of historical fact, are forward-looking statements. We use words such as "believe," "intend," "expect," "anticipate," "plan," "may," "will," "should" and similar expressions to identify forward-looking statements. The forward-looking statements in this private placement memorandum speak only as of the date hereof. We disclaim any obligation to update these statements unless required by applicable securities laws, and we caution you not to rely on them unduly. You are further cautioned that any forward-looking statements are not guarantees of future performance. Our beliefs, expectations and intentions can change as a result of many possible events or factors, not all of which are known to us or are within our control, and a number of risks and uncertainties could cause actual results to differ materially from those anticipated in the forward-looking statements. Such factors, risks and uncertainties include, but are not limited to: 21 o liquidity and availability of additional or continued sources of financing; o the continued weakening national economy in general and the residential real estate market in particular; o the continued global credit crisis and capital market disruption; o changes in general economic and business conditions, including interest rat3es and the availability of financing; o our ability to compete effectively in markets that are material to us; o significant variability in our cash flow; o our ability to retain current management and hire key employees; o our ability to comply with laws and regulations; o reliance on third parties to assist us in our developmental stages; and o trends in pricing for residential real estate. THE RISKS SET FORTH ABOVE SHOULD NOT BE CONSTRUED AS A COMPLETE LIST OF THE RISKS WHICH MAY AFFECT THE COMPANY'S BUSINESS, THE OFFERING OR THE RISKS WHICH YOU FACE AS A PROSPECTIVE INVESTOR. THE SECURITIES OFFERED INVOLVE A HIGH DEGREE OF RISK AND MAY RESULT IN THE LOSS OF YOUR ENTIRE INVESTMENT. ANY PERSON CONSIDERING THE PURCHASE OF THESE SECURITIES SHOULD BE AWARE OF THESE AND OTHER FACTORS SET FORTH IN THIS MEMORANDUM AND SHOULD CONSULT WITH HIS, HER OR ITS LEGAL, TAX AND FINANCIAL ADVISORS PRIOR TO MAKING AN INVESTMENT IN SECURITIES. THE SECURITIES SHOULD ONLY BE PURCHASED BY PERSONS WHO CAN AFFORD TO LOSE ALL OF THEIR INVESTMENT. ITEM 2. SALE OF UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 5. OTHER INFORMATION. None. 22 WORLD MORTGAGE EXCHANGE GROUP, INC. (A DEVELOPMENT STAGE COMPANY) ITEM 6. EXHIBITS. Set forth below is a list of exhibits to this quarterly report on Form 10Q. Exhibit Number Description ------- ----------------------------------------------------------------------- 31.1 * Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 * Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 * Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley act of 2002. 32.2 * Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley act of 2002. (1) Secretary of State of Florida Name change * Filed herewith 23 WORLD MORTGAGE EXCHANGE GROUP, INC. (A DEVELOPMENT STAGE COMPANY) SIGNATURES In accordance with the requirements of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. World Mortgage Exchange Group, Inc. Date: November 15, 2010 By: /s/Ron Reeser ------------- Ron Reeser Chief Executive Officer Date: November 15, 2010 By: /s/ Brian James --------------- Brian James Chief Financial Officer 24

World Mortgage Exchange Group, Inc. 10-Q