UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2001
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _______________________ to ______________________
Commission file number 0-22271
CFI MORTGAGE INC.
(Exact name of registrant as specified in its charter)
Delaware 65-0127741
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
601 Cleveland Street, Suite 500
Clearwater, Florida 33755
(Address of principal executive office) (zip code)
Registrant's telephone number, including area code: 727-674-1010
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _____
27,171,151 shares, $.01 par value, as of March 31, 2001
(Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date)
PART I
ITEM 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward Looking Statements
The following discussion contains certain "forward-looking statements" (rather
than historical facts) which are subject to the safe harbor provision created by
the "Private Securities Litigation Reform Act of 1995" (the "Act") and
regulations and interpretations there under, including Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. All statements and other information contained herein
including such words as "may," "will," "expect," "believe," "plan," "estimate,"
"goal," "anticipate," "intend," and other similar terminology and use of future
tense, constitute forward-looking statements. These forward-looking statements
represent management's current expectations and are subject to business and
economic uncertainties and risks. Actual results could differ materially from
those set forth in and suggested by the forward-looking statements. This
discussion should be read in conjunction with the consolidated financial
statements of the Company and the related notes thereto.
Company Overview
CFI Mortgage, Inc. (the "Company") is engaged in two lines of business: First,
residential mortgage lending; and, second, development and licensing of
proprietary computer software solutions, primarily for the ground transportation
industry. The Company is incorporated in Delaware, and may be described as a
holding company. Its executive offices and operations are located in Clearwater,
Florida. The Company conducts its operations through two wholly owned
subsidiaries. First United MortgageBanc, Inc., a Florida corporation founded by
the Company, conducts the Company's mortgage lending business. Inventek, Inc., a
Florida corporation doing business as Surfside Software Systems, conducts the
Company's computer software business.
Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000
Results of Operations
The results of operations for the three months ended March 31, 2000 reflect no
mortgage related revenue, as the Company did not begin any mortgage operations
until June 2000.
The Company recognized a loss from operations of $417,210 for the three months
ended March 31, 2001 compared to $208,238 for the comparable period in 2000 an
increase of $208,972. The increase is primarily the result of a significant drop
in revenue from the mortgage operation that is the direct result of the
termination of the warehouse line of credit that was due in part to the
unauthorized misrepresentations by a former officer of the Company in the
initial credit application. This resulted in a loss per share of $0.02 from
continuing operations for the three months ended March 31, 2001 compared to a
loss per share of $0.01 from continuing operations for the same period in 2000.
The net loss for the three months ended March 31, 2001 is $442,210 compared to
$37,698 for the same period in 2000. The increase is the result of one-time
gains attributable to forgiveness of debt and a cancellation penalty for the
three months ended March 31, 2000.
Total revenues increased $671,403 or 84% to $795,552 for the three months ended
March 31, 2001 compared to $124,149 for the same period in 2000. The increase is
the direct result of revenues from the mortgage operation for the three months
ended March 31, 2001 compared to no mortgage related operations for the same
period in 2000. The increase, while dramatic, is much less than the Company
would have achieved had it not been for the unauthorized misrepresentation on
the credit application with the Company's warehouse lender perpetrated by a
former officer, which resulted in the termination of the Company's warehouse
line. In February 2001, the Company discovered that this same officer who was
responsible for overseeing the Company's mortgage lending operations had
diverted approximately $40,000 in mortgage payment checks due to the Company to
his own company. The Company is seeking a criminal prosecution of this person
for embezzlement. The Company believes that all the funds are in an account that
has been frozen and is confident that it will be able to recover the funds in
civil litigation.
1
Total operating expenses increased $880,375 or 72% to $1,212,762 for the three
months ended March 31, 2001 compared to $332,387 for the same period in 2000.
Selling expenses increased $321,931 or 91% to $350,114 for the three months
ended March 31, 2001 compared to $28,183 for the same period in 2000. The
primary reason for this was an increase of $313,266 or 97% for salaries and
broker commissions related to the mortgage operation compared to none for the
same period in 2000. General and administrative expenses increased $338,870 or
52% to $635,013 for the three months ended March 31, 2001 compared to $296,143
for the same period in 2000. Office and computer expenses increased $57,849 or
81% to $71,166 for the three months ended March 31, 2001 compared to $13,317 for
the same period in 2000, which is the direct result of increased operations.
Employee benefits and related payroll taxes increased $91,189 or 85% to $106,902
for the three months ended March 31, 2001 compared to $15,713 for the same
period in 2000. The increase is the result of the addition of employees related
to the mortgage operations. Rent expense increased $23,177 or 58% to $39,310 for
the three months ended March 31, 2001 compared to $16,133 for the same period in
2000, due to the renting of additional office space resulting from increased
operations. Depreciation and Amortization expense increased $52,292 or 56% to
$92,521 for the three months ended March 31, 2001 compared to $40,229 for the
same period in 2000. Interest expense increased $219,574 or 96% to $227,635 for
the three months ended March 31, 2001 compared to $8,061 for the same period in
2000. The increase is the result of interest expense charged for loans on the
warehouse line until sold for the three months ended March 31, 2001 compared to
none for the same period in 2000.
Liquidity and Capital Resources
The Company has been dependent on stock sales and third party borrowings to
sustain its operations. In April 2000, the Company sold 1,787,143 shares of
common stock plus 1,787,143 warrants to purchase one share of CFI common stock
at $1.67 per share in a private placement for $500,400. Going forward, the
Company believes that cash flow from operations will be sufficient to fund
operations. However, if additional funds are needed to support working capital
or to complete acquisitions, the Company would seek to raise such funds through
one or more public or private financing of equity, or from other sources. There
is no assurance any such additional financing, if needed, will be available or,
if available, that it would be on terms acceptable to the Company.
Net cash provided by operating activities was $10,631,814 for the three months
ended March 31, 2001 compared to net cash provided by operations of $98,032 for
the comparable period in 2000. The increase is primarily due to the selling of
the mortgage loans held for resale on the Company's warehouse line.
