<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
(x) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1997
-----------------------------------
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 52-2023491
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
580 Village Blvd, Suite 120, West Palm Beach, Fl 33409
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (561) 687-1595
----------------
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(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
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at November 13, 1997
--------------------------------------------------------------------------
Common stock, par value $.01 per share 2,200,000 shares
Transitional Small Business Disclosure Format (Check One):
Yes No X .
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<PAGE> 2
CFI MORTGAGE INC. AND SUBSIDIARY
SEPTEMBER 30, 1997
(Unaudited)
I N D E X
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I - Financial Information:
Item 1. Financial Statements:
Consolidated Balance Sheets As at
September 30, 1997 (Unaudited) and December 31, 1996 ................................ F-2
Consolidated Statements of Operations and Retained Earnings
(Deficit) For the Nine and Three Month Periods Ended
September 30, 1997 and 1996 (Unaudited) ............................................. F-3
Consolidated Statements of Cash Flows For the Nine Month
Periods Ended September 30, 1997 and 1996 (Unaudited) ............................... F-4
Consolidated Statement of Changes in Stockholders' Equity
For the Nine Months Ended September 30, 1997 (Unaudited) ............................ F-5
Notes to Consolidated Financial Statements (Unaudited) ................................. F-6 to F-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations .............................. F-8 to F-13
Part II - Other Information:
Item 1: Legal Proceedings ............................................................. F-14
Item 2: Changes in Securities ......................................................... F-14
Item 3: Defaults upon Senior Securities ............................................... F-14
Item 4: Submission of Matters to a Vote of Security Holders ........................... F-14
Item 5: Other Information ............................................................. F-14
Item 6: Exhibits and Reports on Form 8-K .............................................. F-14
Signatures .................................................................... F-15
</TABLE>
F-1
<PAGE> 3
CFI MORTGAGE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash $ 527,099 $ 644,685
Fees and loans receivable 2,999,686 882,588
Loans held for sale 22,937,412 --
Miscellaneous receivables (net of allowance
for doubtful accounts of $18,000) 165,371 101,468
Property held for sale 207,500 207,500
Investment in 430 Carroll Street Inc. -- 175,224
Prepaid expenses and other current assets 502,859 51,293
Loans receivable - related parties 214,189 12,949
------------ ------------
Total current assets 27,554,116 2,075,707
------------ ------------
Property and equipment:
Furniture and equipment 1,210,113 241,641
Automobile 82,147 35,677
------------ ------------
1,292,260 277,318
Less accumulated depreciation 156,786 90,456
------------ ------------
Total property and equipment 1,135,474 186,862
------------ ------------
Other assets:
Deferred offering costs -- 120,000
Deposits 132,055 48,249
------------ ------------
Total other assets 132,055 168,249
------------ ------------
$ 28,821,645 $ 2,430,818
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Warehouse finance facilities $ 22,277,228 $ --
Cash overdraft 476,358 385,858
Bank loan payable 108,375 133,250
Current maturities of long-term debt 108,252 17,562
Accounts payable, accrued expenses and
other current liabilities 1,934,600 456,002
------------ ------------
Total current liabilities 24,904,813 992,672
------------ ------------
Long-term liabilities:
Notes payable 235,605 28,772
------------ ------------
Total liabilities 25,140,418 1,021,444
------------ ------------
Commitments and contingencies -- --
Stockholders' equity:
Common stock, $1 par value
Authorized, issued and outstanding -
7,500 shares -- 7,500
Common stock, $0.01 par value 20,000,000
Authorized, 2,200,000 shares issued
and outstanding 22,000 --
Additional paid-in capital 5,020,698 1,234,673
Retained earnings (deficit) (1,361,471) 167,201
------------ ------------
Total stockholders' equity 3,681,227 1,409,374
------------ ------------
$ 28,821,645 $ 2,430,818
============ ============
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE> 4
CFI MORTGAGE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
For the Nine For the Three
Months Ended Months Ended
September 30, September 30,
----------------------------- -----------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Total revenues $7,222,617 $5,769,446 $3,494,845 $2,206,045
---------- ---------- ---------- ----------
Expenses:
Selling 3,278,732 2,509,730 1,534,432 885,262
General and administrative 4,138,093 2,794,213 2,030,192 1,010,775
