UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-2
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
of the
SECURITIES EXCHANGE ACT OF 1934
Date of Original Report: September 5, 2001
BOTTOMLINE HOME LOAN, INC.
--------------------------
(Exact name of registrant as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation or organization)
0-31413 88-0356064
------- ----------
(Commission File Number) (IRS Employer Identification Number)
c/o Buster Williams, Jr., CEO
200 South Los Robles Avenue, Suite 230
Pasadena, California 91101
--------------------------
(Address of principal executive offices)
(800) 520-5626
--------------
(Registrant's telephone number, including area code)
1
This Amendment to the 8-K/A dated September 5, 2001 has the sole
purpose of filing a revision to the Pro Forma Condensed Consolidated
Statement of Operation (unaudited) to reflect that the transfer
reported in the original 8-K will be accounted for as a reverse
acquisition, none of the other information has been changed or
modified.
ITEM 7. Financial Statements and Exhibits
The following exhibit(s) are included as part of this report and amendment to
that filing of July 10, 2001:
2.2 Audited Financial Statements as of June 30, 2001, dated August
27, 2001 performed by Mantyla McReynolds the Registrant's
independent auditors.
2.2(a) Pro forma financial statement reflecting the acquisition
reported in the 8-K/A filed on July 8, 2001.
23.1 Consent of Independent Public Accounts - Mantyla McReynolds,
Registrant's independent auditors
Pursuant to the requirement of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
Bottomline Home Mortgage, Inc.
Signature Date
By: /s/ Buster Williams February 4, 2003
--------------------------------------------------
Name: Buster Williams, Jr.
Title: CEO
2
(Letterhead of Mantyla McReynolds)
5872 South 900 East Suite 250
Salt Lake City, Utah 84121
February 4, 2003
Bottomline Home Loan, Inc.
300 South Los Robles Avenue, Suite 230
Pasadena, California 91101
Ladies and Gentlemen:
This letter shall serve as formal notice that we have received your 8-K/A-2, to
be filed with the Securities and Exchange Commission. Upon review of the filing
information as it relates to our audit of the financial statement of Bottomline
Mortgage, Inc. as of June 30, 2001, under our report dated August 27, 2001, we
consent to the incorporation of our report in such filing.
Very truly yours,
/s/ Mantyla McReynolds
MANTYLA McREYNOLDS
3
BOTTOMLINE MORTGAGE, INC.
FINANCIAL STATEMENTS
June 30, 2001
[WITH INDEPENDENT AUDITORS' REPORT]
4
BOTTOMLINE MORTGAGE, INC.
Table of Contents
Page
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . 1
..
Balance Sheet - June 30, 2001 . . . . . . . . . . . . . . . . . . . . . . 2-3
..
Statements of Stockholders' Equity for the years ended June 30,
2001 and 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
..
Statements of Operations for the years ended June 30, 2001 and
2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
..
Statements of Cash Flows for the years ended June 30, 2001 and
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
..
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . 7-14
5
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Bottomline Mortgage, Inc.
Pasadena, California
We have audited the accompanying balance sheet of Bottomline Mortgage, Inc. as
of June 30, 2001, and the related statements of stockholders' equity,
operations, and cash flows for the years ended June 30, 2001 and 2000. 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 generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. 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 provides 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 Bottomline Mortgage, Inc. as of
June 30, 2001, and the results of operations and cash flows for the years ended
June 30, 2001 and 2000, in conformity with accounting principles generally
accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company's history of operating
losses raises substantial doubt about its ability to continue as a going
concern. Management's plans in those matters are described in note 10. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Mantyla McReynolds
---------------------------------------
Mantyla McReynolds
August 27, 2001
Salt Lake City, Utah
6
BOTTOMLINE MORTGAGE, INC.
Balance Sheet
June 30, 2001
June 30,
2001
-----------------
ASSETS
Current Assets
Cash $ 40,184
Marketable securities - trading - Notes 1 & 4 118,546
Mortgage loans held for sale, net 1,717,850
Note receivable - current portion - Note 5 210
Total Current Assets 1,876,790
Fixed Assets
Furniture and equipment - Note 1 80,252
Accumulated depreciation (41,261)
Net Fixed Assets 38,991
Other Assets
Note receivable net of current portion - Note 5 19,923
Note receivable - related party - Note 2 86,017
Deposits 5,172
Total Other Assets 111,112
TOTAL ASSETS $ 2,026,893
=================
See accompanying notes to financial statements
2
BOTTOMLINE MORTGAGE, INC.
