<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K\A
CURRENT REPORT
AMENDMENT NO. 1
Pursuant To Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
April 27, 1999
SUNDERLAND CORPORATION
DELAWARE
(State or Other Jurisdiction of Incorporation)
000-24803 52-2102142
(Commission File Number) (IRS Employer Identification No.)
(Address of Principal Executive Offices, Including Zip Code)
2901 El Camino Avenue, Las Vegas, Nevada 89102
(Registrant's Telephone Number, Including Area Code)
(702) 227-0965
The undersigned hereby amends the following items, financial
statements, exhibits or other portions of its current report on Form 8-K dated
May 5, 1999 as set forth in the pages attached hereto.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired.
<PAGE>
DEL MAR MORTGAGE, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Certified Public Accountants 1
Financial Statements:
Balance Sheets - December 31, 1998 and 1997 2
Statements of Operations for the Years Ended
December 31, 1998 and 1997 3
Statements of Stockholder's Equity for the Years
Ended December 31, 1998 and 1997 4
Statements of Cash Flows for the Years Ended
December 31, 1998 and 1997 5
Notes to Financial Statements 6 - 10
</TABLE>
--------------
<PAGE>
[LETTERHEAD]
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Del Mar Mortgage, Inc.
Las Vegas, Nevada
We have audited the accompanying balance sheets of Del Mar Mortgage, Inc. as of
December 31, 1998 and 1997, and the related statements of operations,
stockholder's equity, 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audits provide 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 Del Mar Mortgage, Inc. as of
December 31, 1998 and 1997, and the results of its operations and cash flows for
the years then ended in conformity with generally accepted accounting
principles.
/s/ Hansen, Barnett & Maxwell
-----------------------------
HANSEN, BARNETT & MAXWELL
Salt Lake City, Utah
April 9, 1999
1
<PAGE>
DEL MAR MORTGAGE, INC.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------------- --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 102,816 $ 191,141
Cash held in trust 421,622 5,570,639
Accounts receivable, net of allowances of
$219,000 and $8,000, respectively 401,526 104,281
Trust accounts receivable 1,009,410 --
Due from related party -- 983
--------------- --------------
TOTAL CURRENT ASSETS 1,935,374 5,867,044
--------------- --------------
PROPERTY AND EQUIPMENT
Furniture and equipment 58,118 57,623
Leasehold improvements 1,754 1,754
--------------- --------------
59,872 59,377
Less: Accumulated depreciation 22,319 11,152
--------------- --------------
TOTAL PROPERTY AND EQUIPMENT 37,553 48,225
--------------- --------------
TOTAL ASSETS $ 1,972,927 $ 5,915,269
--------------- --------------
--------------- --------------
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 34,701 $ 33,173
Due to related party -- 159,404
Current portion of capital lease obligations 4,103 5,652
Trust liabilities 1,431,032 5,570,639
--------------- --------------
TOTAL CURRENT LIABILITIES 1,469,836 5,768,868
--------------- --------------
LONG-TERM PORTION OF CAPITAL LEASE OBLIGATIONS 13,718 15,932
--------------- --------------
TOTAL LIABILITIES 1,483,554 5,784,800
--------------- --------------
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDER'S EQUITY
Common stock - no par value, authorized, issued
and outstanding - 2,500 shares 2,500 2,500
Accumulated earnings 486,873 127,969
--------------- --------------
TOTAL STOCKHOLDER'S EQUITY 489,373 130,469
--------------- --------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 1,972,927 $ 5,915,269
--------------- --------------
--------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
DEL MAR MORTGAGE, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C> <C>
REVENUES
Construction loan origination and servicing fees $ 5,181,148 $ 3,714,196
Single family residence loan origination fees 251,458 712,082
Extension fees 1,084,451 372,105
Miscellaneous fees 9,199 7,984
--------------- ---------------
TOTAL REVENUES 6,526,256 4,806,367
--------------- ---------------
COST OF REVENUES
Referral fees - related party -- 1,536,452
Loan processing costs 335,679 43,989
--------------- ---------------
TOTAL COST OF REVENUES 335,679 1,580,441
--------------- ---------------
GROSS PROFIT 6,190,577 3,225,926
ADVERTISING, GENERAL AND ADMINISTRATIVE EXPENSES
Advertising 536,077 642,558
General and administrative 3,421,660 2,653,019
--------------- ---------------
TOTAL ADVERTISING, GENERAL AND
ADMINISTRATIVE EXPENSES 3,957,737 3,295,577
--------------- ---------------
Income (loss) from continuing operations 2,232,840 (69,651)
OTHER INCOME
Interest income 339,273 70,932
--------------- ---------------
Income Before Provision for Income Taxes 2,572,113 1,281
Provision for Income Taxes -- 1,513
--------------- ---------------
NET INCOME (LOSS) $ 2,572,113 $ (232)
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
DEL MAR MORTGAGE, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------------- TOTAL
NUMBER OF ACCUMULATED STOCKHOLDER'S