Interest 1,159,240 674,573 614,398 258,199
---------- ---------- ---------- ----------
Total expenses 8,576,065 5,978,516 4,179,022 2,154,236
---------- ---------- ---------- ----------
Income (loss) before provision
for income taxes (1,353,448) ( 209,070) ( 684,177) 51,809
---------- ---------- ---------- ----------
Provision for income taxes:
Current - - 68,000 -
Deferred - - 22,000 -
---------- ---------- ---------- ----------
Total provision for income taxes - - 90,000 -
---------- ---------- ---------- ----------
Net income (loss) (1,353,448) ( 209,070) ( 774,177) 51,809
Retained earnings (deficit)
at beginning of period 167,201 ( 144,025) ( 587,294) ( 404,904)
Less: Dividend (Note 3) ( 175,224) ( - ) ( - ) ( - )
---------- ---------- ---------- ----------
Deficit at end of period ($1,361,471) ($ 353,095) ($1,361,471) ($ 353,095)
========== ========== ========== ==========
Pro forma information:
Pro forma net income (loss):
Historical net income (loss) ($1,353,448) ($ 209,070) ($ 774,177) $ 51,809
Pro forma provision (credit)
for income taxes ( 472,637) ( 68,903) ( 319,880) 18,067
---------- ---------- ---------- ----------
Pro forma net income (loss) ($ 880,811) ($ 140,167) ($ 454,297) $ 33,742
========== ========== ========== ==========
Pro forma per share data:
Pro forma net income (loss)
per share ($0.54) ($0.12) ($0.21) $0.03
===== ===== ===== =====
Pro forma weighted average
shares outstanding 1,644,445 1,200,000 2,200,000 1,200,000
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 5
CFI MORTGAGE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Nine
Months Ended
September 30,
-----------------------------
1997 1996
----------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($1,353,448) ($209,070)
----------- --------
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 66,330 22,386
Increase (decrease) in cash flows as
a result of changes in asset and
liability account balances:
Fees and loans receivable (2,117,098) (6,477)
Loans held for sale (22,937,412) -
Warehouse borrowings 22,277,228 -
Miscellaneous receivables (63,903) (90,640)
Prepaid expenses (451,566) 35,226
Deposits (83,806) (22,079)
Accounts payable, accrued expenses
and other current liabilities 1,478,598 231,883
----------- --------
Total adjustments (1,831,629) 170,299
----------- --------
Net cash used in operating activities (3,185,077) (38,771)
----------- --------
Cash flows from investing activities:
Expenditures for property and equipment (1,014,942) (111,943)
Increase in loans receivable-related party (201,240) -
----------- --------
Net cash used in investing activities (1,216,182) (111,943)
----------- --------
Cash flows from financing activities:
Cash overdraft 90,500 341,107
Decrease in bank loan payable (24,875) -
Increase in notes payable 480,150 56,152
Proceeds from issuance of common stock 3,920,525 -
Decrease in due to officers - (326,358)
Repayments - Notes payable (182,627) (4,443)
----------- --------
Net cash provided by financing activities 4,283,673 66,458
----------- --------
Net decrease in cash (117,586) (84,256)
Cash at beginning of period 644,685 563,327
----------- --------
Cash at end of period $ 527,099 $479,071
=========== ========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period:
Income taxes $ - $ -
=========== ========
Interest $ 874,050 $674,573
=========== ========
Supplemental Schedules of Non-Cash Investing
and Financial Activities:
Dividend made by transfer of investment
in 430 Carroll Street Inc. $ 175,224 $ -
=========== ========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 6
CFI MORTGAGE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Additional Retained
Common Stock Paid-In Earnings
Shares Amount Capital (Deficit)
------ ------ -------- ---------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 7,500 $ 7,500 $1,234,673 $ 167,201
Distribution by transferring 40%
of stock interest of investment
in 430 Carroll Street Inc. to
stockholders at March 26, 1997 - - - (175,224)
Issuance of common stock
on May 30, 1997 as a result
of a public offering less
expenses of the offering of
$1,070,540 1,000,000 10,000 3,919,460 -
Additional expenses related
to initial public offering - - (128,935) -
Effect on exchange of shares
of existing shareholders of
CFI Mortgage Corporation for
shares of CFI Mortgage Inc. 1,192,500 4,500 (4,500) -
Net Loss for the nine months
ended September 30, 1997 - - - ( 1,353,448)
--------- ------- ---------- ----------
Balance at September 30, 1997 2,200,000 $22,000 $5,020,698 ($1,361,471)
========= ======= ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 7
CFI MORTGAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
NOTE 1 - The accompanying financial statements have been prepared
without audit pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules
and regulations. These statements include all adjustments,
consisting only of normal recurring accruals, which are, in the
opinion of management considered necessary for a fair
presentation of financial position and results of operations.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could differ
from those estimates.
