SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
<P>
----------------------
<P>
AMENDMENT NO. 1 TO
FORM 8-K
<P>
----------------------
<P>
CURRENT REPORT
<P>
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
<P>
Date of Report (Date of earliest event reported):
October 26, 2000
<P>
TIDALWAVE HOLDINGS, INC.
<P>
(Exact Name of Registrant as Specified in Its
Charter)
<P>
Florida
<P>
(State or Other Jurisdiction of Incorporation)
<TABLE>
<S> <C> <C>
0-26187 65-0693777
------- ----------
(Commission File Number) (IRS Employer Identification No.)
<P>
1831 NE 45th Street, Fort Lauderdale, Florida 33308
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
<P>
(954) 255-6753
<P>
(Registrant's Telephone Number, Including
Area Code)
<P>
(Former Name or Former Address, if Changed
Since Last Report)
<P>
ITEM 1. ACQUISITION OR DISPOSITION OF ASSETS
<P>
Pursuant to a Stock Purchase Agreement and Share
Exchange (the "Agreement") effective October 27,
2000, Tidalwave Holdings, Inc, a Florida
Corporation ("Tidalwave" or the "Company"),
received all of the common outstanding shares of
First American Mortgage Securities, Inc. a Florida
Corporation ("FAMS"), whereby FAMS became a wholly
owned subsidiary of Tidalwave in consideration for
the issuance of a total of 4,000,000 Tidalwave
common shares ($0.001 par value per share) and
14,512,500 Tidalwave preferred shares ($0.001 par
value per share) of "restricted" stock to the FAMS
shareholders. Such shares are valued at
$6,000,000 as set forth as follows:
<P>
$ 600,000 @ $0.15 4,000,000 Common
$2,700,000 @ $0.25 10,800,000 Preferred
$1,350,000 @ $0.50 2,700,000 Preferred
$ 675,000 @ $1.00 - 675,000 Preferred
$ 675,000 @ $2.00 - 337,500 Preferred
<P>
Such shares are "restricted" in accordance with
Rule 144 of the Securities Act of 1933. After the
closing of the Agreement, the directors of FAMS
will be J.R. Stirling and L. Edward Bache, Sr.
J.R. Stirling shall be the President and Secretary
of FAMS. In addition, J.R. Stirling and L. Edward
Bache, Sr. signed agreements with Tidalwave to
serve on its Board of Directors. The following
sets forth the background for both J.R. Stirling
and L. Edward Bache, Sr.:
<P>
J.R. STIRLING, 60, was appointed as a Director of
Tidalwave on October 30, 2000 and has been the President
and Secretary of First American Mortgage Securities,
Inc. ("FAMS") since 1996. As the President of
FAMS he has been responsible for the full
administration and operations of the Company which
is a mortgage banker in both the residential and
commercial divisions. Mr. Stirling began his
career in the mortgage services industry in 1993
working as a loan officer for Ameritrust Funding
Corporation and in 1994 being appointed the
Correspondent Director for Ameritrust. From 1994
to 1995 he was the marketing Director for Creative
Mortgage Securities, Inc. where he was responsible
for marketing wholesale mortgage programs to
mortgage brokers. In 1995 he was President and
Marketing Director of American Mortgage
Securities, Inc. and was responsible for all of
AMS' administration and marketing. From 1980-1993
he was the owner and principal of Donzi Marine
of West Florida, Inc. which bought, sold and
operated small businesses in the manufacturing,
marine and finance fields. Mr. Stirling
graduated from the Detroit Institute of Technology
in 1965 with a degree in Business Administration.
<P>
L. EDWARD BACHE, SR., 45, was appointed as a
Director of Tidalwave on October 30, 2000 and
Managing Director of First American Mortgage
Securities, Inc. ("FAMS") in 1999. His
responsibilities at FAMS include the day to day pipeline
management, asset disposition and risk
management. He developed the FAMS Conduit in
partnership with American Mortgage Securities,
Inc. He assisted in the development of FAMS'
mortgage trading and online underwriting center at
AMSTrading.com. He has been in the mortgage
services industry since 1985 when he was the Vice
President of First City Federal. At First City
Federal, Mr. Bache developed a Manufactured
Housing conduit working with American Bankers
Insurance and Norwest Modern Home Capital. In
such capacity he participated in numerous
securitizations. From 1992-1995 he was the Vice
President of American Mortgage Securities. His
responsibilities included the handling of mortgage
and securities trading and pipeline management.
From 1995 to 1999 he was the Managing Director of
Ameritrust Funding Corp.
<P>
The Acquisition was approved by the unanimous
consent of the Board of Directors of the Company
and FAMS on October 27, 2000. The Board of
Directors of Tidalwave believes that this
transaction will advance the interests of the
Company by adding a mortgage services business to
its asset base. Also, the addition of Mr.
Stirling, Mr. Bache and the FAMS staff will allow
the Company to undertake a much broader and more
extensive mortgage services program.
<P>
ITEM 7. FINANCIAL STATEMENTS
<P>
The pro forma combined balance sheets as of September 30,
2000 and March 31, 2000 and pro forma consolidated
statements of operations for the periods ending September
30, 2000 and March 31, 2000 are filed herewith. In
addition, the audited consolidated financial statements as
of April 30, 1999 and the reviewed financial statement for
October 31, 2000 are filed herewith.
<P>
INTRODUCTION TO UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS
<P>
The unaudited pro forma condensed combined balance sheets as
of March 31, 2000 and September 30, 2000 and the condensed
combined statements of operations for the year and six
months then ended, respectively, assumes the acquisition
occurred on April 1, 1999. The proforma information is based
upon the historical financial statements of Tidalwave
Holdings, Inc. and First American Mortgage Securities, Inc.