Net cash of $14,127 was used in investing activities for the three months ended
March 31, 2001 compared to net cash used in investing activities of $70,641 for
the comparable period in 2000. The change is due to no expenses generated for
software development costs for the three months ended March 31, 2001 compared to
$63,953 for the comparable period in 2000.
Net cash of $10,632,015 was used in financing activities for the three months
ended March 31, 2001 compared to net cash used in investing activities of
$19,942 for the comparable period in 2000. This was primarily the result of
selling the majority of the loans on the warehouse line of credit, and paying
down the line.
Working capital at March 31, 2001 was a deficit of $1,393,421 as compared with a
deficit of $1,066,324 at December 31, 2000. The increase of $327,097 or 30% in
the deficit is primarily the result of selling off the mortgage loans from the
warehouse line. Without the warehouse line, the deficit would have decrease by
$41,176 at March 31, 2001.
In April 2001, the Company signed a letter of intent with Tidalwave Holdings,
Inc., to form a joint venture which will provide the Company with $10,000,000
non-conforming (sub prime), and conforming revolving warehouse lines of credit.
This joint venture will enable the Company to establish and operate a national
wholesale mortgage conduit that will purchase loans on a wholesale basis. The
loans will be processed, underwritten and funded by FUMB for sale in
institutional private placement transactions.
Under the terms of the Agreement with FAMS, FUMB is provided warehouse funding
by FAMS at interest rates ranging from (New York) Prime to Prime plus 2%, and
utilizing compensating balances on deposit at FAMS's participating warehouse
banks, and receives 100% advances on loans funded. The company has executed a
Letter of Intent that will allow the Company to participate in mortgage
2
securitization issues with one of its investment mortgage bankers that will
allow the company to retain an interest in the servicing rights for loans
securitized per that Agreement.
Part II - Other Information
ITEM 1: Legal Proceedings.
In the ordinary course of its business, the Company forecloses on real estate
secured mortgage loans in default and may be involved in other legal proceedings
as a plaintiff or a defendant, none of which the Company believes will be
material.
As a result of the reorganization in Chapter 11, the Company is no longer
threatened with any litigation, claims and assessments, which may have existed
prior to filing of the petition.
A former executive officer, and two of his relatives who were formerly employed
by the Company have filed suit against the Company for unpaid wages and other
matters. The Company terminated this person for cause and believes it has no
liability under the employment agreement. This individual has filed a lawsuit
against the Company seeking back wages. The Company is vigorously defending this
action and expects to prevail, and is currently negotiating a settlement of this
matter. Two other former executive officers were also terminated for cause. The
Company is negotiating with these persons to settle any claims they may have
under their employment agreements and is optimistic in reaching a settlement.
All three former executive officers mentioned in the preceding paragraph had
employment agreements, which included a stock bonus provision, entitling them to
maintain a specified percentage of the Company's common stock as determined at
the end of each fiscal year. The Company believes this bonus provision was
illegal, and based on the advice of counsel, has terminated this provision and
intends to vigorously defend against any attempt to enforce it.
A fourth executive officer was terminated for cause on February 2, 2001. This
person holds one share of the Company's Class 4 convertible preferred stock and
one share of the Company's Class 5 convertible preferred stock. The original par
value was equal to the value of the commercial real estate in Evansville,
Indiana acquired by the Company, less mortgages, liens and encumbrances, which
are now in dispute. The par value of the Class 5 preferred stock is to be equal
to two and one half times the "net profits" from the Company's mortgage lending
operation for the eighteen-month period beginning July 2000. Because this person
will no longer be contributing to the success of the mortgage lending operation
due to his termination, the Company intends to modify the par value of the Class
5 preferred stock. Furthermore, the Company intends to reduce the par value of
its Class 4 preferred stock held by this person by an amount equal to
undisclosed liens on the commercial real estate, which the Company acquired from
this person. This person may seek to enforce the Company's full obligations
under the Class 4 and 5 preferred stock. The Company is presently seeking
criminal prosecution against this person for embezzlement. In addition, the
Company has begun a civil suit to recover the embezzled funds, which are in a
bank account that has been frozen, and bonded by the court.
Item 2. Changes in Securities
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
3
Item 6. Exhibits and Reports Filed on Form 8-K
None
SIGNATURES
In accordance with the requirements of Section 13 or 15(d) of the Exchange Act,
the Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CFI MORTGAGE INC.
(Registrant)
Date: May 18, 2001 /s/ Stephen E. Williams
Stephen E. Williams
President and Chief Executive Officer
Date: May 18, 2001 /s/ Daniel M. Brown
Daniel M. Brown
Chief Financial Officer and Principal Accounting Officer
4
CFI MORTGAGE INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(Unaudited)
I N D E X
Page No.
--------
Part I - Financial Information:
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets
As at March 31, 2001 and December 31, 2000 .......F-2 - F-3
Consolidated Statements of Operations
For the Three Months Ended
March 31, 2001 and 2000 .......................... F-4
Consolidated Statement of Stockholders' Equity
For the Three Months Ended March 31, 2001 ........ F-5
Consolidated Statements of Cash Flows
For the Three Months
Ended March 31, 2001 and 2000 ....................F-6 - F-7
Notes to Consolidated Financial Statements .......F-8 - F-22
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ..F-? - F-?
Part II - Other Information:
Item 3 Through Item 9 - Not Applicable ............ F-??
Signatures ........................................ F-??