Balance Sheet
(continued)
June 30, 2001
June 30,
2001
-----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current Liabilities
Accounts payable and accrued expenses $ 97,520
Warehouse line of credit - Note 5 1,651,944
Income tax payable - Notes 1 & 3 800
Notes payable - current portion - Note 6 22,877
Total Current Liabilities 1,773,141
Long-Term Liabilities
Notes payable - net of current portion - Note 6 14,092
Total Long-Term Liabilities 14,092
-----------------
TOTAL LIABILITIES 1,787,233
STOCKHOLDERS' EQUITY
Common stock - 50,000,000 shares authorized at $0.001 par;
5,373,000 shares issued and outstanding 5,373
Paid in capital 760,718
Retained earnings (deficit) (526,431)
TOTAL STOCKHOLDERS' EQUITY 239,660
-----------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 2,026,893
=================
See accompanying notes to financial statements
3
BOTTOMLINE MORTGAGE, INC.
Statements of Stockholders' Equity
for the years ended June 30, 2001 and 2000
Number of Number of Additional Retained Total
Preferred Common Preferred Common Paid-in Earnings Stockholders'
Shares Shares Stock Stock Capital (Deficit) Equity
---------- ----------- ----------- --------- ------------ ---------------- ----------------
$319,839 June 30, 1999 330,000 10,000 $ 330,000 $ 10 $ 9,990 $ (20,161)
Redeemed preferred shares for cash (75,000) (75,000) (75,000)
Issued common shares for debt 3,400,000 3,400 56,500 59,900
Issued preferred shares for cash 25,000 25,000 25,000
Paid dividends on preferred shares (26,960) (26,960)
Issued common shares for preferred (280,000) 840,000 (280,000) 840 279,160 0
Net income (loss) for year (147,273) (147,273)
Balance, June 30, 2000 0 4,250,000 0 4,250 345,650 (194,394) 155,506
Issued common shares for cash 873,000 873 290,127 291,000
Issued common shares for services 250,000 250 83,083 83,333
Additional capital paid in by officers 41,858 41,858
Net income (loss) for year (332,037) (332,037)
Balance, June 30, 2001 0 5,373,000 $ 0 $ 5,373 $ 760,718 $ (526,431) $ 239,660
========== =========== =========== ========= ============ ================ ================
See accompanying notes to financial statements
4
BOTTOMLINE MORTGAGE, INC.
Statements of Operations
for the years ended June 30, 2001 and 2000
Year ended Year ended
June 30, June 30,
2001 2000
---------------------- ----------------------
Revenues $ 1,330,275 $ 1,743,756
Expenses
Salaries and direct loan costs 789,175 1,401,800
Office and administration costs 403,117 334,664
Rent expenses 76,861 75,360
Advertising 21,323 38,142
Interest 104,673 44,594
Insurance 16,859 14,891
Professional fees 125,972 4,641
Depreciation 10,972 14,834
Total expenses 1,548,952 1,928,926
Net income (loss) from operations (218,677) (185,170)
Other income (expense)
Interest income 8,091 6,886
Dividend income 59 0
Gain (loss) on asset disposal (5,021) 0
Gain (loss) on sale of securities (64,588) 33,785
Unrealized gain (loss) (51,101) (1,974)
on securities Notes 1 & 4 ---------------------- ----------------------
Total other income (expense) (112,560) 38,697
---------------------- ----------------------
Income (loss) before tax (331,237) (146,473)
Provision for income taxes - Notes 1 & 3 (800) (800)
---------------------- ----------------------
Net income (loss) $ (332,037)$ (147,273)
====================== ======================
Net income (loss) per common share $ (0.07) $ (0.13)
====================== ======================
Weighted average shares outstanding 5,039,279 1,226,297
====================== ======================
See accompanying notes to financial statements
5
BOTTOMLINE MORTGAGE, INC.