The proforma condensed combined financial statements are not
necessarily indicative of the financial position or results
of operations of the Company that would have actually
occurred had the acquisition been in effect as of the date
or for the periods presented. The proforma financial
information should be read in conjunction with the Company's
historical financial statements, including notes thereto,
which are incorporated herein by reference.
<P>
The acquisition has been recorded using the purchase method
under generally accepted accounting principles.
<TABLE>
<CAPTION>
TIDALWAVE HOLDINGS INC.
PROFORMA CONDENSED COMBINED BALANCE SHEET
(UNAUDITED)
SEPTEMBER 30, 2000
</CAPTION>
<S> <C> <C> <C> <C>
First
American
Tidalwave Mortgage
Holdings Securities Proforma Proforma
Inc. Inc. Adjustments Combined
---------------------------------------------------------------
Assets
Cash $ 356 $ 30,918 $ - $ 31,274
Accounts receivable - 168,622 - 168,622
Prepaid expenses 1,435 - - 1,435
Due from employee - 1,120 - 1,120
Due from stockholders - 30,897 - 30,897
Marketable securities - 1,874,400 - 1,874,400
--------------------------------------------------------------
Total Current Assets 1,791 2,105,957 - 2,107,748
--------------------------------------------------------------
Property and equipment - net - 37,315 - 37,315
--------------------------------------------------------------
Investments in equity
securities 250,000 134,031 - 384,031
Intangible assets - net - 522,778 5,670,008(a) 5,767,536
(425,250)(c)
Deposits - 1,153 - 1,153
--------------------------------------------------------------
Total Other Assets 250,000 657,962 5,244,758 6,152,720
--------------------------------------------------------------
Total Assets $ 251,791 $2,801,234 $5,244,758 $8,297,783
==============================================================
<P>
Liabilities and Stockholders' Equity
<P>
Accounts payable/accrued
expenses $ 26,187 $ 31,139 $ - $ 57,326
Notes payable - current
portion - 24,433 - 24,433
Due to officer 6,250 - - 6,250
--------------------------------------------------------------
Total Current
Liabilities 32,437 55,572 - 88,009
--------------------------------------------------------------
Deferred income taxes - 2,576 - 2,576
--------------------------------------------------------------
Total Liabilities 32,437 58,148 - 90,585
--------------------------------------------------------------
Equity subject to potential
redemption 4,500 - - 4,500
--------------------------------------------------------------
Common stock 25,619 405,100 3,900(a) 31,619
(403,000)(b)
Paid-in capital 1,438,851 157,372 5,651,765(a) 9,099,538
1,851,550(b)
Preferred stock - 1,450,000 14,513(a) 15,963
(1,448,550)(b)
Retained earnings (902,222) 56,214 (170)(a) (1,271,428)
(425,250)(c)
Accumulated other
comprehensive income (347,394) 674,400 - 327,006
--------------------------------------------------------------
Total Stockholders'
Equity 214,854 2,743,086 5,244,758 8,202,698
--------------------------------------------------------------
Total Liabilities and
Stockholders' Equity $ 251,791 $2,801,234 $5,244,758 $8,297,783
==============================================================
</TABLE>
<P>
<TABLE>
<CAPTION>
TIDALWAVE HOLDINGS INC.
PROFORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)
SIX MONTHS ENDED SEPTEMBER 30, 2000
</CAPTION>
<S> <C> <C> <C> <C>
First
American
Tidalwave Mortgage
Holdings Securities Proforma Proforma
Inc. Inc. Adjustments Combined
--------------------------------------------------------------
Net revenues $ 97 $6,200,033 $ - $6,200,130
Cost of revenues 90 5,970,152 - 5,970,242
--------------------------------------------------------------
Gross profit 7 229,881 - 229,888
--------------------------------------------------------------
Operating Expenses
Selling, general and
administrative 209,326 167,729 - 377,055
Depreciation - 5,058 - 5,058
--------------------------------------------------------------
Total Operating Expenses 209,326 172,787 - 382,113
--------------------------------------------------------------
Income (loss) from
operations (209,319) 57,094 - (152,225)
--------------------------------------------------------------
Other Income (Expenses)
Interest income 92 - - 92
Interest expense - (1,058) - (1,058)
Amortization - (23,334) (141,750)(c) (165,084)
--------------------------------------------------------------
Total Other Income
(Expense) 92 (24,392) (141,750) (166,050)
--------------------------------------------------------------
Net income (loss) $(209,227) $ 32,702 $(141,750) $(318,275)
==============================================================
Income (loss) per share $ (.01) $ .02 $ (.01)
==============================================================
Weighted average common
shares outstanding 25,339,722 2,000,400 29,339,722
==============================================================
<P>
</TABLE>
<P>
TIDALWAVE HOLDINGS INC.
NOTES TO PROFORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2000
<P>
(a) Adjustments made to reflect the acquisition as if it had
occurred as of April 1, 1999.
<P>
(b) Adjustments made to reflect shares issued by First
American Mortgage Securities, Inc. as if Tidalwave
Holdings,Inc. issued these shares.
<P>
(c) Adjustment to reflect goodwill amortization.
<TABLE>
<CAPTION>
TIDALWAVE HOLDINGS INC.