F-1
CFI MORTGAGE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
A S S E T S
March 31, December 31,
2001 2000
----------- ------------
Current assets:
Cash $ 19,219 $ 33,547
Mortgage loans held for sale 1,793,283 13,149,612
Other receivable 293,973 --
Accounts receivable 51,117 20,428
Note receivable 100,000 --
Rent receivable 172,612 115,075
Due from related parties 85,726 85,726
Deferred finance costs 73,125 --
Prepaid expenses and other current assets 30,071 17,811
----------- -----------
Total current assets 2,619,126 13,422,199
----------- -----------
Property and equipment, at cost, less accumulated
depreciation of $129,143 and $97,524, respectively 2,837,341 2,854,833
----------- -----------
Other assets:
Investments - at equity 120,000 120,000
Capitalized software development costs, less
accumulated amortization of $256,109
and $230,368, respectively 258,709 284,450
Goodwill, less accumulated amortization
of $158,827 and $123,666, respectively 1,306,253 1,341,414
Notes receivable -- 100,000
Security deposits 17,205 18,955
----------- -----------
Total other assets 1,702,167 1,864,819
----------- -----------
$ 7,158,634 $18,141,851
=========== ===========
See accompanying notes to financial statements.
F-2
CFI MORTGAGE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
LIABILITIES AND STOCKHOLDER'S
EQUITY
March 31, December 31,
2001 2000
---------- -------------
Current liabilities:
Warehouse bank line of credit $ 1,739,139 $ 12,727,195
Accounts payable 142,665 153,744
Current portion of mortgage payable 84,654 66,754
Note payable - bank 128,541 --
Due to affiliated company 153,191 150,135
Due to related party 175,262 --
Due to officer 30,806 206,068
Notes payable - other 56,000 138,500
Convertible debentures payable 225,000 --
Accrued expenses and other current liabilities 1,277,289 1,046,127
------------ ------------
Total current liabilities 4,012,547 14,488,523
------------ ------------
Mortgage payable - long-term portion 1,407,797 1,425,697
------------ ------------
Deferred income 41,427 221,058
------------ ------------
Commitments and contingencies -- --
Stockholders' equity:
Common stock, $.01 par value
Authorized 35,000,000 shares
Issued and outstanding - 27,171,151 and 271,711 263,311
26,331,151, respectively
Preferred stock, no par value
Authorized 10,000,000 shares
Issued and outstanding - 2 shares 1,721,596 1,721,596
Additional paid-in capital 7,240,421 7,066,321
Accumulated deficit (7,441,048) (6,998,838)
------------ ------------
1,792,680 2,052,390
Less: Stock subscriptions receivable (95,817) (45,817)
------------ ------------
Total stockholders' equity 1,696,863 2,006,573
------------ ------------
$ 7,158,634 $ 18,141,851
============ ============
See accompanying notes to financial statements.
F-3
CFI MORTGAGE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three
Months Ended
March 31,
----------------------------
2001 2000
----------- ------------
Revenues:
Commissions, fees and interest - mortgages $ 661,045 $--
Software 76,971 124,149
Rental income 57,536 --
------------ ------------
Total revenues 795,552 124,149
------------ ------------
Expenses:
Selling 350,114 28,183
General and administrative 635,013 296,143
Interest 227,635 8,061
------------ ------------
Total expenses 1,212,762 332,387
------------ ------------
Loss from operations (417,210) (208,238)
------------ ------------
Other income (expense):
Financial costs (25,000) --
Settlement fee from cancelled acquisition -- 100,000
------------ ------------
Total other income (expense) (25,000) 100,000
------------ ------------
Loss before extraordinary gain (442,210) (108,238)
Extraordinary gain - forgiveness of debt -- 70,540
------------ ------------
Net loss ($ 442,210) ($ 37,698)
============ ============
Basic earnings per common share:
Loss before extraordinary gain ($ 442,210) ($ 108,238)
Extraordinary gain -- 70,540
------------ ------------
Net loss available for common stockholders ($ 442,210) ($ 37,698)
============ ============
Weighted average shares 26,328,618 14,647,255
============ ============
Loss per share - basic:
Loss per share from continuing operations
before extraordinary gain ($ 0.02) ($0.01)
Extraordinary gain -- 0.01
------------ ------------
Net loss ($ 0.02) $ --
============ ============
See accompanying notes to financial statements.
F-4
CFI MORTGAGE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2001
(Unaudited)
Additional
Common Stock Preferred Stock Paid-In Accumulated
Shares Amount Shares Amount Capital Deficit Total Total
------ ------ ------ ------ ------- ------- ----- -----
Balance - January 1, 2001 26,331,151 $263,311 2 $1,721,596 $7,066,321 ($6,998,838) ($45,817) $2,006,573
Shares to be issued as repayment
of advance 375,000 3,750 -- -- 81,250 -- -- 85,000
Shares to be issued pursuant to
employment contract 375,000 3,750 -- -- 71,250 -- (50,000) 25,000
Shares to be issued for sale of
convertible debentures 90,000 900 -- -- 21,600 -- -- 22,500
Net loss for the three months
ended March 31, 2001 -- -- -- -- -- (442,210) -- (442,210)
---------- -------- ----- ---------- ---------- ----------- -------- ----------
Balance - March 31, 2001 27,171,151 $271,711 2 $1,721,596 $7,240,421 ($7,441,048) ($95,817) $1,696,863
========== ======== ===== ========== ========== =========== ======== ==========
See accompanying notes to financial statements.
F-5
CFI MORTGAGE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three
Months Ended
March 31,
--------------------------
2001 2000
------------ ---------
Cash flows from operating activities:
Net loss from operations ($ 442,210) ($ 37,698)
------------ ---------
Adjustments to reconcile net loss to net
cash provided by operating activities:
Write down on mortgages held for sale 81,897 --
Forgiveness of debt -- (70,540)
Deferred income (179,631) --
Depreciation and amortization 92,521 40,229
Common stock issued for salaries and other expenses 25,000 43,480
Interest accrued on related party loans 3,056 3,061
Increase (decrease) in cash flows as a result of
changes in asset and liability account balances:
Mortgage loans held for sale 11,356,329 --
Accounts receivable (30,689) (364)
Rent receivable (57,537) --
Other receivable (293,973) --
Prepaid expenses and other current assets (12,260) (3,018)
Security deposits 1,750 (10,300)
Accounts payable (11,079) --
Accrued expenses and other current liabilities 98,640 133,182
------------ ---------
Total adjustments 11,074,024 135,730
------------ ---------
Net cash provided by operating activities 10,631,814 98,032
------------ ---------
Cash flows from investing activities:
Software development costs -- (63,953)
Expenditures for property and equipment (14,127) (6,688)
------------ ---------
Net cash used in investing activities (14,127) (70,641)
------------ ---------
Cash flows from financing activities:
Warehouse bank line of credit (10,988,056) --
Note payable - bank 128,541 --
Proceeds from convertible debentures 225,000 --
Common stock issued 85,000 --
Notes payable - other (82,500) (17,942)
Due to affiliate -- (2,000)
------------ ---------
Net cash used in financing activities (10,632,015) (19,942)
------------ ---------
Net increase (decrease) in cash (14,328) 7,449
Cash at beginning of period 33,547 7,574
Cash of subsidiary acquired -- 2,466
------------ ---------
Cash at end of period $ 19,219 $ 17,489
============ =========
See accompanying notes to financial statements.