Statements of Cash Flows
for the years ended June 30, 2001 and 2000
Year ended Year ended
June 30, June 30,
2001 2000
Cash Flows from Operating Activities:
------------------ ------------------
Net Income (loss) $ (332,037)$ (147,273)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 10,972 14,834
Loss on disposal of assets 5,021
Unrealized loss on trading securities 51,101 1,974
Common stock issued for services 83,333
Decrease (increase) in advance to agents 20,275 4,325
Decrease (increase) in mortgage loans held for sale (800,271) 107,575
Increase (decrease) in accrued expenses 81,379 15,991
Increase (decrease) in warehouse line payable 815,214 (133,127)
Net Cash Provided by/(Used for) in Operating Activities (65,013) (135,701)
Cash Flows from Investing Activities:
Decrease (increase) in notes receivable (25,446) (80,704)
Decrease (increase) in deposits 15,000
Net change in marketable securities (154,383) 4,413
Net Cash Provided by/(Used for) Investing Activities (179,829) (61,291)
Cash Flows from Financing Activities:
- ------------------------------------
Issued stock for cash 291,000 25,000
Redeemed stock for cash (75,000)
Dividends on preferred stock (26,960)
Increase (decrease) in long term debt (28,466) 38,418
Net Cash Provided by/(Used for) Financing Activities 262,534 (38,542)
Net Increase(decrease) in Cash 17,692 (235,534)
Beginning Cash Balance 22,492 258,026
------------------ ------------------
Ending Cash Balance $ 40,184 $ 22,492
================== ==================
Supplemental Disclosure Information:
Cash paid during the year for interest $ 104,673 $ 44,594
Cash paid during the year for income taxes $ 800 $ 800
See accompanying notes to financial statements
6
BOTTOMLINE MORTGAGE, INC.
Notes to Financial Statements
June 30, 2001
NOTE 1 Summary of Significant Accounting Policies
------------------------------------------------------
Nature of Operations
The Company incorporated under the laws of the State of California on
August 29, 1989 as C&W Global Realty, Inc. The name of the company was
changed to Bottomline Mortgage, Inc. on January 20, 1997. The Company
assists individuals, brokers and others in obtaining long term trust
deed (mortgage) financing. The Company processes loan applications,
effects loan underwriting and receives purchase commitments from
investor groups for mortgage backed loans prior to funding the loans,
primarily at its corporate office in Pasadena California. Loan
applications are also solicited and received at its office locations in
Salt Lake City Utah, Phoenix Arizona, and San Marcos Texas. The Company
is a non-supervised mortgagee, as defined by the U.S. Department of
Housing and Urban Development (HUD), and is therefore required to
conform to certain net worth, liquid assets and other conditions and
requirements and to follow certain specific regulations issued from
time to time by HUD.
Accounting Method
The accompanying financial statements have been prepared in accordance
with accounting principles generally accepted in the United States,
applicable to a going concern, which contemplates the realization of
assets and the liquidation of liabilities in the normal course of
business.
Statement of Cash Flows
Cash is comprised of cash on hand or on deposit in banks. The Company
had $40,184 and $22,492 at June 30, 2001 and 2000. The Company's non
cash financing activities consisted of 250,000 and 3,400,000 common
shares issued for services and debt valued at $83,333 and $59,900
during the years ended June 30, 2001 and 2000. At times during the year
the company maintains more than $100,000 in one bank. Cash is only
insured by the Federal Deposit Insurance Corporation (FDIC) up to
$100,000. Funds in excess of $100,000 are not insured by the FDIC or
any other Federal agency. As of the balance sheet date the Company had
less than $100,000 in any one bank.
Deferred Income Taxes
The Company complies with Statement of Financial Accounting Standard
(SFAS) No. 109, "Accounting For Income Taxes," which requires the asset
and liability method of accounting for income taxes. The asset and
liability method requires that the current or deferred tax consequences
of all events recognized in the financial statements are measured by
applying the provisions of enacted tax laws to determine the amount of
taxes payable or refundable currently or in future years. See Note 3
below.
7
BOTTOMLINE MORTGAGE, INC.