PROFORMA CONDENSED COMBINED BALANCE SHEET
(UNAUDITED)
MARCH 31, 2000
</CAPTION>
<S> <C> <C> <C> <C>
First
American
Tidalwave Mortgage
Holdings Securities Proforma Proforma
Inc. Inc. Adjustments Combined
-----------------------------------------------------------
Assets
Cash $ 1,773 $ 121,741 $ - $ 123,514
Accounts receivable - 39,232 - 39,232
Prepaid expenses 3,500 - - 3,500
Notes receivable 1,850 - - 1,850
Stock subscription
receivable - 550,000 (550,000)(c) -
-----------------------------------------------------------
Total Current Assets 7,123 710,973 (550,000) 168,096
-----------------------------------------------------------
Property and equipment - net - 41,137 - 41,137
-----------------------------------------------------------
Investments in equity
securities 250,000 134,031 - 384,031
Stock subscription
receivable - 650,000 (650,000)(c) -
Intangible assets - net - 546,111 5,670,008(a) 5,932,619
(283,500)(d)
Deposits - 1,153 - 1,153
-----------------------------------------------------------
Total Other Assets 250,000 1,331,295 4,736,508 6,317,803
-----------------------------------------------------------
Total Assets $ 257,123 $2,083,405 $4,186,508 $6,527,036
===========================================================
<P>
Liabilities and Stockholders' Equity
<P>
Accounts payable/accrued
expenses $ 20,174 $ 28,039 $ - $ 48,213
Notes payable - current
portion - 16,806 - 16,806
Due to officer 400 - - 400
-----------------------------------------------------------
Total Current
Liabilities 20,574 44,845 - 65,419
<P>
Deferred income taxes - 2,576 - 2,576
-----------------------------------------------------------
Total Liabilities 20,574 47,421 - 67,995
-----------------------------------------------------------
Equity subject to potential
redemption 50,800 - - 50,800
-----------------------------------------------------------
Common stock 24,680 405,100 3,900(a) 30,680
(403,000)(b)
Paid-in capital 1,201,457 157,372 5,651,765(a) 8,862,144
1,851,550(b)
Stock subscription receivable - - (1,200,000)(b)(1,200,000)
Preferred stock - 1,450,000 14,513(a) 15,963
(1,448,550)(b)
Retained earnings (692,994) 23,512 (170)(a) (953,152)
(283,500)(d)
Accumulated other
comprehensive income (347,394) - - (347,394)
-------------------------------------------------------------
Total Stockholders'
Equity 185,749 2,035,984 4,186,508 6,408,241
-------------------------------------------------------------
Total Liabilities and
Stockholders' Equity $ 257,123 $2,083,405 $4,186,508 $6,527,036
=============================================================
</TABLE>
<P>
<TABLE>
<CAPTION>
TIDALWAVE HOLDINGS INC.
PROFORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)
YEAR ENDED MARCH 31, 2000
</CAPTION>
<S> <C> <C> <C> <C>
First
American
Tidalwave Mortgage
Holdings Securities Proforma Proforma
Inc. Inc. Adjustments Combined
-------------------------------------------------------------
Net revenues $ 266 $8,007,626 $ - $8,007,892
<P>
Cost of revenues 265 7,801,999 - 7,802,264
-------------------------------------------------------------
Gross profit 1 205,627 - 205,628
-------------------------------------------------------------
Operating Expenses
Selling, general and
administrative 270,339 184,180 - 454,519
Depreciation 66 5,909 - 5,975
-------------------------------------------------------------
Total Operating Expenses 270,405 190,089 - 460,494
-------------------------------------------------------------
Income (loss) from
operations (270,404) 15,538 - (254,866)
-------------------------------------------------------------
Other Income (Expenses)
Forgiveness of indebtedness 9,766 - - 9,766
Interest income and
miscellaneous 1,586 - - 1,586
Interest expense - (2,643) - (2,643)
Amortization - (3,889) (283,500)(d) (287,389)
-------------------------------------------------------------
Total Other Income
(Expense) 11,352 (6,532) (283,500) (278,680)
-------------------------------------------------------------
Income (loss) before income
tax provision (benefit) (259,052) 9,006 (283,500) (533,546)
<P>
Income tax provision
(benefit) - 3,227 - 3,227
-------------------------------------------------------------
Net income (loss) (259,052) 5,779 (283,500) (536,773)
<P>
Other comprehensive (loss) (347,394) - - (347,394)
-------------------------------------------------------------
Comprehensive income (loss)$(606,446) $ 5,779 $(283,500) $(884,167)
=============================================================
<P>
Income (loss) per share $ (.01) $ .07 $ (.02)
=============================================================
Weighted average common
shares outstanding 23,422,569 83,733 27,422,569
================================================================
</TABLE>
<P>
TIDALWAVE HOLDINGS INC.
NOTES TO PROFORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2000
<P>
(a) Adjustments made to reflect the acquisition as if it had
occurred as of April 1, 1999.
<P>
(b) Adjustments made to reflect shares issued by First
American Mortgage Securities, Inc. as if Tidalwave
Holdings,Inc. issued these shares.
<P>
(c) Adjustment to reflect stock subscription receivable as
an offset against stockholders' equity.
<P>
(d) Adjustment to reflect goodwill amortization.
<P>
<P>
Puissegur, Finch & Slivinski, P.A.
Certified Public Accountants & Consultants
<P>
TRUSTED ADVISORS
TO BUSINESSES AND PROFESSIONALS
<P>
Members of 5410 S. Florida Ave., Ste. 12
American and Florida P.O. Box 6196
Institute of Certified Lakeland, FL 33807-6196
Public Accountants Telephone 863.648.4467
Telefacsimile 863.648.4983
e-mail [email protected]
<P>
December 5, 2000
<P>
To the Board of Directors
First American Mortgage Securities, Inc.
Clearwater, Florida
<P>
We have compiled the accompanying balance sheet of First
American Mortgage Securities, Inc. as of October 31, 2000,
and the related statements of income and retained earnings
and cash flows for the six months then ended, in accordance
with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified
Public Accountants.
<P>
A compilation is limited to presenting in the form of
financial statement information that is the representation
of management. We have not audited or reviewed the
accompanying financial statements and, accordingly, do not
express an opinion or any other form of assurance of them.
<P>
Puissegur, Finch & Slivinski, P.A.
