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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1997
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OR
(_) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 0-17192
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CYPRESS FINANCIAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
NEVADA 84-1061382
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
5400 ORANGE AVENUE, SUITE 200, CYPRESS CA 90630
(Address of Principle Executive Office) (Zip Code)
Registrant's telephone number including area code (714) 995-0627
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 report), and (2) has been subject to such filing
requirements for the past 90 days.
(1) Yes X No
----- -----
(2) Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date.
Common Stock 4,510,271 as of May 5, 1997
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CYPRESS FINANCIAL SERVICES, INC.
FORM 10-QSB
INDEX
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Condensed Consolidated Balance Sheet as
of March 31, 1997 ...................................... 1
Condensed Consolidated Statements of
Operations for the three and Six-month periods
ended March 31, 1997 and 1996 .......................... 2
Condensed Consolidated Statements of
Cash Flows for the Six-month periods
ended March 31, 1997 and 1996 .......................... 3
Notes to Condensed Consolidated Financial
Statements ............................................. 4 to 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations ............................................. 7 to 10
PART II. OTHER INFORMATION ..................................... 11
Item 1. Legal Proceedings ......................................
Item 3. Changes in Securities ..................................
Item 4. Defaults Upon Senior Securities ........................
Item 5. Submission of Matters to a Vote of Security Holders ....
Item 6. Exhibits and Reports on Form 8-K .......................
CYPRESS FINANCIAL SERVICES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
ASSETS
CASH $ 410,296
RESTRICTED CASH 479,004
ACCOUNTS RECEIVABLE, NET 519,297
PORTFOLIO RECEIVABLES 543,207
NOTES RECEIVABLE FROM SHAREHOLDERS 61,750
PROPERTY, NET 2,593,071
OTHER ASSETS 35,058
------------
$ 4,641,683
============
LIABILITIES AND SHAREHOLDERS' EQUITY
ACCOUNTS PAYABLE $ 44,342
TRUST PAYABLES 479,004
ACCRUED LIABILITIES 293,349
LINE OF CREDIT 1,143,245
LONG-TERM DEBT 2,585,533
------------
TOTAL LIABILITIES 4,545,473
------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
PREFERRED STOCK, 5,000,000 SHARES
AUTHORIZED, 345,000 ISSUED AND OUTSTANDING 690,000
COMMON STOCK, $ 0.001 PAR VALUE; 30,000,000
SHARES AUTHORIZED; 4,510,271 SHARES ISSUED
AND OUTSTANDING 7,000
ADDITIONAL PAID-IN CAPITAL 495,500
ACCUMULATED DEFICIT (1,096,290)
------------
TOTAL SHAREHOLDERS' EQUITY 96,210
------------
$ 4,641,683
============
SEE ACCOMPANYING NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
1
CYPRESS FINANCIAL SERVICES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE-MONTH PERIODS ENDED
MARCH 31, 1997 AND 1996
1997 1996
---------- -----------
REVENUES:
SERVICE FEES $ 1,045,129 $ 1,313,048
PORTFOLIO INCOME 294,864 45,619
----------- -----------
TOTAL 1,339,993 1,358,667
SELLING, GENERAL AND ADMINISTRATIVE 1,303,305 1,283,773
----------- -----------
INCOME FROM OPERATIONS 36,688 74,894
----------- -----------
OTHER INCOME (EXPENSE):
INTEREST INCOME 482 0
INTEREST EXPENSE (68,276) (57,053)
RENTAL OPERATIONS, NET 35,463 30,603
----------- -----------
TOTAL (32,331) (26,450)
----------- -----------
INCOME BEFORE INCOME TAXES 4,357 48,444
PROVISION FOR INCOME TAXES 2,579 0
----------- -----------
NET INCOME $ 1,778 $ 48,444
=========== ===========
NET INCOME PER SHARE $ 0.00 $ 0.01
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 4,510,271 4,500,271
=========== ===========
See accompanying notes to condensed