SHARES AMOUNT EARNINGS EQUITY
--------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
BALANCE - DECEMBER 31, 1996 2,500 $ 2,500 $ 128,201 $ 130,701
Net Loss -- -- (232) (232)
--------------- ------------- -------------- -------------
BALANCE - DECEMBER 31, 1997 2,500 2,500 127,969 130,469
Distribution to shareholder -- -- (2,213,209) (2,213,209)
Net Income -- -- 2,572,113 2,572,113
--------------- ------------- -------------- -------------
BALANCE - DECEMBER 31, 1998 2,500 $ 2,500 $ 486,873 $ 489,373
--------------- ------------- -------------- -------------
--------------- ------------- -------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
DEL MAR MORTGAGE, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 2,572,113 $ (232)
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
Depreciation 11,167 7,690
Changes in operating assets and liabilities:
Increase in accounts receivable (297,245) (70,403)
(Increase) decrease in due from related party (2,212,226) 49,017
Increase (decrease) in accounts payable and
accrued expenses 1,528 (32,426)
Increase (decrease) in due to related party (159,404) 159,404
--------------- --------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (84,067) 113,050
--------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of furniture and equipment (495) (13,175)
--------------- --------------
NET CASH USED BY INVESTING ACTIVITIES (495) (13,175)
--------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on capital lease obligations (3,763) (843)
--------------- --------------
NET CASH USED BY FINANCING ACTIVITIES (3,763) (843)
--------------- --------------
NET INCREASE (DECREASE) IN CASH (88,325) 99,032
CASH, BEGINNING BALANCE 191,141 92,109
--------------- --------------
CASH, ENDING BALANCE $ 102,816 $ 191,141
--------------- --------------
--------------- --------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Income taxes $ 1,513 $ 23,746
--------------- --------------
--------------- --------------
</TABLE>
In 1998, a receivable account, in the amount of $2,213,209, was distributed to
the Company's sole shareholder and accounted for as a distribution of equity.
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
DEL MAR MORTGAGE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--Del Mar Mortgage, Inc. (the "Company") was incorporated
in the State of Nevada in April 1995. The Company operates as a
mortgage company licensed in the states of Nevada and Arizona. The
Company is engaged in the origination, arrangement, and secondary
purchase and sale of loans secured by real property. In addition, the
Company services construction loans during the construction period
which it has arranged for investor parties.
GEOGRAPHIC CONCENTRATION -- Substantially all of the Company's
operations are derived from Southern Nevada. Consequently, the
Company's results of operations and financial condition are affected by
general trends in the Southern Nevada economy and its commercial and
residential real estate market.
USE OF ESTIMATES--The preparation of 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 at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
REVENUE RECOGNITION -- The Company recognizes revenue primarily from
loan origination fees, loan servicing fees, and extension fees. Loan
origination fees are recorded as revenue at the close of escrow and
reduced by direct loan origination costs, excluding loan processing
costs, incurred to such loan origination activities. Loan servicing
fees are recorded as revenue when such services are rendered. Servicing
fees represent the interest spread between what is paid to the investor
and what the borrower pays for the use of the money. This can vary from
loan to loan. Extension fees are recorded as revenue at the extension
grant date.
EXPENSES -- Expenses incurred from cost of revenues, and general and
administrative activities are recorded in the period incurred.
CASH -- The Company invests its cash in high quality financial
institutions, which at times may be in excess of the Federal Deposit
Insurance Corporation insurance limits.
PROPERTY AND EQUIPMENT -- Property and equipment are stated at cost
less accumulated depreciation. Depreciation is provided principally on
the straight-line method over the estimated useful lives of the assets.
The cost of repairs and maintenance is charged to expense as incurred.
Expenditures for property betterments and renewals are capitalized.
Upon sale or other disposition of depreciable assets, cost and
accumulated depreciation are removed from the accounts and any gain or
loss is reflected in other income (expense).
6
<PAGE>
ADVERTISING COSTS -- Advertising costs incurred in the normal course of
operations are expensed currently.
INCOME TAXES-- The Company elected, during 1998, to convert from a
C-Corporation to an S-Corporation for federal income tax purposes. As
an S-Corporation, elements of income tax and expense are passed through
to the stockholder to be included in his personal income tax return.
Accordingly, no income tax effects are included in the 1998 financial
statements.