Certified Public Accountant and Consultants
<P>
<TABLE>
<CAPTION>
FIRST AMERICAN MORTGAGE SECURITIES,
INC.
BALANCE SHEET
OCTOBER 31, 2000
</CAPTION>
ASSETS
<S> <C>
Current assets
Cash and cash equivalents $30,918
Receivables:
Trade 168,622
Employee 1,120
Stockholders 30,897
Marketable securities (available for sale) 1,874,400
---------------
Total current assets 2,105,957
<P>
Property and equipment, at cost
Furniture and fixtures 17,112
Office equipment 20,729
Computers and software 18,503
----------------
56,344
Less accumulated depreciation (19,029)
----------------
Net property and equipment 37,315
<P>
Other assets
Investments 134,031
Intangible assets - net of accumulated
amortization of $27,223 522,778
Deposits 1,153
----------------
Total other assets 657,962
----------------
Total assets 2,801,234
================
<P>
LIABILITIES AND STOCKHOLDERS' EQUITY
<P>
Current liabilities
Accrued liabilities 31,139
Notes payable - current portion 24,433
----------------
Total current liabilities 55,572
<P>
Deferred income taxes 2,576
----------------
Total liabilities 58,148
<P>
Stockholders' equity
Common stock 405,100
Additional paid-in capital 157,372
Preferred stock 1,450,000
Retained earnings 56,214
Accumulated other comprehensive income 674,400
----------------
Total stockholders' equity 2,743,086
----------------
Total liabilities and stockholders' equity $2,801,234
================
<P>
The accompanying notes are an integral part of these
financial statements.
<P>
</TABLE>
<P>
<TABLE>
<CAPTION>
FIRST AMERICAN MORTGAGE SECURITIES,
INC.
STATEMENT OF INCOME AND RETAINED
EARNINGS
FOR THE SIX MONTHS ENDED OCTOBER 31,
2000
</CAPTION>
<S> <C>
Contract revenues earned $6,200,033
<P>
Cost of revenues 5,970,152
-------------------
Gross profit 229,881
<P>
Selling, general and administrative expense 172,787
-------------------
Income from operations 57,094
<P>
Other income (expense)
Interest expense (1,058)
Amortization expense (23,334)
-------------------
Total other income (expense) (24,392)
-------------------
Net income 32,702
<P>
Retained earnings, beginning of year 23,512
-------------------
Retained earnings, end of period $56,214
===================
<P>
The accompanying notes are an integral part of these
financial statements.
<P>
</TABLE>
<P>
<TABLE>
<CAPTION>
FIRST AMERICAN MORTGAGE SECURITIES,
INC.
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED OCTOBER 31,
2000
</CAPTION>
<S>
<C>
Cash flows from operating activities
Net Income $32,702
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 5,058
Amortization 23,334
(Increase) decrease in:
Trade receivables (129,390)
Employee advances (1,120)
Increase (decrease) in:
Accrued liabilities 3,762
--------------
Net cash used in operating activities (65,654)
--------------
Cash flows from investing activities
Purchase of furniture and equipment (1,236)
--------------
Cash flows from financing activities
Payments made on line of credit (5,436)
Loans to stockholders (30,897)
Proceeds from additional borrowing 12,400
--------------
Net cash used in financing activities (23,933)
--------------
Net decrease in cash (90,823)
<P>
Cash, at beginning of year 121,741
---------------
Cash, at end of period $30,918
===============
Supplemental cash flow information:
<P>
Cash paid for interest during the year $1,058
================
</TABLE>
<P>
FIRST AMERICAN MORTGAGE SECURITIES, INC.
NOTES TO THE FINANCIAL STATEMENTS
OCTOBER 31, 2000
<P>
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
<P>
This summary of significant accounting policies of First
American Mortgage Securities, Inc. (the Company) is
presented to assist in understanding the Company's financial
statements. The financial statements and notes are
representations of the Company's management. These
accounting policies conform to generally accepted accounting
principles and have been consistently applied in the
preparation of the financial statements.
<P>
Nature of Business:
-------------------
<P>
The Company is licensed as a correspondent mortgage lender
originating residential and commercial loans within the
State of Florida.
<P>
Basis of Accounting:
--------------------
<P>
The Company prepares its financial statements on the accrual
method of accounting, recognizing income when earned and
expenses when incurred.
<P>
Cash and Cash Equivalents:
--------------------------
<P>
Cash and cash equivalents represents cash in banks and
short-term investments with original maturities of 90 days
or less.
<P>
Accounts Receivable:
----------------------
<P>
No allowance for doubtful accounts is provided as all
accounts receivable are considered collectible.
<P>
Property and Equipment:
-----------------------
<P>
Property and equipment are stated at cost. Depreciation is
provided using the straight-line method over the estimated
useful lives of the assets. Estimated lives are as follows:
<P>
Computers and software 5 years
Office Equipment 5 years
Furniture and Fixtures 7 years
<P>
Investments:
--------------
<P>
The Company carries its investment in nonmarketable equity
securities at cost. Under the cost method, revenue is
generally recognized when dividends are received and changes
in the financial position of the investment are not
recognized unless the changes represent an other than
temporary decline in the value of the investment.
Marketable securities:
<P>
The Company carries its investment in marketable equity
securities at fair value. The Company's investment in
marketable securities are held for an indefinite period and
thus are classified as available for sale. Unrealized
holding gains on such securities, which were added to
stockholders' equity were $674,400.
<P>
Intangible Assets:
------------------
<P>
Intangible assets are stated at cost. Amortization is
provided using the straight-line method over the estimated
useful lives of the assets. Estimated useful lives are as
follows:
<P>
Mortgage servicing rights 9 years
Intellectual property rights 15 years
Internet domain name 15 years
<P>
Income Taxes:
-------------
<P>
The Company accounts for income taxes using the liability
method as prescribed in SFAS No. 109, "Accounting for Income
Taxes." Deferred tax assets and liabilities are determined
based upon the differences between financial statement
carrying amounts and the tax bases of existing assets and
liabilities. These temporary differences are measured at
prevailing enacted rates that will be in effect when the
differences are settled or realized.
