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FIRST UNITED MORTGAGEBANC, INC.
FINANCIAL STATEMENTS
JUNE 30, 2000
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FIRST UNITED MORTGAGEBANC, INC.
FINANCIAL STATEMENTS
JUNE 30, 2000
I N D E X
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Page No.
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INDEPENDENT ACCOUNTANTS' REPORT ..................................... 1
FINANCIAL STATEMENTS:
Balance Sheet as at June 30, 2000 .............................. 2
Statement of Operations and Retained Earnings
For the Period April 28, 2000 (Inception) to June 30, 2000 ... 3
Statement of Cash Flows
For the Period April 28, 2000 (Inception) to June 30, 2000.... 4
NOTES TO FINANCIAL STATEMENTS ....................................... 5-7
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[Letterhead of WEINICK SANDERS LEVENTHAL & CO., LLP]
INDEPENDENT ACCOUNTANTS' REPORT
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To the Board of Directors and Stockholder
First United MortgageBanc, Inc.
We have audited the accompanying balance sheet of First United MortgageBanc,
Inc. as at June 30, 2000, and the statements of operations and retained earnings
and cash flows for the period April 28, 2000 (inception) to June 30, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of First United MortgageBanc, Inc.
as at June 30, 2000, and the results of its operations and its cash flows for
the period April 28, 2000 (inception) to June 30, 2000 in conformity with
generally accepted accounting principles.
/s/ WEINICK SANDERS LEVENTHAL & CO., LLP
New York, N. Y.
August 2, 2000
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FIRST UNITED MORTGAGEBANC, INC.
BALANCE SHEET
JUNE 30, 2000
<TABLE>
<CAPTION>
A S S E T S
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<S> <C>
Current assets:
Cash $ 184,588
Buildings, at cost, less accumulated
depreciation of $2,838 2,547,162
Other asset:
Goodwill less accumulated amortization of $364 116,836
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$ 2,848,586
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<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
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<S> <C> <C>
Current liabilities:
Mortgage payable - current portion $ 66,584
Accrued expenses and other current liabilities 41,151
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Total current liabilities $ 107,735
Mortgage payable - long-term portion 1,456,890
Commitment --
Stockholder's equity:
Common stock - .01 par value
Authorized, issued and outstanding - 1,000 shares 10
Additional paid-in capital 1,139,286
Retained earnings 144,665
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Total stockholder's equity 1,283,961
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$2,848,586
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</TABLE>
See accompanying notes to financial statements.
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FIRST UNITED MORTGAGEBANC, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
FOR THE PERIOD APRIL 28, 2000 (INCEPTION) TO JUNE 30, 2000
Revenues:
Commission and fees $172,681
Rental income 7,470
-------- $180,151
Operating expenses:
Selling 22,046
Interest 10,238
Depreciation and amortization 3,202
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Total operating expenses 35,486
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Net income transferred to retained earnings $144,665
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See accompanying notes to financial statements.
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FIRST UNITED MORTGAGEBANC, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD APRIL 28, 2000 (INCEPTION) TO JUNE 30, 2000
<TABLE>
<S> <C> <C>
Cash flows from operating activities:
Net income $ 144,665
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization $ 3,202
Increase (decrease) in cash flows as
a result of changes in asset and
liabilities account balances:
Accrued expenses and other current liabilities 41,151
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Total adjustments 44,353
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Net cash provided by operating activities 189,018
Cash flows from financing activities:
Payments on mortgage (4,930)
Issuance of common stock 500
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Net cash used in financing activities (4,430)
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Cash at end of period - net increase in cash $ 184,588
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Supplemental Disclosures of Cash Flow Information:
Cash payments for the period:
Interest $ 10,238
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Income taxes $ --
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Supplemental Schedule of Noncash Investing
and Financing Activities:
Buildings contributed by parent $ 2,550,000
Less: mortgage assumed 1,528,404
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1,021,596
Issuance of common stock 1,138,796
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Goodwill $ 117,200
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</TABLE>
See accompanying notes to financial statements.