consolidated financial statements
2
CYPRESS FINANCIAL SERVICES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX-MONTH PERIODS ENDED
MARCH 31, 1997 AND 1996
1997 1996
----------- -----------
REVENUES:
SERVICE FEES $ 2,020,125 $ 2,347,520
PORTFOLIO INCOME 507,688 48,050
----------- -----------
TOTAL 2,527,813 2,395,570
SELLING, GENERAL AND ADMINISTRATIVE 2,593,376 2,354,250
----------- -----------
LOSS FROM OPERATIONS (65,563) 41,320
----------- -----------
OTHER INCOME (EXPENSE):
INTEREST INCOME 482 0
INTEREST EXPENSE (127,821) (115,085)
RENTAL OPERATIONS, NET 64,511 65,804
----------- -----------
TOTAL (62,828) (49,281)
----------- -----------
LOSS BEFORE INCOME TAXES (128,391) (7,961)
PROVISION FOR INCOME TAXES 5,251 3,949
---------- ----------
NET LOSS $ (133,642) $ (11,910)
========== ==========
NET LOSS PER SHARE $ (0.03) $ (0.01)
========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 4,510,271 4,500,271
========== ==========
SEE ACCOMPANYING NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
3
CYPRESS FINANCIAL SERVICES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX-MONTH PERIODS ENDED
MARCH 31, 1997 AND 1996
1997 1996
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS $(133,642) $ (11,910)
ADJUSTMENTS TO RECONCILE NET LOSS
TO NET CASH USED IN OPERATING
ACTIVITIES:
DEPRECIATION AND AMORTIZATION 89,351 34,800
CHANGES IN OPERATING ASSETS AND
LIABILITIES:
ACCOUNTS RECEIVABLES 73,275 (65,441)
PORTFOLIO RECEIVABLES (56,702) 113,505
ACCOUNTS PAYABLE (28,600) (41,557)
TRUST PAYABLES 26,414 21,644
ACCRUED LIABILITIES (97,620) (32,031)
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (127,524) 19,010
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
PURCHASES OF PROPERTY AND EQUIPMENT (63,408) (20,223)
NOTES RECEIVABLE FROM SHAREHOLDER (1,250) (6,333)
DECREASE (INCREASE) IN OTHER ASSETS (10,981) (740)
DECREASE IN RESTRICTED CASH (26,414) (21,644)
--------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES (102,053) (48,940)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
COMMON STOCK PURCHASE 2,500 0
NET BORROWINGS FROM LINE OF CREDIT 151,160 139,319
LONG-TERM DEBT (34,493) (45,662)
--------- ---------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 119,167 93,657
--------- ---------
NET INCREASE (DECREASE) IN CASH (110,410) 63,727
CASH, AT BEGINNING OF PERIOD 520,706 362,234
--------- ---------
CASH, AT END OF PERIOD $ 410,296 $ 425,961
========= =========
SEE ACCOMPANYING NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
4
CYPRESS FINANCIAL SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX-MONTH PERIODS ENDED
MARCH 31, 1997 AND 1996
NOTE 1 - QUARTERLY INFORMATION
- ------------------------------
THE ACCOMPANYING UNAUDITED, CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS HAVE
BEEN PREPARED IN ACCORDANCE WITH SECURITIES AND EXCHANGE COMMISSION REQUIREMENTS
FOR INTERIM FINANCIAL STATEMENTS. THEREFORE, THEY DO NOT INCLUDE ALL DISCLOSURES
THAT WOULD BE PRESENTED IN THE ANNUAL REPORT ON FORM 10-KSB OF CYPRESS FINANCIAL
SERVICES, INC. (THE "COMPANY"). THESE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL
STATEMENTS CONTAINED IN THE COMPANY'S 1996 ANNUAL REPORT ON FORM 10-KSB.
THE INFORMATION FURNISHED REFLECTS ALL ADJUSTMENTS (CONSISTING ONLY OF NORMAL
RECURRING ADJUSTMENTS) WHICH ARE, IN THE OPINION OF MANAGEMENT, NECESSARY FOR A
FAIR PRESENTATION OF FINANCIAL POSITION AND RESULTS OF OPERATIONS FOR THE
INTERIM PERIODS. THE OPERATING RESULTS ARE NOT NECESSARILY INDICATIVE OF RESULTS
TO BE EXPECTED FOR THE YEAR ENDING SEPTEMBER 30, 1997.
NOTE 2 - PORTFOLIO RECEIVABLES
- ------------------------------
PORTFOLIO RECEIVABLES REPRESENT LIQUIDATING PORTFOLIOS OF DELINQUENT ACCOUNTS
WHICH HAVE BEEN PURCHASED BY THE COMPANY FOR COLLECTION AND ARE STATED AT COST.
COST IS REDUCED BY CASH COLLECTIONS ON A PORTFOLIO BY PORTFOLIO BASIS AND
REVENUE IS RECOGNIZED WHEN CASH COLLECTIONS FOR A PORTFOLIO EXCEED ITS COST
BASIS.