F-6
CFI MORTGAGE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
For the Three
Months Ended
March 31,
--------------------------
2001 2000
------------ ---------
Supplemental Disclosures of Cash Flow Information:
Cash paid during the periods for:
Income taxes $ -- $ --
============ =========
Interest $ 195,670 $ --
============ =========
Supplemental Schedules of Noncash Investing
and Financing Activities:
Common stock issued for convertible debenture $ 22,500 $ --
============ =========
Common stock issued for salaries and other expenses $ 25,000 $ 43,480
============ =========
Transfer in interest of notes payable
from officer to related party $ 175,262 $ --
============ =========
See accompanying notes to financial statements.
F-7
CFI MORTGAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(UNAUDITED)
NOTE 1 - GOING CONCERN.
The accompanying interim unaudited consolidated financial
statements have been prepared assuming the Company will continue as
a going concern. The Company recently completed a voluntary plan of
reorganization. The Company may continue to need to raise additional
capital to fund operations until such time as operating cash flows
are sufficient to sustain the operations of the Company. There are
no assurances that the Company can raise capital to sustain
operations until cash flows from operations are sustainable. Should
the Company be unable to obtain such capitalization, management
might be forced to cease operations and liquidate the Company. Such
conditions raise substantial doubt about the Company's ability to
continue as a going concern. The consolidated financial statements
contained herein do not include any adjustments that might result
from the outcome of this uncertainty.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES.
(a) Basis of Presentation:
The accompanying interim unaudited consolidated financial
statements have been prepared in accordance with accounting
principles generally accepted in the United States of America. The
financial statements include the accounts of CFI mortgage Inc.
("CFI"), First United MortgageBanc, Inc. ("FUMB"), Inventek, Inc.,
doing business as Surfside Software Systems ("Surfside") and
Monetech, Inc., all wholly owned subsidiaries of CFI. The financial
statements also include the Company's 40% minority interest in First
Mortgage Securities, Inc., of Clearwater Florida ("FMS") accounted
for under the equity method. CFI and its subsidiaries are hereafter
collectively referred to as the "Company".
The accompanying unaudited consolidated financial statements
have been prepared in accordance with accounting principles
generally accepted in the United States of America for interim
financial information and with instructions for Form 10-QSB and
Article 10 and Regulation S-B. Accordingly, they don not include all
of the information and footnote required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, the statements contain all adjustments
(consisting only of normal recurring accruals) necessary to present
fairly the financial position as of March 31, 2001 and the results
of operations and cash flows for the three months ended March 31,
2001 and 2000. The results of operations for the three months ended
March 31, 2001 and 2000 are not necessarily indicative of the
results to be expected for the full year.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(a) Basis of Presentation: (Continued)
The December 31, 2000 balance sheet has been derived from the
audited financial statements at that date included in the Company's
annual report on Form 10-KSB. These unaudited financial statements
should be read in conjunction with the financial statements and
notes thereto included in the Company's annual report on
Form-10-KSB.
F-8
(b) Use of Estimates:
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions in
determining the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities as of the date of
the consolidated financial statements, and the reported amounts of
revenues and expenses during the year. Actual results could differ
from those estimates.
(c) Applicable Accounting Pronouncements:
The Company has previously adopted Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities"
("SFAS No. 125"), which provides accounting and reporting standards
for transfers and servicing of financial assets and extinguishments
of liabilities. The statement also provides standards for
distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings.
Fee income in connection with mortgage loans, is accounted for
in conformity with Statement of Financial Accounting Standards No.
91. This statement requires that fees are offset by their direct
loan costs and the net deferred income is recognized over the life
of the loan. The Company has previously adopted the guidance under
SFAS No. 91.
Upon sale of the related collateral mortgages, the net fee
income previously being amortized is then recognized into income.
Concurrent with the acquisition of its new subsidiary,
Surfside, the Company has adopted the guidance provided under SFAS
No. 86, "Accounting for the Costs of Computer Software to Be Sold,
Leased, or Otherwise Marketed". SFAS No. 86 provides guidance for
the specific costs in the development of proprietary software
products which may be capitalized, and the stages of development
during which they may be capitalized.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(d) Property and Equipment:
Property and equipment are stated at cost less accumulated
depreciation. The Company's policy is to provide for depreciation
over the estimated useful lives of the assets ranging from 3 to 39
years. Expenditures for leasehold improvements are capitalized and
amortized over their estimated useful lives or the life of the
lease, whichever is shorter in duration. Expenditures for
betterments are capitalized and depreciated as described above.
Expenditures for repairs, maintenance and minor renewals are
charged to operations as incurred. Upon retirement or abandonment of
the property and equipment, the carrying value and related
accumulated depreciation and amortization are removed from the
accounts.
(e) Capitalized Software Development Costs:
F-9
Capitalized software costs, which represent the costs incurred
by the Company to develop its proprietary software products
subsequent to determining the programs' technical feasibility and
prior to availability for sale to the general public, are
capitalized and amortized over a period of five years. Any remaining
unamortized costs relating to program development which is
considered obsolete is written off in the period of obsolescence.