<P>
Use of Estimates:
-----------------
<P>
The preparation of the financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements as well as the reported amounts of
revenues and expenses during the reporting period. Actual
results could differ from those estimates.
<P>
NOTE B - LINE OF CREDIT
<P>
The Company has an unsecured line of credit with a bank in
the amount of $20,000. The line of credit is due on demand,
carries a variable rate of interest of prime plus 2.00%
(11.50% at October 31, 2000), and requires monthly payments
of 3% of outstanding principal or $250, whichever is
greater. The loan is by the guaranteed by the stockholders.
Balance outstanding as of October 31, 2000 was $13,482.
<P>
NOTE C STOCKHOLDERS' EQUITY
<P>
The stockholder's equity section of the Company contains the
following classes of capital stock at October 31, 2000:
<P>
Preferred stock, nonvoting, $1 par value, 1,600,000 shares
authorized, 1,450,000 shares issued and outstanding.
<P>
Common stock, no par value, 2,000,400 shares authorized,
issued and outstanding.
<P>
NOTE D OPERATING LEASES
<P>
The Company leases its office space under an operating lease
that expires September 30, 2002. Office lease rent expense
for October 31, 2000 was $17,195.
<P>
NOTE E INCOME TAXES
<P>
The source of deferred income tax and the tax effects are as
follows as of April 30, 2000:
<P>
Excess of tax over financial statement
depreciation $ 2,576
=============
<P>
NOTE F - NONMONETARY TRANSACTIONS (CASH FLOW DISCLOSURES)
<P>
On April 15, 2000, the Company purchased certain assets of
Ameritrust Mortgage Securities, Inc., and an individual.
The Company issued common stock and preferred stock in
exchange for property received. The transaction resulted in
the following financial position:
<TABLE>
<S> <C>
Stock subscription receivable $ 1,200,000
Intellectual property 250,000
Mortgage service rights 225,000
Internet domain name 75,000
Property and equipment 25,000
Common stock (405,000)
Preferred stock (1,450,000)
-----------------
Cash received $ 80,000
=================
</TABLE>
<P>
On October 27, 2000, marketable equity securities were
received in order to satisfy the stock subscription
receivable.
<P>
Puissegur, Finch & Slivinski, P.A.
Certified Public Accountants & Consultants
<P>
TRUSTED ADVISORS
TO BUSINESSES AND PROFESSIONALS
<P>
Members of 5410 S. Florida Ave., Ste. 12
American and Florida P.O. Box 6196
Institute of Certified Lakeland, FL 33807-6196
Public Accountants Telephone 863.648.4467
Telefacsimile 863.648.4983
e-mail [email protected]
<P>
INDEPENDENT AUDITOR'S REPORT
<P>
To the Stockholders
First Mortgage Securities, Inc.
Clearwater, Florida
<P>
We have audited the accompanying balance sheet of First
Mortgage Securities, Inc., as of April 30, 2000, and the
related statements of income and retained earnings, and cash
flows for the years then ended. 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.
<P>
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.
<P>
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of First Mortgage Securities, Inc., as of April 30,
2000, and the results of its operations and its cash flows
for year then ended in conformity with generally accepted
accounting principles.
<P>
Puissegur, Finch & Slivinski, P.A.
Certified Public Accountants & Consultants
<P>
July 2, 2000
<P>
<TABLE>
<CAPTION>
FIRST MORTGAGE SECURITIES, INC.
BALANCE SHEET
APRIL 30, 2000
<P>
ASSETS
<S> <C>
Current assets
Cash and cash equivalents $121,741
Accounts receivable 39,232
Stock subscription receivable 550,000
-------------
Total current assets 710,973
<P>
Property and equipment, at cost
Furniture and fixtures 15,876
Office equipment 20,729
Computers and software 18,503
-------------
55,108
Less accumulated depreciation (13,971)
--------------
Net property and equipment 41,137
<P>
Other assets
Investments 134,031
Stock subscription receivable 650,000
Intangible assets - net of accumulated
amortization of $3,889 546,111
Deposits 1,153
--------------
Total other assets 1,331,295
--------------
Total assets 2,083,405
==============
<P>
LIABILITIES AND STOCKHOLDERS' EQUITY
<P>
Current liabilities
Accrued liabilities 27,377
Federal income tax payable 662
Notes payable - current portion 16,806
-------------
Total current liabilities 44,845
<P>
Deferred income taxes 2,576
-------------
Total liabilities 47,421
<P>
Stockholders' equity
Common stock 405,100
Additional paid-in capital 157,372
Preferred stock 1,450,000
Retained earnings 23,512
--------------
Total stockholders' equity 2,035,984
--------------
Total liabilities and
stockholders' equity $2,083,405
===============
<P>
The accompanying notes are an integral part of these financial statements.