THE FOLLOWING IS THE ACTIVITY OF PORTFOLIO RECEIVABLES, AT FACE VALUE, DURING
THE SIX-MONTH PERIOD ENDED MARCH 31, 1997:
FACE VALUE OF PORTFOLIO RECEIVABLES,
SEPTEMBER 30, 1996 $ 58,658,758
ADD-FACE VALUE OF PORTFOLIO RECEIVABLES PURCHASED 18,602,238
5
CYPRESS FINANCIAL SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
FOR THE SIX-MONTH PERIODS ENDED
MARCH 31, 1997 AND 1996
NOTE 2 - PORTFOLIO RECEIVABLES, CONTINUED
- -----------------------------------------
LESS-FACE VALUE OF PORTFOLIO RECEIVABLES
SOLD/COLLECTED (13,792,466)
------------
FACE VALUE OF PORTFOLIO RECEIVABLES,
MARCH 31, 1997 $ 63,468,530
============
THE FOLLOWING IS THE ACTIVITY OF PORTFOLIO RECEIVABLES, ON A COST BASIS, DURING
THE SIX-MONTH PERIOD ENDED MARCH 31, 1997:
PORTFOLIO RECEIVABLES, SEPTEMBER 30, 1996 $ 486,505
ADD: PURCHASES OF PORTFOLIO RECEIVABLES 462,245
LESS: PROCEEDS FROM SALES (COST RECOVERY) (83,315)
COLLECTIONS (COST RECOVERY) (322,228)
------------
PORTFOLIO RECEIVABLES, MARCH 31, 1997 $ 543,207
============
AS REFLECTED IN THE ACCOMPANYING 1997 CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS AS REVENUES, THE COMPANY COLLECTED OR RECEIVED PROCEEDS FROM SALES OF
ITS PORTFOLIO RECEIVABLES, IN EXCESS OF THEIR ORIGINAL COST ON A PORTFOLIO BY
PORTFOLIO BASIS, AGGREGATING $507,688. TOTAL CASH RECEIVED FROM ALL COLLECTIONS
AND SALES OF THE COMPANY'S PORTFOLIO RECEIVABLES DURING THE SIX-MONTH PERIOD
ENDED MARCH 31, 1997 TOTALED $908,226.
NOTE 3 - PROPERTY
- -----------------
PROPERTY CONSISTS OF THE FOLLOWING AT MARCH 31, 1997:
LAND $ 866,575
BUILDING 1,540,577
EQUIPMENT AND FURNISHINGS 1,488,341
------------
3,895,493
LESS: ACCUMULATED DEPRECIATION (1,302,422)
------------
PROPERTY - NET $ 2,593,071
============
6
CYPRESS FINANCIAL SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
FOR THE SIX-MONTH PERIODS ENDED
MARCH 31, 1997 AND 1996
NOTE 4 - INDEBTEDNESS
- ---------------------
ON JANUARY 29, 1997, THE COMPANY AND ITS BANK AMENDED THE MAXIMUM BORROWINGS
UNDER THE LINE OF CREDIT AGREEMENT FROM $1,250,000 TO $1,500,000. NET BORROWINGS
FROM THE LINE OF CREDIT AT MARCH 31, 1997 AMOUNTED TO $1,143,245. INTEREST ON
THE BORROWINGS ARE CHARGED MONTHLY BASED A COMMERCIAL BANK'S PRIME RATE PLUS
2.0% PER ANNUM (10.25% AT MARCH 31, 1997). THE LINE OF CREDIT EXPIRES ON JANUARY
29, 1998.
LONG-TERM DEBT AT MARCH 31, 1997 CONSISTS OF THE FOLLOWING:
NOTE PAYABLE TO BANK, SECURED BY CERTAIN EQUIPMENT,
DUE IN MONTHLY PAYMENTS OF $10,969, INCLUDING INTEREST
AT 11% PER ANNUM, THROUGH JUNE, 2000 AT WHICH TIME
THE ENTIRE PRINCIPAL BALANCE IS DUE AND PAYABLE. $ 714,949
MORTGAGE NOTE PAYABLE TO BANK, COLLATERALIZED BY LAND
AND BUILDING, DUE IN MONTHLY PAYMENTS OF $14,089,
INCLUDING INTEREST AT 8% PER ANNUM THROUGH DECEMBER,
2000 AT WHICH TIME THE ENTIRE PRINCIPAL BALANCE IS
DUE AND PAYABLE. 1,870,584
-----------
LONG-TERM DEBT $ 2,585,533
===========
NOTE 5 - INCOME TAXES
- ---------------------
INCOME TAX EXPENSE FOR THE PERIODS PRESENTED ARE BASED ON THE ESTIMATED
EFFECTIVE TAX RATE TO BE INCURRED FOR THE YEAR. DEFERRED TAX ASSETS AND
LIABILITIES AT MARCH 31, 1997, WERE NOT CONSIDERED SIGNIFICANT.