NOTE 2 - The results of operations of CFI Mortgage Inc. and its
wholly-owned subsidiary, CFI Mortgage Corporation (collectively
the "Company") for the nine and three month periods ended
September 30, 1997 and 1996 are not necessarily indicative of the
results to be expected for the full year.
NOTE 3 - On March 26, 1997, a dividend of CFI Mortgage Corporation's
("CFI") undistributed subchapter "S" earnings in the amount of
$175,224 was made by the transfer of title of the 40% investment
in 430 Carroll Street Inc. to CFI's two stockholders who are the
sons of the Chief Executive Officer.
NOTE 4 - In 1997, the Company's subsidiary changed its name from CFI
Mortgage Corp. to Bankers Direct Mortgage Corporation.
F-6
<PAGE> 8
NOTE 5 - On June 30, 1997, the Company obtained a warehouse credit line of
$50,000,000 from Bank One, Texas, N.A. maturing on June 30, 1998.
At September 30, 1997 $22,277,228 had been utilized and was
outstanding. An annual facility fee of $125,000 will be charged.
NOTE 6 - On July 3, 1997, the Company acquired assets from FT Mortgage
Companies, a Kansas corporation. The acquisition included all the
leasehold improvements, furniture and equipment located at their
Boulder, Colorado office.
NOTE 7 - On August 5, 1997, the Company acquired substantially all the assets
of CT Mortgage Company of Florida, Inc., a subsidiary of CT Mortgage
Company, Inc.; a non-conforming wholesale lender with offices in
Orlando, Tampa, and Knoxville, Tennessee. The acquisition included
all leasehold interests and rights under the leases related to all
the aforementioned locations, office equipment and all loans
receivable.
NOTE 8 - On August 5, 1997, the Company formed a wholly-owned subsidiary
Direct Mortgage Partners, Inc. (DMP) for the purpose of obtaining
licenses from various states to originate and purchase subprime
(B/C) first and second lien mortgages in those localities.
F-7
<PAGE> 9
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
General
Through its wholly-owned subsidiaries, Bankers Direct Mortgage
Corporation and Direct Mortgage Partners, Inc., CFI Mortgage,
Inc. is a rapidly growing mortgage banker engaged in originating,
purchasing and selling conventional as well as government
guaranteed, subprime (B/C) loans on one-to-four-family
residential units through its Retail, Wholesale and Consumer
Finance divisions. CFI common shares are publicly traded on the
NASDAQ small cap market system under the symbol CFIM.
CFIM's goal to diversify its production channels while expanding
Nationally to avoid geographic risk was realized in the third
quarter with the acquisition of the assets of CT Mortgage Company
of Florida, Inc., the purchase of an economic interest in
California Pacific Mortgage Corporation and the opening of two
regional wholesale offices. The CT Mortgage acquisition provided
the Company with an established subprime (B/C) regional wholesale
operation doing business in four (4) Southeastern states. The
California Pacific acquisition provided the Company with a direct
mail subprime (B/C) platform currently licensed to do business in
nine (9) Western states. The development of the subprime (B/C)
channels continued with the opening of two regional wholesale
offices producing subprime (B/C) first and second mortgage loans
through full service hubs located in Oakbrook, Illinois and
Orange, California. Through these offices the Company has
developed a template for future growth and expansion. Subsequent
to the quarter, an additional regional wholesale office was
opened in Atlanta, Georgia. In all cases, the Company has been
able to secure seasoned professionals to staff these offices
which is expected to reduce the time before the offices are
profitable.
The start up costs associated with the national expansion coupled
with the increased corporate overhead put in place to support the
production network created a loss for the quarter. The loss is
viewed as an investment in the future with the newly added
offices already yielding increased subprime (B/C) production. The
Company continued its efforts to improve technology and operating
efficiency during the quarter. Progress was made in networking
all offices for communication and data flow with the installation
of a wide area network.