<P>
</TABLE>
<P>
<TABLE>
<CAPTION>
FIRST MORTGAGE SECURITIES, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED APRIL 30, 2000
</CAPTION>
<S> <C>
Contract revenues earned $8,007,626
<P>
Cost of revenues 7,801,999
-------------
Gross profit 205,627
<P>
Selling, general and administrative expense 190,089
-------------
Income from operations 15,538
<P>
Other income (expense)
Interest expense (2,643)
Amortization expense (3,889)
-------------
Total other income (expense) (6,532)
-------------
Income before income tax provision 9,006
<P>
Income tax provision (benefit)
Current 651
Deferred 2,576
--------------
Total income taxes 3,227
--------------
Net income 5,779
<P>
Retained earnings, beginning of year 17,733
--------------
Retained earnings, end of year $23,512
==============
</TABLE>
<P>
<TABLE>
<CAPTION>
FIRST MORTGAGE SECURITIES, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED APRIL 30, 2000
</CAPTION>
<S> <C>
Cash flows from operating activities
Net Income $5,779
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 5,909
Amortization 3,889
Deferred income taxes 2,576
(Increase) decrease in:
Accounts receivable (36,165)
Deposits (196)
Increase (decrease) in:
Income taxes payable 662
Accrued liabilities 23,794
--------------
Net cash provided by operating activities 6,248
--------------
Cash flows from financing activities
Proceeds from line of credit 18,868
Payments made on line of credit (3,322)
Capital lease principal repayment (16,400)
Proceeds from issuance of common stock 80,000
--------------
Net cash provided (used) by financing activities 79,146
--------------
Net increase in cash 85,394
<P>
Cash, at beginning of year 36,347
--------------
Cash, at end of year $121,741
==============
Supplemental cash flow information:
Cash paid for interest during the year $2,643
==============
<P>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<P>
FIRST MORTGAGE SECURITIES, INC.
NOTES TO THE FINANCIAL STATEMENTS
APRIL 30, 2000
<P>
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
<P>
This summary of significant accounting policies of First
Mortgage Securities, Inc. (the Company) is presented to
assist in understanding the Company's financial statements.
The financial statements and notes are representations of
the Company's management. These accounting policies conform
to generally accepted accounting principles and have been
consistently applied in the preparation of the financial
statements.
<P>
Nature of Business:
-------------------
<P>
The Company is licensed as a correspondent mortgage lender
originating residential and commercial loans within the
State of Florida.
<P>
Basis of Accounting:
--------------------
<P>
The Company prepares its financial statements on the accrual
method of accounting, recognizing income when earned and
expenses when incurred.
<P>
Cash and Cash Equivalents:
--------------------------
<P>
Cash and cash equivalents represents cash in banks and
short-term investments with original maturities of 90 days
or less.
<P>
Accounts Receivable:
--------------------
<P>
No allowance for doubtful accounts is provided as all
accounts receivable are considered collectible.
<P>
Property and Equipment:
-----------------------
<P>
Property and equipment are stated at cost. Depreciation is
provided using the straight-line method over the estimated
useful lives of the assets. Estimated lives are as follows:
<P>
Computers and software 5 years
Office Equipment 5 years
Furniture and Fixtures 7 years
<P>
Investments:
------------
<P>
The Company carries its investment in nonmarketable equity
securities at cost. Under the cost method, revenue is
generally recognized when dividends are received and changes
in the financial position of the investment are not
recognized unless the changes represent an other than
temporary decline in the value of the investment.
<P>
Intangible Assets:
-------------------
<P>
Intangible assets are stated at cost. Amortization is
provided using the straight-line method over the estimated
useful lives of the assets. Estimated useful lives are as
follows:
<TABLE>
<S> <C> <C>
Mortgage servicing rights 9 years
Intellectual property rights 15 years
Internet domain name 15 years
</TABLE>
<P>
Income Taxes:
-------------
<P>
The Company accounts for income taxes using the liability
method as prescribed in SFAS No. 109, "Accounting for Income
Taxes." Deferred tax assets and liabilities are determined
based upon the differences between financial statement
carrying amounts and the tax bases of existing assets and
liabilities. These temporary differences are measured at
prevailing enacted rates that will be in effect when the
differences are settled or realized.
<P>
Use of Estimates:
------------------
<P>
The preparation of the financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements as well as the reported amounts of
revenues and expenses during the reporting period. Actual
results could differ from those estimates.
<P>
NOTE B - LINE OF CREDIT
<P>
The Company has an unsecured line of credit with a bank in
the amount of $20,000. The line of credit is due on demand,
carries a variable rate of interest of prime plus 2.00%
(11.50% at April 30, 2000), and requires monthly payments of
3% of outstanding principal or $250, whichever is greater.
The loan is by the guaranteed by the stockholders. Balance
outstanding as of April 30, 2000 was $16,806.
<P>
NOTE C STOCKHOLDERS' EQUITY
<P>
The stockholder's equity section of the Company contains the
following classes of capital stock at April 30, 2000:
<P>
Preferred stock, nonvoting, $1 par value, 1,600,000 shares
authorized, 1,450,000 shares issued and outstanding.
<P>
Common stock, no par value, 2,000,400 shares authorized,
issued and outstanding.
<P>
In connection with the preferred stock, a stock subscription
receivable has been recorded. The stock subscription
receivable shall be paid at the rate of $50,000 per month
for 24 months beginning June 1, 2000.
<P>
NOTE D OPERATING LEASES
<P>
The Company leases its office space under an operating lease
that expires September 30, 2000. Office lease rent expense
for April 30, 2000 was $21,604.
<P>
NOTE E INCOME TAXES
<P>
The source of deferred income tax and the tax effects are as
follows as of April 30, 2000:
<P>
Excess of tax over financial
statement depreciation $ 2,576
=============
<P>
NOTE F - PRIOR PERIOD ADJUSTMENT
<P>
Certain errors, resulting in the understatement and
overstatement of previously reported assets and income of
prior years, were corrected during the year resulting in the
following changes to retained earnings as of April 30, 2000:
<TABLE>
<S> <C>
Retained earnings as previously reported $ 170
<P>
Overstatement of depreciation expense 17,563
<P>
Retained earnings as adjusted $ 17,733
=================
</TABLE>
<P>
NOTE G - NONMONETARY TRANSACTIONS (CASH FLOW DISCLOSURES)
<P>
On April 15, 2000, the Company purchased certain assets of
Ameritrust Mortgage Securities, Inc., and an individual.