7
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
- -------
The Company is engaged in the collection of receivables in the commercial,
retail and medical industries. The Company historically earned commissions on
receivables collected for the Company's clients. Commencing January 1995, the
Company began purchasing a significant amount of receivables for its own
collection account ("Portfolio Receivables"). The Company has aggressively
increased its purchases of Portfolio Receivables for its own collection and
anticipates that this will become a significant portion of its future
operations. The Company's accounting policy does not recognize revenue from
ongoing collection and resale of its Portfolio Receivables until after the
recovery of the cost of each portfolio.
The following discussion of the financial condition and results of operations of
the Company should be read in conjunction with consolidated financial statements
and notes thereto included elsewhere in this report.
This report contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including, but not limited to, competition which has and will continue to put
price pressure on the Company's third party collection business, the cost and
availability of capital to finance its Portfolio Receivables and overall
economic conditions which generally have a direct effect on the Company's
ability to collect on the receivables.
RESULTS OF OPERATIONS
- ---------------------
THREE-MONTHS ENDED MARCH 31, 1997 VERSUS THREE-MONTHS ENDED MARCH 31, 1996
The Company had operating revenues of $ 1,339,993 for the three-month period
ended March 31, 1997 as compared to $ 1,358,667 for the three-month period ended
March 31, 1996. Revenues generated by the Company's collection service divisions
(contingency) was $ 1,045,129 for the three-month period ended March 31, 1997 as
compared to $1,313,048 for the three-month period ended March 31, 1996. Each of
the Company's collection service divisions have either decreased or remained
relatively constant as a result of the reduced commission rate structure and the
Company's focus on expanding its Portfolio Receivables business. Portfolio
income of $ 294,864 was recognized for the three-month period ended March 31,
1997 from Portfolio Receivables as compared to $ 45,619 for the three-month
period ended March 31, 1996.
8
As of March 31, 1997, the Company's direct purchases of Portfolio Receivables
had a remaining face value of approximately $ 63,468,000 as compared to a
remaining face value of approximately of $ 38,389,000 as of March 31, 1996. The
Company's accounting policy does not recognize revenue from the sales or
collections of its Portfolio Receivables until after the recovery of the cost of
each portfolio. During the three-month period ended March 31, 1997, the Company
received proceeds from sales and collections of $456,893 as compared to
$351,857 for the three-month period ended March 31, 1996. This increase of 29.9%
is attributable to the Company's focus on expanding its Portfolio Receivables
business.
Operating expenses for the three-month period ended March 31, 1997 were
$1,303,305 as compared to operating expenses of $1,283,773 for the three-month
period ended March 31, 1996. The increase is primarily attributable to an
increase in payroll costs, advertising and promotion costs and other operating
expenses for the collection of the Company's Portfolio Receivables.
Interest expense for the three-month period ended March 31, 1997 was $68,276 as
compared to interest expense of $57,053 for the three-month period ended March
31, 1996. The increase relates to the additional borrowings to acquire its
Portfolio Receivables. The Company expects to continue to utilize its credit
facilities to finance future acquisitions of Portfolio Receivables.
Net rental income for the three-month period ended March 31, 1997 was $35,463
as compared to net rental income of $30,603 for the three-month period ended
March 31, 1996. The increase relates to the Company's continued efforts to
control rental expenses.
The Company reported net income of $1,778 for the three-month period ended
March 31, 1997 as compared to net income of $48,444 for the three-month period
ended March 31, 1996. The decrease relates to the downward trend of commission
rates of its collection service divisions and the increase in operating expenses
related to collection of the Company's Portfolio Receivables.
RESULTS OF OPERATIONS
- ---------------------
SIX-MONTHS ENDED MARCH 31, 1997 VERSUS SIX-MONTHS ENDED MARCH 31, 1996
The Company had operating revenues of $ 2,527,813 for the six-months ended
March 31, 1997 as compared to operating revenues of $ 2,395,570 for the
six-months ended March 31, 1996. The increase of $ 132,243, or 5.5%, is
primarily the result of an
9
increase of $ 459,638 from its collection and sales of Portfolio Receivables for
the six-months ended March 31, 1997 as compared to the same period last
fiscal year. This increase more than offset lower revenues generated by the
Company's collection service divisions of $2,020,125 for the six-months ended
March 31, 1997 as compared to $2,347,520 for the six-months ended March 31,
1996. Each of the Company's collection service divisions have either decreased
or remained relatively constant as a result of the reduced commission structure
and the Company's focus on expanding its portfolio receivables business.