Amortization of capitalized software development costs
amounted to $25,741 and $10,645 for the three months ended March 31,
2001 and 2000, respectively.
(f) Mortgage Loans Held for Sale:
Mortgage loans are carried at the lower of cost or market
determined on an aggregate basis.
(g) Sale of Loans:
Premiums received from investors are recognized as revenue
upon the sale of mortgage loans when all of the incidence of
ownership passes to the permanent investor.
NOTE 2- SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(h) Goodwill:
In conjunction with the Company's acquisition of a 100%
interest in Surfside, the value of assets exchanged, which was in
excess of the value of assets received, net of liabilities, resulted
in the creation of goodwill in the amount of $1,347,880. The Company
is amortizing the goodwill over a period of ten years. Additionally,
the acquisition by one of the Company's subsidiaries of two
buildings net of liabilities resulted in the creation of goodwill in
the amount of $117,200. The subsidiary is amortizing the goodwill
created in the acquisition of the buildings over a period of 15
years. Amortization expense charged to operations amounted to
$35,161 and $24,058 for the three months ended March 31, 2001 and
2000, respectively.
Management periodically reviews the value of all long-lived
assets, including goodwill, to determine if there has been any
impairment in the carrying value of the asset. Should management
determine that such an impairment has occurred, an appropriate
allowance will be set up to reflect the impairment of said asset.
(i) Income Taxes:
The Company complies with SFAS No.109, "Accounting for Income
Taxes", which requires an asset and liability approach to financial
accounting and reporting for income taxes. Deferred income tax
assets and liabilities are computed for differences between the
financial statement and tax bases of assets and liabilities that
will result in future taxable or deductible amounts, based on the
enacted tax laws and rates in the periods in
F-10
which differences are expected to effect taxable income. Valuation
allowances are established, when appropriate, to reduce deferred tax
assets to the amount to be realized.
(j) Loss Per Common Share:
Earnings (loss) per common share is based on the weighted
average number of common shares outstanding. SFAS No. 128, "Earnings
Per Share", requires dual presentation of basic and diluted earnings
per share on the face of the statements of operations. Basic
earnings (loss) per share excludes any dilutive common stock
equivalents and is computed by dividing net income or loss by the
weighted average number of shares outstanding for the period.
Diluted earnings per share reflect the potential dilution to common
shareholders as if all common stock equivalents were converted into
equivalent shares of common stock, thereby diluting net income
available to holders of the common stock.
Diluted loss per share has not been presented in the financial
statements herein, as the effect of including the common stock
equivalents would be antidilutive for all periods presented.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(k) Recently Issued Accounting Pronouncements.
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 - "Reporting Comprehensive
Income", No. 131 - "Disclosures about Segments of an Enterprise and
Related Information", No. 132 - "Employer's Disclosures about
Pension and Other Postretirement Benefits" and No. 133 - "Accounting
for Derivative Instruments and Hedging Activities". Management does
not believe that the effect of implementing these new standards will
be material to the Company's financial position, results of
operations and cash flows.
NOTE 3 - FORGIVENESS OF DEBT.
On July 6, 1999, pursuant to the filing of Chapter 11 by the
Company, the Court confirmed a plan of reorganization effective
August 2, 1999 (the "Plan"), whereby creditors' claims that were
approved by the Court were satisfied by the issuance of one share of
the Company's common stock in exchange for each dollar of debt of
the approved claim. As a result of the satisfaction of the
pre-petition liabilities, the Company has recognized forgiveness of
debt in the amount of $-0- and $70,540 for the three months ended
March 31, 2001 and 2000, respectively.
NOTE 4 - ACQUISITIONS.
(a) On January 14, 2000, the Company acquired a 65% interest in
Inventek, Inc. (Doing business as Surfside Software Systems of
Clearwater, Fl.) ("Surfside"), in exchange for the Company's
convertible preferred stock and certain common stock purchase
warrants valued at approximately $1,080,000. Surfside creates
and markets proprietary software products. The Company issued
preferred stock with a par value of $700,000 and 1,000,000
common stock purchase warrants, to which the Company
attributed a value of $380,000. The preferred stock is
convertible into shares of the Company's common stock based on
the average ask price for the five trading days at the end of
the month prior
F-11
to conversion. The preferred shares have no cumulative
dividend features, but do entitle the holders thereof to
participate in any dividends payable to holders of common
stock on a pro rata basis as if the shares had previously been
converted.
The warrants entitle the holders thereof to purchase one share
of the Company's common stock at an exercise price of $.15 per
share for a period of five years from the issue date.
NOTE 4 - ACQUISITIONS. (Continued)
On August 4, 2000, the Company acquired the remaining 35%
minority interest in Inventek, Inc. in exchange for 300,000
shares of the Company's common stock and 30,000 common stock
purchase warrants at an exercise price of 120% of the average
closing price or average closing asked price for the Company's
common stock on the date of the grant. These warrants are
exercisable for a period of two years.
The Company also agreed to contribute $250,000 as additional
paid-in capital, at various dates through June 1, 2000. As of
March 31, 2001, the Company has contributed $229,000 of the
total due to be contributed.
The agreement calls for a potential adjustment to the purchase
price, based on earnings of Surfside over the twenty-four
month period following the closing of the transaction. Such
adjustment would be in the form of additional convertible
preferred stock up to an additional $4,000,000 at par value.
(b) On June 13, 2000, the Company acquired two commercial office
buildings from Flamingo Financial Services, Inc. The buildings
have been appraised at a value of $2,550,000 and the Company
assumed the related collateral mortgages, which amounted to
$1,528,404. In exchange, the Company gave the sellers one
share of its convertible preferred stock with a par value of
$1,021,596 and warrants to purchase 750,000 shares of its
common stock. CFI then contributed the two buildings along
with the underlying mortgage to a newly formed company, First
United MortgageBanc, Inc. ("FUMB"), a wholly owned subsidiary.