Notes to Financial Statements
June 30, 2001
NOTE 1 Summary of Significant Accounting Policies (continued)
------------------------------------------------------------------
Net Income Per Common Share
Net income per common share is based on the weighted average number of
shares outstanding during the period.
Depreciation
The Company's furniture and equipment is depreciated using primarily
the straight-line method over useful lives of five to seven years.
Depreciation for financial reporting purposes amounted to $10,972 and
$14,834 for the years ended June 30, 2001 and 2000.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles 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 revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Mortgage Loans Held for Sale
Mortgage loans held for sale, net of any deferred loan origination fees
or costs, are carried at the lower of cost or market value as
determined by outstanding commitments from investors. In accordance
with Statement of Financial Accounting Standards (SFAS) No. 140
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities", gains resulting from sales of mortgage
loans are recognized as of the date the loans are sold to permanent
investors if the following conditions are met: (i) the mortgage loan is
beyond the reach of the Company and its creditors, (ii) the investor
(transferee) has been given the right to pledge or exchange the
mortgage loan, and (iii) the Company maintains no effective control
over the mortgage loan. Losses are recognized when the market value is
determined to be lower than cost. Generally, the Company minimizes the
provisions for recourse available on mortgage loans sold. Such recourse
provisions generally consist of an early default provision (non-payment
in first month) and fraud provision. The limited-recourse nature of the
Company's loan sales does not, however, entirely eliminate the
Company's default risk since the Company may be required to repurchase
a loan from the investor or indemnify an investor if the borrow fails
to make its first mortgage payment or if the loan goes into default and
the Company is found to be negligent in uncovering fraud in connection
with the loan origination process. The Company incurred loan repurchase
expenses of $46,967 and $98,750 during the years ended June 30, 2001
and 2000. No provision has been included in the financial statements
for future loan repurchases.
8
BOTTOMLINE MORTGAGE, INC.
Notes to Financial Statements
June 30, 2001
NOTE 1 Summary of Significant Accounting Policies (continued)
------------------------------------------------------------------
Commitment Fees
Commitment fees are received, which arise from agreements with
borrowers that obligate the Company to make a loan or to satisfy an
obligation under a specified condition, are initially deferred and
recognized as income as loans are delivered to investors, or when it is
evident that the commitment will not be utilized.
Mortgage Fee Income
The Company recognizes revenue from the sale of mortgage loans, the
sale of servicing rights of such loans, commitment fees and loan
origination fees.
In accordance with Statement of Financial Accounting Standards (SFAS)
No. 140 "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," gains resulting from sales of mortgage
loans are recognized as of the date the loans are sold to permanent
investors if the following conditions are met: (i) the mortgage loan is
beyond the reach of the Company and its creditors, (ii) the investor
(transferee) has been given the right to pledge or exchange the
mortgage loan, and (iii) the company maintains no effective control
over the mortgage loan. The Company does not carry any mortgage loans
for investment purposes. A firm commitment is obtained from the
investor on a loan-by-loan basis before closing a loan. Immediately
after closing, the loan documents are sent to the investor endorsed in
blank, thus meaning title and effective control have transferred to the
investor. At such time, revenue, calculated as the amount due from the
investor in excess of the loan funded by the Company, is recorded.
In connection with the sale of mortgage loans, the Company also sells
the servicing rights to such loans. The Company recognizes revenue from
the sale of such servicing rights when an agreement with the purchaser
of such servicing rights exists, ownership to such servicing rights has
been transferred to the purchaser, the selling price of such servicing
rights is fixed or determinable, and collectibility is reasonably
assured. The Company's contracts with investors or servicers that
purchase these rights require certain warrants and representations by
the Company which guarantee the mortgages will be service for a minimum
of 3-12 months after they are purchased. Should for any reason the loan
be paid off or prepaid during the first year, the servicer may request
the return of all or a pro-rated portion of the service release premium
paid to the Company. The Company's accounting policy is to provide a
reserve for the amount of fees that are estimated to be refunded to the
servicers, however to date such estimates are minor. During the years
ended June 30, 2001 and 2000, the Company did not refund any service
release premiums to a servicer.