IMPAIRMENT OF LONG-LIVED ASSETS TO BE DISPOSED OF -- The Company
adopted the provisions of SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT
OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF, as of
December 31, 1996. This Statement requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Assets to be disposed of are reported
at the lower of the carrying amount or fair value less costs to sell.
Adoption of this Statement did not have a material impact on the
Company's financial position, results of operations, or liquidity.
RECENT ACCOUNTING PRONOUNCEMENTS -- In June 1997, the Financial
Accounting Standards Board issued SFAS No. 130, REPORTING COMPREHENSIVE
INCOME. SFAS No. 130 established standards for reporting and display of
comprehensive income and its components in the financial statements.
SFAS No. 130 is effective for fiscal years beginning after December 15,
1997. Reclassification of financial statements for earlier periods
provided for comparative purposes is required. Adoption of this
Statement did not have a material impact on the Company's financial
position, results of operations, or cash flows.
RECLASSIFICATION -- Reclassifications were made to the Statement of
Operations for the year ended December 31, 1997. This was done to
correct a misclassification and had no effect on the net loss for the
year ended December 31, 1997.
NOTE 2--ACCOUNTS RECEIVABLE
The Company services loans which have been arranged for investor
parties through a servicing agreement. The servicing agreement
stipulates that all extension fees charged in behalf of the investors
shall be retained by the Company as part of the loan service fees.
Accounts receivable represent extension and loan origination fees
earned but not yet funded.
NOTE 3--RELATED PARTY TRANSACTIONS
The Company has an arrangement with a related party wholly-owned by the
Company's sole shareholder, whereby, the related party paid certain
expenses, such as processing payroll and other operating activities on
behalf of the Company. The Company subsequently reimbursed the related
party for such expenses paid in behalf of the Company. Total
reimbursements paid to the related party for the years ended December
31, 1998 and 1997, totaled $3,088,542 and $1,977,794, respectively.
7
<PAGE>
During 1998, the Company accumulated balance due from a related party
wholly-owned by the Company's shareholder totaling $2,213,209 for funds
advances. At year-end the balances due from the related party were
distributed to the Company's sole shareholder as a distribution of
equity. As of December 31, 1997, the balance due from the related party
entity totaled $983.
In 1997, the Company paid referral fees on loans originated by the
Company referred by a related party wholly-owned by the Company's sole
shareholder. The referral fees range from 33% to 100% of the loan
origination fee charged by the Company. Total payments for such fees
for the year ended December 31, 1997 totaled $1,536,452.
The Company and its employees participate in an employee savings and
profit sharing plan (Plan) under section 401(k) of the Internal Revenue
Code sponsored by an entity wholly-owned by the Company's sole
shareholder. The Company may make discretionary contributions to this
Plan on behalf of the employees. No discretionary contributions have
been made by the Company for the years ended December 31, 1998 and
1997.
NOTE 4-CAPITAL LEASES
The Company is obligated under various capital leases for certain
equipment that expire at various dates over the next four years.
Capital lease obligations totaling $17,821 require minimum monthly
lease payments ranging from $71 to $400 with implicit interest rates of
9.50%.
Future minimum capital lease obligations as of December 31, 1998 are as
follows:
<TABLE>
<S> <C>
1999 $ 5,181
2000 5,652
2001 5,652
2002 4,777
-------------
21,262
Less amount representing interest 3,441
-------------
17,821
Less current portion due 4,103
-------------
Long-term portion of capital lease obligations $ 13,718
-------------
-------------
</TABLE>
The carrying value of equipment leased under capital leases at December
31, 1998 and 1997 totals $16,403 and $22,427, respectively, which is
net of accumulated depreciation of $5,924 and $1,439, respectively.
NOTE 5--LOANS SERVICED FOR OTHERS
8
<PAGE>
The Company services loans for others which are not shown on the
balance sheet. The balance of these loans at December 31, 1998 and 1997
approximated $163,000,000 and $83,919,000, respectively. In connection
with the loans serviced for others, amounts held in trust for
undistributed principal and interest collections, and interest
receivables for both investors and borrowers aggregated $1,431,032 and
$5,570,639 at December 31, 1998 and 1997, respectively.
Loans serviced for others include construction loans that are
originated by the Company.
NOTE 6--COLLATERALIZED MORTGAGE OBLIGATIONS
The Company offers High Yield Collateralized Mortgage obligation
certificates (CMO's), collateralized by deeds of trust through a
private placement offering limited to the state of Nevada for a maximum
amount of $20,000,000. As of December 31, 1998, the Company has raised
approximately $5,000,000 through this private placement offering which
is not shown on the balance sheet. The Company had not yet offered the
CMO's as of December 31, 1997. Even though the Company is the issuer,
the assets and liabilities associated with the CMO's is not on the
Company's balance sheet because the certificates do not give rise to
any recourse liability to the Company and are secured solely by the
Collateral Pool. They are accounted for as trust activities.