Progress toward the goal of improving the Company's Secondary
Market execution was made during the quarter as the Company
received Fannie Mae Seller/Servicer approval for the Bankers
Direct subsidiary. In addition subservicing relationships have
been established with Advanta Mortgage for subprime (B/C) and
Cenlar, F.S.B. for all other products. These relationships
improve the collection efforts until the loans are sold as well
as outsourcing certain of these operational functions associated
with loan sales.
F-8
<PAGE> 10
General (Continued)
During the quarter, operational changes were made to utilize the
Bank One warehouse facility. The use of this facility allows for
improved earnings due to interest rate spreads with this fact
contributing to the increase in revenue for the quarter. The use
of the Bank One facility also changes the balance sheet as the
loans held for sale are now reflected in the balance sheet as an
asset with the outstanding balance in the warehouse facility
reflected as a liability. As production increases this facility
is expected to contribute positively to earnings.
Results of Operations
Comparison for the Nine Months Ended September 30, 1997 and 1996:
Revenues, including interest income, increased $1,454,000 (25.2%)
to $7,223,000 for the nine months ended September 30, 1997
compared to $5,769,000 for the comparable prior year period. The
increase is due to greater fee income per loan produced, while
the number of loans remained relatively constant. The 1997
product mix showed a sharp increase in subprime (B/C) loan
production, which generates greater fee income per loan than
conforming loans.
Selling expenses increased $769,000 (30.6%) to $3,279,000 for the
nine months ended September 30, 1997 compared to $2,510,000 for
the comparable prior year period. Commissions and benefits
accounted for over two-thirds of this increase, which was
directly related to the increased revenues. The remainder was the
result of the national expansion and the upfront costs associated
with establishing the support functions required for this
expansion to be successful. Selling expenses as a percentage of
revenues were relatively constant: 45.4% in 1997 and 43.5% in
1996.
General and administrative expenses increased $1,344,000 (48.1%)
to $4,138,000 for the nine months ended September 30, 1997
compared to $2,794,000 for the comparable prior year period.
Salaries and benefits rose over $965,000. The non-commissioned
support staff increased from 61 to 150 between September 30, 1996
and September 30, 1997, an increase of 146%. The Company added
senior management personnel with experience in the revised
operational structure that the Company now utilizes. Additional
expenses were incurred in 1997 as part of the national expansion
and upfront costs associated with establishing the support
functions required for this expansion to be successful. As a
percentage of revenues, general and administrative expenses
increased to 57.3% in 1997 from 48.4% in 1996.
Interest expense increased $484,000 (71.7%) to $1,159,000 for the
nine months ended September 30, 1997 compared to $675,000 for the
comparable prior year period. The average cost of borrowings
increased due to the introduction of subprime loans, and loans
were aggregated for a longer period of time by the Company to
take advantage of bulk sale premiums.
F-9
<PAGE> 11
Results of Operations (Continued)
Comparison for the Nine Months Ended September 30, 1997 and 1996:
(Continued)
Loss before taxes increased $1,144,000 (547.4%) to $1,353,000 for
the nine months ended September 30, 1997 compared to $209,000 for
the comparable prior year period as a result of the national
expansion and the upfront costs associated with establishing the
support functions required for this expansion to be successful.
The second and third quarter losses were significantly
attributable to the increases in general and administrative
expenses and interest expense caused by those changes. The first
quarter loss was primarily the result of the seasonality of home
sales in Florida. Home sales typically decline in the first
quarter of the year due in part to Florida's homestead laws,
which reduce a purchaser's taxes resulting in many home
purchasers buying before year end. The increased demand at year
end tends to drive up administrative costs in the first quarter.
Comparison for the Three Months Ended September 30, 1997 and 1996:
Revenues, including interest income, increased $1,289,000 (58.4%)
to $3,495,000 for the three months ended September 30, 1997
compared to $2,206,000 for the comparable prior year period.
Total loan volume increased by 43%, which impacted both fees
generated as well as interest income. The majority of the volume
increase was subprime (B/C) loan production, which generates
greater fee and interest income per loan than conforming loans.