NOTE 1 Summary of Significant Accounting Policies (continued)
------------------------------------------------------------------
9
BOTTOMLINE MORTGAGE, INC.
Notes to Financial Statements
June 30, 2001
Mortgage Fee Income (continued)
Commitment fees received, are non-refundable fees that arise from
agreements with borrowers that obligate the Company to make a loan or
satisfy an obligation under a specified condition, are initially
deferred and recognized as revenue as loans are delivered to investors,
or when it is evident that the commitment will not be utilized.
Loan Origination Fees
Loan origination fees received and direct costs of originating loans
are deferred and recognized as income or expense when the loans are
sold to investors.
Accounting for Impaired Loans
The Company accounts for impaired loans in accordance with Statement of
Financial Accounting Standards (SFAS) No. 114 "Accounting by Creditors
for Impairment of a Loan" as amended by SFAS 118. These standards
require that all creditors value loans at the loan's fair market value
if it is probable that the creditor will be unable to collect all
amounts due according to the terms of the loan agreement. Because the
Company does not service any loans at this time and has purchase
commitments from investors prior to the closing of all loans, the
Company believes that no impairment exists on the mortgage loans held
for sale as of June 30, 2001.
Marketable Securities
The Company has classified its marketable securities as "trading"
securities in accordance with Statement of Financial Accounting
Standards (SFAS) No. 115. Trading securities are stated at fair value,
with unrealized gains and losses reported as a separate portion of
other income (expense) in the statements of operations. Marketable
securities - trading at June 30, 2001 were valued at $118,546.
Valuation of other security investments is based on acquisition costs.
Markdowns are made to reflect significant and permanent impairment in
value. Gains and losses on sales of securities are determined using the
average cost method.
Fiscal Year
The Company recently adopted June 30 as its fiscal year end. Previous
financial statements of the Company have been issued based on a July 31
fiscal year end. These statements have been prepared assuming June 30
as the fiscal year end for current and previous periods.
10
BOTTOMLINE MORTGAGE, INC.
Notes to Financial Statements
June 30, 2001
NOTE 1 Summary of Significant Accounting Policies (continued)
------------------------------------------------------------------
Web Site Development Costs
The Company accounts for web site development costs in accordance with
Emerging Issues Task Force (EITF) No. 00-2. Accordingly, all costs
incurred in the planning stage are expensed as incurred, costs incurred
in the web site application and infrastructure development stage are
accounted for in accordance with Statement of Position (SOP) 98-1 which
requires the capitalization of certain costs that meet specific
criteria, and costs incurred in the day to day operation of the web
site are expensed as incurred.
NOTE 2 Related Party Transactions
In August 1999, the Company advanced $75,900 to an officer/director in
exchange for a note secured by a third deed of trust on his personal
residence. The note bears interest at 7% and requires no monthly
payments. Principal and interest are due on July 4, 2009. Interest
accrued on the note but not paid totals $5,313 and $4,804 for the years
ended June 30, 2001 and 2000.
During the year ended June 30, 2001 officers of the Company personally
paid operating expenses of the Company for which they were not
reimbursed. The officers have agreed not to seek reimbursement from the
Company. $41,858 in expenses paid by the officers has been treated as
additional paid in capital for the year.
NOTE 3 Accounting for Income Taxes
The Company has adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes." The Company has net operating loss
carryforwards of $520,000 and $190,000 at June 30, 2001 and 2000 that
will begin to expire in 2019. No deferred tax benefit has been recorded
because management has determined that it is not likely that the
benefit of the carryforward will be realized. The tax benefit of the
cumulative carryforwards has been offset by a valuation allowance in
the same amount. The table below reflects changes in the valuation
allowance for the year ended June 30, 2001. Income taxes payable of
$800 at June 30, 2001 and 2000 represent minimum taxes payable to the
State of California.
Change in valuation allowance Valuation
Allowance
- -------------------------------------------------- ----------------------
6-30-2000 NOL $190,000 @ 34% $ 64,600
Operating loss of $330,000 for year @ 34% 112,200
6-30-2001 NOL $520,000 @ 34% $ 176,800
======================
NOTE 4 Marketable Securities
11
BOTTOMLINE MORTGAGE, INC.