The agreement also provides for a potential adjustment to the
purchase price, based on the net profit of FUMB over the
eighteen month period following the closing of the
transaction. This adjustment will be satisfied by the issuance
of a 2nd share of CFI's preferred stock.
The preferred stock is convertible into shares of the
Company's common stock based on the average asking price for
the five trading days at the end of the month prior to
conversion. The preferred shares have no cumulative dividends
rights, but permit the holders thereof to participate in any
dividends payable to holders of common stock on a pro rata
basis, as if the shares had been converted. The three
warrants, each for 250,000 shares of the Company's common
stock, are exercisable at prices of $.15, $.35 and $.50 per
share, respectively. The warrants are exercisable for a period
of five years from the date of issuance.
F-12
NOTE 4 - ACQUISITIONS. (Continued)
(c) On May 4, 2000, the Company acquired a 40% interest in First
Mortgage Securities, Inc., of Clearwater Florida, in exchange
for 400,000 shares of its common stock and common stock
purchase warrants to acquire 400,000 shares of the Company's
common stock at an exercise price of $.67 per share. The
acquisition was accounted for under the equity method.
The Company attributed a value of $225,000 to the common stock
and common stock purchase warrants exchanged for the interest
in FMS. The Company wrote down the investment by $105,000
during fiscal 2000, based on then most current financial
information available for FMS. The Company has become aware
through public documents, that FMS and its parent company were
acquired by Tidalwave Holdings, Inc. in a stock exchange. As a
result of the Tidalwave acquisition, the Company's investment
in FMS may be worth at least $225,000. However, the Company
could not quantify the value as of the date of this report.
On April 28, 2000, the Company formed a wholly-owned
subsidiary Monetech, Inc. for the purpose of acquiring the net
assets of RJ Systems, Inc., a software development company. At
March 31, 2001 the Company has determined that this
acquisition would not be beneficial to its future plans and
has decided not to pursue the acquisition. Monetech, Inc. will
continue as an inactive company, to be used for future
acquisitions the Company may be involved with.
(d) On April 12, 2001, the Company signed a letter of intent with
Tidalwave Holdings, Inc., a Florida corporation ("Tidalwave")
to form a joint venture for the purpose of originating, buying
and funding collateral mortgages primarily in the sub-prime
mortgage market.
Under the terms of the proposed agreement, a new corporation
will be formed. CFI will acquire preferred stock in the
corporation in exchange for its preferred stock with a value
of $2.5 million. Tidalwave will acquire all of the issued
common stock in exchange for $2.5 million of its preferred
stock.
Tidalwave will provide the new corporation with access to its
warehouse lines and secondary marketing and will receive a fee
of one percent of each loan funded under the joint venture.
CFI, through its wholly-owned subsidiary FUMB, will be
responsible for all costs associated with the loan origination
and will receive all income, less the one percent.
NOTE 5 - OTHER RECEIVABLE.
In connection with the sale of the collateral mortgages the
bank has retained 10% of the principal balance on those mortgages
that are more than 90 day old, and still not sold as at March 31,
2001. Upon the sale of all the mortgages (which occurred in May
2001), and payment of all outstanding interest and fees due the
bank, any balance remaining will be remitted to the Company.
F-13
NOTE 6 - PROPERTY AND EQUIPMENT.
Property and equipment, at cost, consists of the following:
March 31, December 31,
2001 2000
----------- ----------
Buildings $2,550,000 $2,550,000
Leasehold improvements 15,031 15,031
Furniture 217,661 217,661
Computer equipment 129,508 115,381
Office equipment 54,284 54,284
---------- ----------
2,966,484 2,952,357
Less: Accumulated depreciation
and amortization 129,143 97,524
---------- ----------
$2,837,341 $2,854,833
========== ==========
Depreciation and amortization expense amounted to $31,619 and
$5,526 for the three months ended March 31, 2001 and 2000,
respectively.
NOTE 7 - RELATED PARTY TRANSACTIONS.
(a) For the three months ended March 31, 2001, all of the rental
income was derived from a company owned by a preferred
stockholder of the Company. The Company was due $172,612 and
$115,075 at March 31, 2001 and December 31, 2000, respectively
from this company for rent and is reflected in the financial
statements as a current asset. In addition there is a note
receivable from this company in the amount of $100,000. The
note receivable with accrued interest at 6% is due on March
31, 2002. On September 1, 2000 this company filed a petition
for reorganization under Chapter XI of the United States
Bankruptcy Codes. Neither the lease or the note have been
included in the petitioner's schedule of debts submitted to
the court. Management of the Company expects full recovery of
both amounts. Should the Company be unsuccessful in asserting
these claims, it believes it can offset them against certain
stock rights the individual has been granted by the Company in
the aforementioned acquisition of the Indiana property. The
ultimate resolution of these events are undeterminable as of
the date of this report.
NOTE 7 - RELATED PARTY TRANSACTIONS. (Continued)
As of March 31, 2001, the Company owes this preferred
stockholder $175,262. The notes payable were originally issued
to an officer of the Company who has assigned his rights to
the aforementioned individual.
(b) The Company has made advances to two individuals, one of whom
is a former director of the Company. The balance amounted to
$85,726 at each of March 31, 2001 and December 31, 2000. The
advances are due on demand and there has been no interest
charged on the outstanding balances.
(c) The Company has a revolving line of credit with an affiliate,
whereby it can borrow up to $150,000, with interest charged at
9% per annum. The loan is due on demand. The Company was
liable under this credit facility for $153,191 and $150,135 at
March 31, 2001 and December 31, 2000, respectively. The
F-14
balances include accrued interest of $15,450 and $12,400,
respectively.
As an inducement to make the loan, the affiliate was
previously granted warrants to purchase 150,000 shares of the
Company's common stock at an exercise price of $.25 per share,
which represented 105% of the closing bid price on the date of
the grant. During the year 2000 the sole stockholder of this
affiliate passed away and all interests have passed through to
his estate.
NOTE 8 - NOTE PAYABLE - BANK.