Selling expenses increased $649,000 (73.3%) to $1,534,000 for the
three months ended September 30, 1997 compared to $885,000 for
the comparable prior year period. Commissions and benefits
accounted for nearly 75% of the increase and was related to the
increased revenues. The remainder was the result of the national
expansion and the upfront costs associated with establishing the
support functions required for this expansion to be successful.
Selling expenses as a percentage of revenues increased to 43.9%
in 1997 from 40.1% in 1996.
General and administrative expenses increased $1,019,000 (100.8%)
to $2,030,000 for the three months ended September 30, 1997
compared to $1,011,000 for the comparable prior year period.
Salaries and benefits rose over $662,000. The non-commissioned
support staff increased from 61 to 150 between September 30, 1996
and September 30, 1997, an increase of 146%. The Company added
senior management personnel with experience in the revised
operational structure that the Company now utilizes. Additional
expenses were incurred in 1997 as part of the national expansion
and the upfront costs associated with establishing the support
functions required for this expansion to be successful. As a
percentage of revenues, general and administrative expenses
increased to 58.1% in 1997 from 45.8% in 1996.
F-10
<PAGE> 12
Results of Operations (Continued)
Comparison for the Three Months Ended September 30, 1997 and 1996:
(Continued)
Interest expense increased $356,000 (138.0%) to $614,000 for the
three months ended September 30, 1997 compared to $258,000 for
the comparable prior year period. The average cost of borrowings
increased due to the introduction of subprime loans, and loans
were aggregated for a longer period time by the Company to take
advantage of bulk sale premiums.
The Company experienced a pretax loss of $684,000 for the three
months ended September 30, 1997 compared to a pretax profit of
$52,000 for the comparable prior year period as a result of the
national expansion and the upfront costs associated with
establishing the support functions required for this expansion to
be successful. The loss was significantly attributable to the
increases in general and administrative expenses and interest
expense caused by those changes.
The credit for taxes of $90,000 recorded in the second quarter of
1997 was reversed in the third quarter due to the continuing
losses.
Financial Condition
September 30, 1997 Compared to December 31, 1996:
Cash in banks, net of overdrafts, decreased $208,000 to $51,000
at September 30, 1997 from $259,000 at December 31, 1996. The net
cash proceeds from the Company's initial public offering (the
"Offering") were $3,921,000, including the $120,000 refund of
deferred offering costs previously paid by the Company in 1996.
The use of these proceeds is discussed in the following section.
Fees and loans receivable increased $2,117,000 (239.8%) to
$3,000,000 at September 30, 1997 from $883,000 at December 31,
1996. Fees receivable from investors and interest income
receivables accounted for the majority of this increase.
Loans held for sale total $22,937,000 at September 30, 1997 and
correspond directly to the warehouse finance facilities debt of
$22,277,000. These items correspond to the use of the $50,000,000
credit agreement entered into by Bankers Direct Mortgage
Corporation ("BDMC") with Bank One, Texas, N.A. on June 30, 1997.
The credit facility is being used to finance mortgage
originations and purchases and is collateralized by the mortgage
loans held for sale by BDMC.
F-11
<PAGE> 13
Liquidity and Capital Resources
Currently, the Company's cash requirements include the funding of
(i) mortgage originations and purchases pending their sale, (ii)
ongoing administrative and other operating expenses, and (iii)
new retail and wholesale locations. The Company has relied upon a
few lenders to provide the primary credit facilities for its loan
originations and purchases.
As noted above, BDMC entered into a $50,000,000 credit agreement
with Bank One on June 30, 1997. As of September 30, 1997,
$22,277,000 had been utilized and was outstanding.
At September 30, 1997, the Company also had aggregate purchase
facilities of $25,000,000 from three financial institutions
ranging from $2,000,000 to $20,000,000. The utilized and
outstanding portions of the facilities at September 30, 1997 were
$19,266,000. The unused purchase facilities aggregated
$5,734,000. Interest rates range from 9.5% to the rate on the
purchased loan.
For the nine months ended September 30, 1997, net cash used in
operating activities was $3,185,000. The major uses were
$22,937,000 for the funding of Bank One loan originations,
$2,117,000 for the increase in fees and loans receivable, and
$1,353,000 for the net loss for the period. The loss was financed
by the Offering proceeds and the use of the credit facilities.