Notes to Financial Statements
June 30, 2001
Marketable securities are equity securities held in a single brokerage
account and are shown at fair value at the balance sheet date. Net
unrealized holding losses of $51,101 and $1,974 have been recorded for
the years ended June 30, 2001 and 2000.
NOTE 5 Warehouse Line of Credit
The Company has a $2,000,000 line of credit that bears interest at 1%
above the bank's reference rate. The line is used exclusively to fund
pre-sold and pre-approved mortgage loans. The line is paid down when
loans are sold to investor groups, and each funding must be repaid
within 60 days. The line is secured by the Company's mortgage backed
debt securities. At June 30, 2001 the warehouse line of credit amounted
to $1,651,944 at a interest rate of 7.75%.
NOTE 6 Debt
The Company has the following long term debts:
Bank loan in the amount of $29,465 bearing interest of 14.5%, monthly
payments of $1,281 plus interest, maturity of May 2003, unsecured.
Capital lease obligation in the amount of $7,504 with imputed interest
of $21%, monthly payments of $1,135, maturity of February 2002, secured
by furniture and equipment.
Maturities of long term debt are as follows:
Year ended June 30 Amount
- -------------------------------------------- ---------------------------------
2002 22,877
2003 14,092
2004 0
NOTE 7 Equity Transactions
Prior to May 15, 2000 the Company had authorized 1,100,000 shares of a
preferred class of stock with par value of $1.00 per share, paying
non-cumulative dividends quarterly at 12% per annum. The preferred
class of shares was non-voting, redeemable at par value and convertible
to common at a rate of one for one. On May 15, 2000 the Company amended
its Articles of Incorporation to authorize 50,000,000 shares of only
one class of stock, that class being common stock with par value of
$.001.
NOTE 7 Equity Transactions (continued)
-------------------------------
During the year ended June 30, 2000 the Company redeemed 75,000
preferred shares for $75,000 and issued another 25,000 preferred shares
for $25,000. At May 30, 2000 the Company converted
12
BOTTOMLINE MORTGAGE, INC.
Notes to Financial Statements
June 30, 2001
the remaining 280,000 preferred shares to 840,000 common shares, a rate
of 3 common shares for each preferred share. On May 15, 2000 the
Company issued 3,400,000 common shares to officers and directors for
debt and services valued at $59,900.
During the year ended June 30, 2001 the Company issued 873,000 common
shares for cash of $291,000 and 250,000 common shares for services
valued at $83,333.
In June 2001, individuals holding 76% of the common shares of the
Company exchanged their shares for common shares of Bottomline Home
Loan, Inc., a Nevada corporation (formerly known as CyberEnergy, Inc.).
As a result of these transactions the Company became a subsidiary of
Bottomline Home Loan, Inc.
NOTE 8 Contingencies
On May 1, 2001 a previous preferred shareholder filed suit against the
Company alleging failure of the Company to repay a claimed loan of
$180,000. Plaintiff seeks to recover general and special damages in an
unspecified amount together with punitive damages and court costs.
Discovery and trial preparation has not yet begun, no trial date has
been set, nor has the Company filed an answer in the case. Management
disputes the claims made and plans to vigorously contest the matter.
Based solely on the allegations of the plaintiff, an adverse judgment
could result in a loss in the range of $300,000. No opinion can
reasonably be given as to the outcome of the suit and no loss or
liability has been accrued in the financial statements. It is
reasonably possible that this estimate could change within the next
year, which change would have a material effect on the financial
statements.
Sales of Loans with Recourse
The Company has agreements with investors that purchase mortgage notes
from the Company. These agreements contain certain recourse provisions.
The Company is required to repurchase loans in the event of the
following circumstances:
o Failure to deliver original documents specified by the
investor o The existence of fraud in the origination of the
loan o The borrower becomes delinquent during the first month
after the loan is sold
To date, losses from recourse have not been material.
13
NOTE 9 Going Concern
The Company has suffered operating losses in recent years and its
adjusted net worth has fallen below the $250,000 required to continue
as a non-supervised mortgagee under HUD guidelines. These facts lend
substantial doubt about the Company's ability to continue as a going
concern. Managements plans include expanding its market area to
increase revenues and obtaining additional equity financing. If
management is unsuccessful in these plans the Company may have to
significantly change the type of business it does or cease operations.