The note is payable in twelve monthly installments of
approximately $11,800 including interest at a rate of prime plus 2%.
NOTE 9 - DUE TO OFFICER.
During the period ended December 31, 2000, the Company
received advances from an officer totaling $200,000 of which
$170,000 plus interest was assigned to a preferred stockholder of
the Company. The remaining loan balance is payable on demand and
bears interest at 9% per annum. The balance at March 31, 2001 of
$30,806 includes accrued interest of $806.
NOTE 10 - WAREHOUSE LINE OF CREDIT.
FUMB had an agreement with an institution that provided a
$15,000,000 warehouse credit facility, whereby advances were
available up to the extent of the loan limit based upon submitted
mortgage documents which collateralize the loan. As the mortgages
were sold to investors, the proceeds were used to reduce the loan
advances specifically identified with those mortgages sold.
As of February 13, 2001 the financial institution terminated
the warehouse line of credit due in part to the unauthorized
misrepresentation of a former officer of the Company. As a result of
this default the outstanding principal balance, accrued interest and
fees became due. As of the report date, the Company has sold all of
the collateral mortgages and expects to repay the institution in
full. The Company and two stockholders have guaranteed payment of
the credit facility.
The terms of the credit facility called for an interest rate
at the bank's prime rate. Interest expense on the warehouse line
amounted to $196,000 and $-0- for the three months ended March 31,
2001 and 2000, respectively.
In addition, for the three months ended March 31, 2001 the
Company charged operations for approximately $82,000 to recognize
the loss on the mortgages sold subsequent to March 31, 2001.
F-15
NOTE 11 - MORTGAGE PAYABLE.
The mortgage is payable in monthly installments of $15,168
including interest at 7.75% with a final payment due on December 31,
2014. The buildings collateralize the mortgage, and in addition, the
sellers remain primarily liable. The mortgage balance consists of
the following:
March 31, December 31,
2001 2000
---------- ----------
Current portion $ 84,654 $ 66,754
Long-term portion 1,407,797 1,425,697
---------- ----------
$1,492,451 $1,492,451
========== ==========
NOTE 11 - MORTGAGE PAYABLE. (Continued)
Annual maturities for the next five years are as follows:
Years Ending
March 31,
------------
2002 $ 84,654
2003 73,623
2004 79,367
2005 86,127
2006 93,167
Thereafter 1,075,513
----------
$1,492,451
==========
Interest expense amounted to $28,910 and $-0- for the three
months ending March 31, 2001 and 2000, respectively. In addition at
March 31, 2001 the Company is in arrears on its mortgage principal
payments for the 1st quarter of 2001 amounting to $16,593 plus
unpaid interest of $28,910.
NOTE 12 - DUE TO BANKS AND SUNDRY CREDITORS.
The Plan of Reorganization as discussed in note 3 included
claims from two financial institutions in the amount of $4,000,000,
as well as certain non-priority claims from present and former
employees for unpaid compensation up to the petition date amounting
to $83,328. During the year December 31, 2000, the Company issued
2,400,000 shares of its common stock in satisfaction of the claims
from the two financial institutions, which resulted in the
recognition of forgiveness of debt amounting to $3,100,000.
F-16
Additionally, the Company issued 467,531 shares of its common stock
in satisfaction of liabilities resulting in forgiveness of debt of
$168,216.
NOTE 13 - 12% CONVERTIBLE DEBENTURES.
During the quarter ending March 31, 2001, the Company received
$225,000 from the sale of 12% convertible debentures through a
private securities subscription agreement. The agreement calls for a
maximum of $700,000 in debentures to be sold in $25,000 minimum
increments. The debentures are collaterilized by a second trust deed
up to the value of $700,000 in the Company's real property. The
debentures have a maturity date of 190 days from the date of issue
and allow the holders the option of converting 15% of their
investment into the Company's common stock at $0.10 per share upon
maturity. In addition each holder of a $25,000 unit shall be issued
10,000 shares of the Company's common stock upon subscription.
F-17
NOTE 14 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES.
Accrued expenses and other current liabilities are comprised
of the following:
March 31, December 31,
2001 2000
--------- ------------
Professional fees $ 120,089 $ 96,900
Accrued writedown on mortgages held for sale 81,897 -
Accrued compensation of employees - 52,206
Accrued compensation of officers 520,151 512,651
Accrued finance costs -
convertible debentures 50,625 -
General and administrative expenses 177,541 23,899
Payroll taxes, penalties and interest 298,077 210,069
Interest accrued on warehouse line 28,909 150,402
---------- ----------
$1,277,289 $1,046,127
========== ==========
Included in accrued compensation of officers is $405,150 which
represents the aggregate compensatory element of stock bonuses to be
issued pursuant to employment agreements entered into, subsequent to
the effective date of the Plan.
NOTE 15 - COMMITMENTS AND CONTINGENCIES.
(a) Leases:
In January 2000, the Company's wholly owned subsidiary,
Surfside, entered into a lease for office space which runs through
December 31, 2004. Minimum annual rents under the lease are as
follows:
Years Ending
March 31,
2002 $151,635
2003 159,150
2004 167,091
2005 129,942
--------
$607,818
========
Rent expense amounted to $39,310 and $16,133 for the three
months ended March 31, 2001 and 2000, respectively.
F-18
NOTE 15 - COMMITMENTS AND CONTINGENCIES. (Continued)
(b) Employment Contracts:
In August 1999, the Company entered into employment contracts
with the (then) four officers. The contracts provided for annual
base salaries and escalation clauses. They also provided for
mandatory cash bonuses accruable ratably throughout the year and
payable at the end of each fiscal year. The contracts also included
a provision which granted each of the four individuals a stock bonus
equal to 5% of the Company's common stock issued during each fiscal
year of the contract. The mandatory cash bonuses were accrued
throughout fiscal year and payable at the end of the year. Each of
the individuals were given the option to take the bonus in shares of
the Company's common stock, valued at a 50% discount to the average
closing bid price for the five trading days immediately after the
close of the fiscal year.