The Company issued common stock and preferred stock in
exchange for property received. The transaction resulted in
the following financial position:
<TABLE>
<S> <C>
Stock subscription receivable $ 1,200,000
Intellectual property 250,000
Mortgage service rights 225,000
Internet domain name 75,000
Property and equipment 25,000
Common stock (405,000)
Preferred stock (1,450,000)
------------------
Cash received $ 80,000
==================
</TABLE>
<P>
Willett, Canter & MacLaren
Certificated Public Accountants
2100 West Bay Drive
Largo, Florida 33770
727-585-5599
Fax: 727-586-4796
<P>
Member of: Ronald Willett,C.P.A.
Institute of Certified Richard Canter, C.P.A.
Public Accountants Berta MacLaren, C.A.A.
Florida Institute of
Certified Public Accountants
Greater Largo Chamber of
Commerce
Gulf Beached Chamber of
Commerce
Belleair Bluffs Business
Professional Assoc.
Indian Rocks Business
Association, President
<P>
Independents Auditors' Report
<P>
Tho the Stockholders and Board of Directors
First Mortgage Securities, Inc.
601 Cleveland Street, Suite 360
Clearwater, FL 33755
<P>
We have audited the accompanying statement of financial
position of First Mortgage Securities, Inc., as of April 30,
1999, and the related statements of activities and cash
flows for the year then ended. 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.
<P>
We conducted our audit in accordance with generally accepted
audinting 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. We included such tests of the accounting
records and such other auditing procedures as we considered
necessary in the circumstances.
<P>
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of First Mortgage Securities, Inc., as of April 30,
1999, and the results of its operations and cash flows for
the year then ended in conformity with generally accepted
accounting principles.
<P>
/s/ Willett, Canter & MacLaren, C.P.A.'s
-----------------------------------------
Willett, Canter & MacLaren, C.P.A.'s
<P>
August 10, 1999
<P>
<TABLE>
<CAPTION>
FIRST MORTGAGE SECURITIES, INC.
STATEMENTS OF FINANCIAL POSITION
APRIL 30, 1999
</CAPTION>
<S> <C> <C>
ASSETS
<P>
Current Assets
Cash in Bank $36,347
Accounts receivable 3,067
------------
$39,414
<P>
Furniture and Equipment
Furniture 8,674
Equipment 11,325
Computers & Software 10,109
Less Accumulated Depreciation (19,361)
------------
Total Furniture and Equipment 10,747
<P>
Other Assets
Investments - Note 2 306,381
Security deposits 957
------------
307,338
--------------
TOTAL ASSETS 357,499
==============
LIABILITIES & EQUITY
<P>
Current Liabilities
Accounts and payroll taxes
payable $3,583
Amsouth line of credit 4,202
------------- $7,785
<P>
Long Term Liabilities
Equipment leases payable 19,722
<P>
Equity
Common Stock $ 100
Paid in Capital 157,372
Valuation increase in
stock held 172,350
Retained earnings 170
-------------
Total Equity 329,992
---------------
TOTAL LIABILITIES & EQUITY $357,499
===============
<P>
See Accountant's Audit Report
</TABLE>
<P>
<TABLE>
<CAPTION>
FIRST MORTGAGE SECURITIES, INC.
STATEMENT OF OPERATING ACTIVITIES
FOR THE YEAR ENDED
APRIL 30, 1999
</CAPTION>
<S> <C> <C>
Revenues
INCOME $208,881
<P>
Expenses
COMMISSIONS 61,050
SALARIES 48,528
TELEPHONE & FAX 20,854
MORTGAGE CLOSING COSTS 18,892
RENT OFFICE & EQUIPMENT 17,938
INTEREST EXPENSES 10,558
TAXES 6,016
OFFICE EXPENSE 5,842
LEGAL & ACCOUNTING 3,564
INSURANCE 1,600
REPAIRS & MAINTENANCE 1,590
TRAVEL & ENTERTAINMENT 1,112
ADVERTISING 1,055
DEPRECIATION 5,748
<P>
Total Expenses 204,356
<P>
Net Income (Loss) 4,525
<P>
Retained earnings analysis:
Retained earnings 4-30-98 (43,301)
Current year profit 4,525
Adjustment to prior year depreciation (3,649)
Adjustment for loan sales in the
prior year 42,595
<P>
Retained earnings 4-30-99 $ 70
<P>
See Accountant's Audit Report
<P>
</TABLE>
<P>
<TABLE>
<CAPTION>
FIRST MORTGAGE SECURITIES, INC.