The financial statements contain no adjustments that might result from
the outcome of this uncertainty.
NOTE 10 Concentrations
The Company is involved in the real estate loan market. Fluctuations in
interest rates or other market conditions within the real estate loan
market may have a significant effect on the volume of business and
profitability of the Company.
14
BOTTOMLINE HOME LOAN, INC.
(formerly known as CYBERENERGY, INC.)
and Subsidiary
Pro Forma Condensed Consolidated Statement of Operations (Unaudited)
On June 27, 2001, the Company acquired 76% of the issued and outstanding shares
of common stock of Bottomline Mortgage, Inc. in exchange for 10,000,000 newly
issued shares of the Company's common stock.
The transaction will be accounted for as a reverse acquisition using the
purchase method of accounting, the net effect of which is a recapitalization of
the operating company. According to SFAS 141 paragraph 17, the acquiring entity
for accounting purposes is the entity whose owners will have the majority of
voting rights, authority to elect the governing board, or continuing senior
management of the surviving entity. Subsequent to the acquisition the previous
owners of Bottomline Mortgage, Inc. will have a majority of voting rights,
authority to elect the governing board, and continuing senior management of
Bottomline Home Loan, Inc.
The accompanying condensed consolidated statement of operations illustrates the
effect of the acquisition (pro forma) on the Company's results of operations.
The statement is based on the historical statements of operations for the
period. The statement assumes the acquisition took place on July 1, 2000.
The pro forma condensed consolidated statement of operations may not be
indicative of the actual results of the acquisition.
The accompanying pro forma condensed consolidated statement of operations should
be read in connection with the historical financial statements of the Company
and Bottomline Mortgage, Inc.
15
BOTTOMLINE HOME LOAN, INC.
(formerly known as CYBERENERGY, INC.)
and Subsidiary
Pro Forma Condensed Consolidated Statement of Operations (Unaudited)
for the year ended June 30, 2001
Bottomline Bottomline Pro forma Pro forma
Home Loan, Mortgage, Adjustments Consolidated
Inc. Inc. Results
----------------- ----------------- ----------------- -----------------
Revenues $ 0 $ 1,330,275 $ 0 $ 1,330,275
Expenses
Salaries and direct loan costs 789,175 789,175
Office and administration costs 2,214 403,117 405,331
Rent expenses 76,861 76,861
Advertising 21,323 21,323
Interest 104,673 104,673
Insurance 16,859 16,859
Professional fees 28,466 125,972 154,438
Depreciation 10,972 10,972
Total expenses 30,680 1,548,952 0 1,579,632
Net loss from operations (30,680) (218,677) 0 (249,357)
Other income (expense)
Interest income 132 8,091 8,223
Dividend income 59 59
Gain (loss) on asset disposal (5,021) (5,021)
Gain (loss) on sale of securities (64,588) (64,588)
Unrealized gain (loss) on securities (51,101) (51,101)
----------------- ----------------- ----------------- -----------------
Total other income (expense) 132 (112,560) 0 (112,428)
----------------- ----------------- ----------------- -----------------
Income (loss) before tax (30,548) (331,237) 0 (361,785)
Provision for income taxes (800) (800)
----------------- ----------------- ----------------- -----------------
Net income (loss) $ (30,548)$ (332,037)$ 0 $ (362,585)
================= ================= ================= =================
Net income (loss) per common share $ (0.01) $ (0.03)
================= =================
Weighted shares outstanding 16,039,000 16,039,000
================= =================
See Notes to Pro Forma Condensed Consolidated Statement of Operations (Unaudited)
16
BOTTOMLINE HOME LOAN, INC.
(formerly known as CYBERENERGY, INC.)
and Subsidiary
Notes to Pro Forma Condensed Consolidated
Statement of Operations (Unaudited)
NOTE 1 There are no pro forma adjustments to the condensed
consolidated statement of operations.
Weighted number of shares outstanding was calculated assuming that the
acquisition took place on July 1, 2000.
17