As of March 31, 1997, the Company's direct purchases of Portfolio Receivables
had a remaining face value of approximately $63,468,000 as compared to a
remaining face value of approximately of $58,659,000 as of September 30, 1996.
The Company's accounting policy does not recognize revenue from the sales or
collections of its Portfolio Receivables until after the recovery of the cost of
each portfolio. During the six-months ended March 31, 1997, the Company received
proceeds from sales and collections $911,874 as compared to $775,439 for the
six-months ended March 31, 1996.
Operating expenses for the six-months ended March 31, 1997 were $2,593,376 as
compared to operating expenses of $2,354,250 for the six-months ended March 31,
1996. The increase is primarily attributable to an increase in payroll costs,
advertising and brochure expenses, court costs, insurance expenses, depreciation
and other expenses for the collection of the Company's Portfolio Receivables.
Interest expense for the six-months ended March 31, 1997 was $127,821 as
compared to $115,085 for the six-months ended March 31, 1996. The increase
relates to the additional borrowings to acquire its Portfolio Receivables. The
Company expects to continue to utilize its credit facility to finance future
acquisitions of Portfolio Receivables.
Net rental income for the six-months ended March 31, 1997 $64,511 as compared
to $65,804 for the six-months ended March 31, 1996. The decrease in net rental
income is directly attributable to the Company utilitizing more space and
thereby leasing out less space in the Company owned office building.
The Company reported a net loss of $(133,642) for the six-months ended March
31, 1997 as compared to a net loss of $(11,910) for the six-months ended March
31, 1996. The increase in net loss resulted from an increase in operating
expenses and certain revenue loss during the first quarter which was
attributable to the upgrading of its collection software and the replacement of
old hardware which required additional training and caused computer down time
for its collection staff.
10
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company funds its operations primarily through cash flows from operations,
and its existing credit facility, which has an outstanding balance of
$1,143,245 as of March 31, 1997. The Company's credit facility, which is used to
acquire Portfolio Receivables and which carries an interest rate of prime plus
2%, has been increased to $1,500,000 and is due to expire on January 29, 1998.
Management plans to purchase additional Portfolio Receivables which will
necessitate the raising of additional capital through the issuance of either
debt or equity securities. There are no assurances that such financing will be
obtained and any delays in raising additional capital will affect the Company's
ability to acquire a material amount of additional Portfolio Receivables.
The Company currently has outstanding long-term debt with financial institutions
of $2,585,533 which is collateralized by a mortgage and certain equipment. The
Company's equipment debt is a term note with a remaining balance of
approximately $714,949 which is due in December, 2000 and carries an interest
rate of 11% per annum. The Company's mortgage note has a remaining balance of
approximately $1,870,584 and carries an interest rate of 8% per annum and is
due on March 5, 2000. Management is currently evaluating the feasibility of
refinancing the mortgage note payable. In either case, management expects to
continue to service its outstanding long-term debt through its cash flows from
operations.
11
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Change in Registrant's Independent Public Accountants
On April 28, 1997, the Company's Board of Directors approved the
engagement of Arthur Andersen, LLP to serve as the Company's independent public
accountants and to conduct the audit of the Company's financial statements for
the fiscal year ending September 30, 1997, replacing the firm of Corbin & Wertz,
CPAs, who had been engaged to audit the Company's financial statements for the
fiscal years ended September 30, 1995 and 1996. The change in accountants was
made with the view that it was in the best interests of the Company and its
shareholders to engage a nationally-recognized accounting firm to audit its
financial statements. The audit reports provided by Corbin & Wertz, CPAs for the
fiscal years ended September 30, 1995 and 1996 did not contain any adverse
opinion or a disclaimer of opinion nor any report qualified in any respect, and
management of the Company knows of no past disagreements between the Company and
Corbin & Wertz, CPAs on any matter of accounting principles or practice,
financial statement disclosure or auditing, scope or procedure.
12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibit is filed as part of this report in accordance with
the provisions of Item 601 of Regulation S-B:
Exhibit Name of Exhibit
- ------- ---------------
5 Letter on Change in the Company's Independent Public Accountants
(b) Reports on Form 8-K
Not Applicable
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CYPRESS FINANCIAL SERVICES, INC.
Date: May 5, 1997 By: /s/ FARREST HAYDEN
------------------------------
Farrest Hayden
Chairman of the Board and
Chief Executive Officer
Date: May 5, 1997 By: /s/ OTTO J. LACAYO
------------------------------
Otto J. Lacayo
Director, Chief Financial
Officer and Vice President
(Principle Accounting Officer)
14
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
5 Letter on Change in the Company's Independent
Public Accountants
27 Financial Data Schedule