Statement of Activities
For the Period Ended April 30, 1999
</CAPTION>
<S> <C> <C> <C> <C>
Current Month Percent Current Year Percent
4-30-99 4-30-99
----------------------------------------------------------
Revenues
CLOSING PREMIUM $52,508.44 99.8% $380,814.11 98.4%
OTHER INCOME 0.00 0.0 4,218.27 1.1
APPRAISAL FEE 0.00 0.0 1,703.74 0.4
INCOME FROM STOCK SALE 0.00 0.0 310.00 0.1
INTEREST INCOME 126.19 0.2 126.19 0.0
----------------------------------------------------------
Total Revenues 52,634.63 100.0 387,172.31 100.0
<P>
Cost of Services
LOAN BROKERS REBATES 1,051.00 2.0 2,967.25 0.8
RECORDING & COURT DOC 0.00 0.0 582.00 0.2
CREDIT REPORT FEES 45.00 0.1 1,685.25 0.4
CONTRACT DOCUMENT SUP 0.00 0.0 1,500.00 0.4
DELIVERY & COURIER FEES 252.75 0.5 8,836.80 2.3
MORTGAGE SERVICING EXPENSES 79.00 0.2 1,048.47 0.3
APPRAISAL FEES 0.00 0.0 1,387.00 0.4
BUSINESS/CONTRACT FEE 0.00 0.0 35.00 0.0
WAREHOUSE FUNDING 0.00 0.0 57,600.00 14.9
Premiums paid to FMS 39,611.05 75.3 120,690.57 31.2
COMMISSIONS 3,900.00 7.4 61,050.00 15.8
OUTSIDE SECRETARIAL 452.00 0.9 850.94 0.2
SALARIES - OFFICE 3,120.00 5.9 40,277.54 10.4
SALARIES - OFFICERS 0.00 0.0 8,250.00 2.1
-----------------------------------------------------------
Total Cost of Services 48,510.80 92.2 306,760.82 79.2
-----------------------------------------------------------
Gross Profit 4,123.83 7.8 80,411.49 20.8
---------------------------------------------------------
Expenses
ADVERTISING 105.60 0.2 1,066.35 0.3
AUTO-TRUCK EXPENSE 0.00 0.0 12.50 0.0
BANK CHARGES 84.50 0.2 648.23 0.2
COMPUTER SUPPLIES 158.70 0.3 158.70 0.0
DUES & SUBSCRIPTIONS 0.00 0.0 350.00 0.1
INSURANCE - GENERAL 0.00 0.0 760.75 0.2
INSURANCE - EMPLOYEES 0.00 0.0 419.50 0.1
INSURANCE LIFE 0.00 0.0 209.75 0.1
INTEREST EXPENSE 341.65 0.6 10,555.70 2.7
ACCOUNTING SERVICES 0.00 0.0 3,387.50 0.9
MISCELLANEOUS 0.00 0.0 300.00 0.1
LEGAL SERVICES 0.00 0.0 176.00 0.0
OFFICE EXPENSE 145.58 0.3 3,659.68 0.9
POSTAGE 0.00 0.0 681.26 0.2
RENT 5.00 0.0 14,981.91 3.9
EQUIPMENT RENTAL 0.00 0.0 2,956.25 0.8
COMPUTER MAINT. & SUPPLIES 0.00 0.0 376.40 0.1
REPAIRS & MAINTENANCE 58.72 0.1 1,213.77 0.3
TAXES - PAYROLL 238.68 0.5 4,805.57 1.2
<P>
<CAPTION>
FIRST MORTGAGE SECURITIES, INC.
Statement of Activities
For the Period Ended April 30, 1999
</CAPTION>
<S> <C> <C> <C> <C>
Current Month Percent Current Year Percent
4-30-99 4-30-99
----------------------------------------------------------
TAXES & LICENSES OTHER 158.75 0.3 1,210.92 0.3
TELEPHONE 880.16 1.7 12,311.44 3.2
FAX EXPENSE 702.30 1.3 8,542.10 2.2
Maiden Brook 0.00 0.0 242.70 0.1
BUSINESS ENTERTAINMENT 0.00 0.0 1,003.00 0.3
MEETINGS & SEMINARS 0.00 0.0 108.50 0.0
----------------------------------------------------------
Total Expenses 2,879.64 5.5 70,138.48 18.1
----------------------------------------------------------
Net Income (Loss) $1,244.19 2.4% $10,273.01 2.7%
==========================================================
<P>
</TABLE>
<P>
<TABLE>
<CAPTION>
FIRST MORTGAGE SECURITIES, INC.
Statement of Cash Flows
For the Period Ended April 30, 1999
</CAPTION>
<S> <C>
Cash Flows from Operating Activities
Net Income $4,525
<P>
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 5,748
(Increase) Decrease in Accounts Receivable (3,067)
Increase (Decrease in Accounts Receivable 4,688
----------
Total Adjustments $7,369
----------
Net Cash Provided (Used) By Operating Activities $11,894
----------
Cash Flows from Financing Activities
Principal Payments on Long-Term Debt $(6,243)
Net repayments of paid in capital (6,840)
----------
Net Cash Provided (Used) By Financing Activities $(13,083)
-----------
Net Increase (Decrease) in Cash $ (1,189)
Cash at Beginning of Period 37,536
-----------
Cash at End of Period $ 36,347
===========
</TABLE>
<P>
First Mortgage Securities, Inc.
Notes to Financial Statements
April 30, 1999
<P>
1. GENERAL INFORMATION
<P>
First Mortgage Securities, Inc. was incorporated under the
laws of the State of Florida on October 17, 1996 as a
Florida Corporation.
<P>
2. SHARES OF STOCK OWNED
<P>
The Corporation owns 149,454 Shares of Stock in American
Mortgage Securities, Inc., having a total net equity value
of $306,381 as of their April 30, 1999 Audited Financial
Statement.
<P>
3. CONCENTRATION OF CREDIT RISK
<P>
The Company's accounts receivable are concentrated in the
mortgage banking industry. The Company does not believe
that it is subject to any unusual credit risk beyond the
normal credit risk attendant to operating its business.
<P>
4. LEASES
<P>
The corporation also leases telephone, office equipment and
computer equipment. The leases are treated as purchase
leases and the equipment is capitalized. The payments,
including interest are as follows:
<P>
$ 378.39/mo. With 32 payments left - $ 12,108
514.72/mo. With 32 payments left - $ 16,471
45.22/mo. With 32 payments left - $ 1,447
<P>
Index to Exhibits
<P>
2.1 Stock Purchase Agreement and Share
Exchange and Exhibits *
<P>
* Filed with the original Form 8K on November 13, 2000
(SEC File No. 0-26187)
<P>
SIGNATURES
<P>
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 hereunto duly authorized.
<P>
Tidalwave Holdings, Inc.,
a Florida Corporation
<P>
By: /s/ Leon Kline
-----------------------
Leon Kline
President
<P>
DATED: January 11, 2001
<P>
