Timios National Corp

On September 15, 2013, Timios, a wholly-owned subsidiary of the Company, entered into an Asset Purchase Agreement (the “Agreement”) with Adobe Title, LLC, a Texas limited liability company (“Adobe”),.and Adobe’s members, Geoff Henley and Hudson Henley.  Adobe provides title insurance and escrow services to lenders in Texas.

The Agreement provides for customary representations and warranties by both parties, and provides Timios with a right to indemnification for losses arising out of (i) the breach of such representations and warranties; (ii) the failure to satisfy any covenants; (iii) the liabilities contractually excluded from the sale; (iv) the ownership of the assets acquired prior to the closing and the ownership of the assets excluded from the sale; (v) the operation of the business acquired prior to the closing; or (vi) any indebtedness of Adobe or transaction expenses of Adobe not satisfied at or prior to the closing.  Timios may make a claim for indemnification if and when it suffers losses equal at least an aggregate of  $25,000, at which time all losses, including the initial $25,000, may be claimed.  Timios’s right to indemnification is subject to a cap of $250,000 for any losses arising out of clause (i) above and up to the Maximum Contingent Amount with respect to all other losses.  Timios has a right of set-off for its losses against the Earn-Out payments.

The Company intends to provide proforma financial statements, in an amended 8K filed not later than November 29, 2013, reflecting the results of the combined companies assuming the acquisition of the assets was completed at December 31, 2011. The proforma consolidation will include statements for the periods December 31, 2011, June 30, 2012, December 31, 2012 and June 30, 2013.

In general, rising interest rates tend to have a negative effect on the volume of real estate transactions. This is specifically the case for real estate transactions that include mortgage refinancing, a business channel that makes up a large portion of our closing transactions. From May 2013 until September 2013, mortgage interest rates in the U.S. increased by approximately 20%, before recently returning to pre May 2013 levels . This increase had a negative affect on our revenue for the quarter ended September 30, 2013 as compared to our quarter ended June 30, 2013. We are not sure if or when mortagage interest rates will increase again, but if they do, the increased will likely lead to lower order volume and have a negative effect on revenue in our future quarters. Also affecting the Company’s volume of real estate closing transactions was the loss of a significant customer who exited the mortgage refinancing business entirely.

The Company has been changing the mix of services it offers, relying less on mortgage refinance products and adding deed-in-lieu, real estate owned (REO) and loan origination title and escrow services, the latter through the acquisition of the assets of Adobe Title LLC (see Note 6). Management believes that as the mix of services equalizes, mortgage interest rate fluctuations will have a lesser effect on our business.

The Holding Company’s operating expense decrease is predominately related to decreased professional fees, including legal, accounting and shareholder expenses which mostly took place during the quarter ended September 2013.The quarterly decrease was a result of a fewer needs of these services during the 2013 quarter.