The cash proceeds from the Offering of $3,921,000 were used (i)
to fund mortgage loans, (ii) to expand the Company's retail,
subprime, and consumer finance divisions, (iii) for primary
marketing and brand recognition and (iv) to purchase new
technology and infrastructure. The Company anticipates that cash
from operating activities, together with funds available under
its purchase agreements, will be sufficient to fund its
operations for the next twelve months if the Company's future
operations are consistent with management's expectations. The
Company may need additional financing thereafter. There can be no
assurance that the Company will be able to obtain financing on a
favorable or timely basis. The type, timing and terms of
financing selected by the Company will depend on its cash needs,
the availability of other financing sources and the prevailing
conditions in the financial markets.
For the nine months ended September 30, 1996, cash used in
operating activities was $39,000. This deficit was financed by
cash on hand and an increase in accounts payable and accrued
expenses of $232,000.
The mortgage banking industry is generally subject to seasonal
trends. These trends reflect the general pattern of resales of
homes, which sales typically peak during the spring and summer
seasons and decline from January through March. In addition, the
primary home market in Florida tends to increase during the
fourth quarter, while the second home market increases from
October through April. Refinancings tend to be less seasonal and
more closely related to changes in interest rates.
F-12
<PAGE> 14
Risk Factors
Except for historical information contained herein, certain
matters discussed in this Form 10-QSB are "forward-looking
statements" as defined in the Private Securities Litigation
Reform Act (PSLRA) of 1995, which involve risk and uncertainties
that exist in the Company's operations and business environment,
and are subject to changes based on various important factors.
The Company wishes to take advantage of the "safe harbor"
provisions of the PSLRA by cautioning readers that numerous
important factors discussed below, among others, in some cases
have caused, and in the future could cause the Company's actual
results to differ materially from those expressed in any
forward-looking statements made by, or on behalf of, the Company.
The following include some, but not all, of the factors or
uncertainties that could cause actual results to differ from
projections:
- A general economic slowdown.
- The unanticipated expenses of assimilating newly-acquired
business into the Company's business structure, as well as,
the impact of unusual expenses from ongoing evaluations of
business strategies, asset valuations, acquisitions,
divestitures and organizational structures.
- Unpredictable delays or difficulties in the development of
new product programs.
- Rapid or unforeseen escalation of the cost of regulatory
compliance and/or litigation, including but not limited to,
environmental compliance, licenses, adoptions of new, or
changes in accounting policies and practices and the
application of such policies and practices.
- The effects of changes in monetary and fiscal policies,
laws and regulations, other activities of governments,
agencies and similar organizations, and social and economic
conditions, unforeseen inflationary pressures and monetary
fluctuation, the ability or inability of the Company to
hedge against fluctuations in interest rates.
- The ability or inability of the Company to continue its
current practices relating to mortgage loans held for sale.
- Increased competition within the Company's markets.
The Company believes that it has the product offerings,
facilities, personnel and competitive and financial resources for
continued business success. However, future revenues, costs,
margins and profits are all influenced by a number of factors, as
discussed above.
F-13
<PAGE> 15
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
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 Financial Data Schedule.
F-14
<PAGE> 16
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.
CFI Mortgage Inc.
----------------------------
(Registrant)
Date: November 13, 1997 /s/ Vincent C. Castoro
----------------------------
Vincent C. Castoro
Chief Executive Officer
Date: November 13, 1997 /s/ Vincent J. Castoro
----------------------------
Vincent J. Castoro
President
F-15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEETS, AND CONSOLIDATED STATEMENTS OF INCOME OF THE
COMPANY ON THE COMPANY'S FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 527099
<SECURITIES> 0
<RECEIVABLES> 25937098
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 27554116
<PP&E> 1292260
<DEPRECIATION> 156786
<TOTAL-ASSETS> 28821645
<CURRENT-LIABILITIES> 24904813
<BONDS> 235605
0
0
<COMMON> 22000
<OTHER-SE> 3659227
<TOTAL-LIABILITY-AND-EQUITY> 28821645
<SALES> 0
<TOTAL-REVENUES> 7222617
<CGS> 0
<TOTAL-COSTS> 7416825
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1159240
<INCOME-PRETAX> (1353448)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1353448)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1353448)
<EPS-PRIMARY> (0.54)
<EPS-DILUTED> 0
</TABLE>