In November 2000, the Company's corporate counsel advised
management that the stock bonus provision of the employment
contracts were illegal under Delaware corporate law. Accordingly, in
December 2000, the Company's Board of Directors voted to terminate
this provision retroactively to January 1, 2000. As a result of the
board's action, the Company' reversed approximately $539,000 of
compensation in the fourth quarter that had been accrued through
September 30, 2000.
In September 2000, one of the above individuals and in
December 2000 two of the other individuals covered by these
employment contracts were terminated for cause. All other
compensation due these individuals under the agreements has been
accrued to the date of termination.
Included in the results of operations is $58,667 and $72,324
for the three months ended March 31, 2001 and 2000, respectively,
for compensation due to the officers under the terms of the
contracts. At March 31, 2001, $520,151 remains unpaid of which
$7,500 applies to 2001 and $512,651 applies to 2000 and prior.
In July 2000, the Company entered into an employment contract
with an individual to become the Company's Chief Financial Officer
("CFO"). The contract is for a period of three years and provides
for a base salary of $120,000 per annum for the first year. Salary
increases and cash bonuses, if any, shall be determined by The Board
of Directors. This contract was verbally amended in August 2000 to
allow for the CFO to receive stock options. The manner of granting
the options, the number of shares under option, the per share price
of the option are currently under negotiation.
F-19
NOTE 15 - COMMITMENTS AND CONTINGENCIES. (Continued)
(b) Employment Contracts: (Continued)
In March 2001, the Company entered into an employment contract
with an individual to become the president of ("FUMB"). The contract
is for a period of three years and provides for a base salary of
$130,000 per annum for the first year. Salary increases shall be
determined by the Board of Directors on an annual basis. The
individual has agreed to purchase 375,000 shares of the Company's
common stock at a price of $0.20 per share for a total of $75,000.
The March 31, 2001 financial statements give recognition to the
shares as being issued. In addition the contract allows for a stock
bonus to be issued to the individual each year during the employment
contract. The terms call for the Company to issue shares of its
common stock, the number of shares determined by taking the earnings
before income tax and depreciation of FUMB and multiplying that
number by 8.5%. The quotient shall be divided by the mean bid/ask
price of the Company's common stock for the month following the
anniversary date of the executives employment contract. The
individual shall have at his option the right to take up to 15% of
the stock bonus in cash.
(c) Mortgage Loans Held for Sale:
The Company sells mortgage loans on a non-recourse basis with
certain representations and warranties. The Company may be obligated
by industry practice under certain circumstances to repurchase a
loan if it goes into default within the first year.
NOTE 16 - LIIGATION.
An officer, and two of his relatives who were formerly
employed by the Company have filed suit against the Company for
unpaid wages and other matters. The Company is vigorously defending
the action while considering opportunities to settle the matter. The
minimum potential cost to the Company is not readily determinable
because all the plaintiffs have not made demand nor disclosed their
damages. Management is of the opinion this suit will not have a
material impact on the financial statements.
NOTE 17 - INCOME TAXES.
The Company and its wholly owned subsidiaries file a
consolidated federal income tax return. As of December 31, 2000, the
Company and its subsidiaries have a net operating loss carryforward
of approximately $21,000,000 available to reduce future taxable
income through the year 2020. The Company's ability to utilize its
net operating loss carryforward could be limited following a change
in ownership in excess of 50%, which resulted from the Company's
reorganization and recapitalization under the Plan. The Company has
fully reserved its deferred tax asset due to the uncertainty about
its ability to utilize it in future periods.
F-20
NOTE 18 - STOCKHOLDERS' EQUITY.
(a) Common Stock:
In February 2001 the Board of Directors approved the issuance
of 375,000 shares of the Company's common stock to a board member in
consideration of an advance made by him to the Company. The issuance
at this stock resulted in a charge to operations of $25,000 for
financial costs.
In conjunction with an employment contract between the Company
and an individual 375,000 shares of common stock were issued for
$25,000 cash and a subscription receivable for $50,000 pursuant to
the terms of the agreement.
In March 2001 the Company issued 90,000 shares of its common
stock for $225,000 in conjunction with the issuance of 12%
convertible debentures.
(b) Warrants:
During the three months ended March 31, 2001 in connection
with loans made to the Company by an individual, the Company issued
10,000 and 5,000 common stock purchase warrants both exercisable at
$.18 per share, as an inducement to make the loans. The warrants are
exercisable for a period of one year expiring on February 9, 2002
and February 22, 2002, respectively.
At March 31, 2001 the Company had outstanding warrants
entitling the holders to purchase common stock as follows:
Exersise Expiration
Number of Price Date
Shares (Range) (Fiscal Year End)
--------- ------------- -----------------
476,000 $0.08 - $0.41 December 31, 2001
3,382,143 $0.18 - $1.44 December 31, 2002
110,000 $0.39 December 31, 2003
1,750,000 $0.15 - $0.50 December 31, 2005
The warrants are not valued in the financial statements as the
amounts are immaterial.
F-21
NOTE 19 - SEGMENT INFORMATION.
The Company is engaged in two segments; residential mortgage
lending and licensing of proprietary computer software solutions.
Three Months Ended
March 31,
-------------------------------
2001 2000
------------ ------------
Revenues:
Mortgage lending $ 661,000 $ --
Licensing computer software 77,000 124,000
Other 58,000 --
------------ ------------
$ 796,000 $ 124,000
============ ============
Operating income (loss):
Mortgage lending ($ 73,000) $ --
Licensing computer software (146,000) (89,000)
Other (198,200) (119,000)
------------ ------------
($ 417,200) ($ 208,000)
============ ============
March 31, December 31,
2001 2000
------------ ------------
Identifiable assets:
Mortgage lending $ 5,975,000 $ 16,937,000
Licensing computer software 1,575,000 1,607,000
Other 3,637,000 3,542,000
Eliminations (4,028,000) (3,944,000)
------------ ------------
$ 7,159,000 $ 18,142,000
============ ============
F-22