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FIRST UNITED MORTGAGEBANC, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE 1 - ORGANIZATION AND PRINCIPAL BUSINESS ACTIVITY:
First United MortgageBanc, Inc. ("FUMB"), hereafter referred
to as the "Company", was incorporated under the laws of the State of
Florida on April 28, 2000. The Company is a wholly owned subsidiary of
CFI Mortgage Inc. ("CFI"), hereafter referred to as the ("Parent").
First United MortgageBanc, Inc. is a diversified financial
services company that provides mortgages and mortgage related services
to individuals indirectly through mortgage brokers and mortgage
lenders. The Company originates, processes, underwrites and funds
residential mortgage loans that are sold on either an individual or
bulk basis to institutional and private investors. The Company
originates loans that do not conform to agency guidelines, known as
non-conforming loans. Non-conforming loans typically fail to meet
agency guidelines due to credit impairment, higher loan-to-value ratios
and debt-to-income ratios, and are priced to compensate for the
additional credit risk. In addition, the Company has acquired two
office buildings located in Evansville, Indiana which it leases to a
related party.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES.
(a) Use of Estimates:
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.
(b) Buildings:
Buildings are stated at cost less accumulated depreciation.
The Company's policy is to provide for depreciation over the estimated
useful lives of 39 years. Expenditures for repairs, maintenance and
minor renewals are charged to operations as incurred.
Depreciation expense attributable to the buildings and charged
to operations for the period April 28, 2000 (inception) to June 30,
2000 amounted to $2,838.
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NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES. (Continued)
(c) Goodwill:
The Company's acquisition of two buildings net of liabilities,
resulted in the creation of goodwill in the amount of $117,200. The
Company amortizes goodwill over a period of 15 years. Amortization
expense charged to operations for the period April 28, 2000 (inception)
to June 30, 2000 amounted to $364.
Management periodically reviews the value of all long-lived
assets, including goodwill, to determine if there has been any
impair-ment 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.
(d) Concentrations of Credit Risk:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash
investments. The Company places its temporary cash investments with
high credit quality financial institutions, which at times may be in
excess of the FDIC insurance limit.
(e) Income Taxes:
The Company will file a consolidated federal tax return with
its parent. The taxable income of the Company is expected to be offset
against a net operating loss carryforward and taxable loss of its
parent. Accordingly, the Company does not have a provision for income
taxes.
NOTE 3 - RELATED PARTY TRANSACTIONS.
On June 13, 2000 CFI contributed to FUMB two buildings with an
appraised value of $2,550,000 along with the underlying mortgage on the
properties that had an outstanding balance of $1,528,404. The
difference between the appraised value of the assets acquired and the
liabilities assumed were treated as additional paid-in capital by the
Company. The parent originally acquired the buildings and assumed the
underlying mortgage from a company whose stockholders received in
exchange, two shares of its preferred stock, and common stock purchase
warrants exercisable for the purchase of 750,000 shares of its common
stock which resulted in goodwill of $117,200. This goodwill which is
directly attribute-able to the purchase of the buildings has also been
transferred to the Company by the parent.
As part of the purchase agreement the two leases that were in
effect at the time of the sale were assumed by CFI and subsequently
transferred to FUMB. The two buildings are leased to the seller of the
properties who is now a stockholder of CFI.
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NOTE 4 - MORTGAGE PAYABLE.
As part of the purchase agreement (as discussed in Note 3) CFI
assigned to the Company the mortgage it had assumed. The mortgage is
payable to a bank in equal monthly installments of $15,168 including
interest at 7.75% until July 15, 2014. The note is collateralized by
the buildings owned by the Company. The seller of the buildings remains
primarily liable on the mortgage.
The aggregate amounts of maturities on the outstanding
mortgage balance at June 30, 2000 are as follows:
Years Ending
June 30,
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2000 $ 66,584
2001 71,611
2002 77,362
2003 83,576
2004 90,287
2005 and thereafter 1,134,054
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$1,523,474
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Interest expense amounted to $10,238 for the period April 28,
2000 (inception) to June 30, 2000.
NOTE 5 - COMMITMENT.
(a) Leases:
The Company has leases with one tenant to lease 100% of
the space in the two buildings it owns. The minimum annual rental
income on these leases is as follows:
Years Ending
June 30,
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2001 $ 236,777
2002 248,614
2003 261,090
2004 274,103
2005 116,520
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$1,137,104
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