The proceeds from this offering are used for the funding and
acquisition of loans in accordance with the Indenture Agreement related
to the offering or used in connection with loans held by the Indenture
Trustee as part of the collateral pool (e.g., payments on senior
encumbrances).
NOTE 7--FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts receivable, accounts payable and
accrued liabilities, approximate fair value because of the short-term
maturity of these instruments.
NOTE 8--COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS -- The Company operates from a leased office facility
under a noncancellable operating lease with a company owned by the
Company's sole shareholder. The lease requires the Company to pay
certain escalation clauses for real estate taxes, operating expense,
usage and common area charges. Rent expense for leased office facility
charged to operations for the year ended December 31, 1998 and 1997
approximated $159,000 and $43,000, respectively.
Future minimum rental payments required under the operating lease for
leased office facility as of December 31, 1998, are as follows:
<TABLE>
<S> <C>
1999 $ 148,500
2000 99,000
2001 57,750
-------------
9
<PAGE>
<S> <C>
Total future minimum operating lease payments $ 305,250
-------------
-------------
</TABLE>
UNFUNDED LOAN COMMITMENTS -- The Company originated construction loans
which are funded by investor parties based on scheduled draws. The
future funding of these scheduled draws represent an unfunded loan
commitment for the Company. As of December 31, 1998 and 1997, unfunded
loan commitments approximated $6,113,000 and $34,721,000, respectively.
LEGAL MATTERS -- The Company is involved in several legal matters
arising in the ordinary course of business. Management is vigorously
defending itself through its legal counsel. In one case, the party has
claimed damages in excess of $790,000. The case is still in discovery.
Losses, if any, that may be sustained are not presently determinable.
The Company's president has agreed to indemnify the Company for any
loss that may be incurred. Management believes that losses, if any,
would not be material to the Company's financial position, results of
operations or liquidity.
On February 11, 1999, the State of Nevada, Department of business and
Industry, Financial Institutions Division (the Division), issued an
Order Taking Possession of Mortgage Companies, alleging certain
violations of State statutes, and whereby the Division established a
conservator to oversee the Company's operations. On February 16, 1999,
the Company filed a complaint against the Division resulting from its
actions. Negotiations between the Company and the Division were
concluded on March 26, 1999 resulting in the dismissal of the order and
the removal of the conservator.
POTENTIAL MERGER OF BUSINESS -- Subsequent to the balance sheet date,
the Company has entered into negotiations with Sunderland Acquisition
Corporation, a public filing company, whereby the Company will exchange
its assets for stock in the public company. Discussions are presently
underway, and no agreement has yet been finalized.
VOUCHER CONTROL SERVICE CONTRACT -- In August of 1998, the Company
entered into a contract with Disbursement Management, Inc. (DMI) to
provide construction voucher control services. The Company will pay
monthly fees to DMI based upon the amount of disbursements for
construction vouchers. The monthly fees range from a minimum of $26,500
to $35,000. The Company may terminate this contract any time after
August of 1999. DMI will have the option of canceling the contract
three years after its inception.
10
<PAGE>
CAPSOURCE, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Certified Public Accountants 1
Financial Statements:
Balance Sheets - December 31, 1998 and 1997 2
Statements of Income for the year ended December 31, 1998 and
for the period April 30, 1997 (Date of Inception) through
December 31, 1997
3
Statement of Stockholder's Equity for the period April 30,
1997 (Date of Inception) through December 31, 1997
and for the year ended December 31, 1998 4
Statements of Cash Flows for the year ended December 31, 1998
and for the period April 30, 1997
(Date of Inception) through December 31, 1997 5
Notes to Financial Statements 6-7
</TABLE>
--------------
<PAGE>
[LETTERHEAD]
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholder
CapSource, Inc.
Las Vegas, Nevada
We have audited the accompanying balance sheets of CapSource, Inc. as of
December 31, 1998 and 1997, and the related statements of income, stockholder's
equity, and cash flows for the year ended December 31, 1998, and for the period
April 30, 1997 (date of inception) through December 31, 1997. 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 audits.
We conducted our audits in accordance with generally accepted auditing standards
which require that we plan and perform the audits 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
audits provide 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 CapSource, Inc. as of December
31, 1998 and 1997, and the results of its operations and its cash flows for the
period April 30, 1997 (date of inception) through December 31, 1997, and for the
year ended December 31, 1998 in conformity with generally accepted accounting
principles.
/s/ Hansen, Barnett & Maxwell
-----------------------------
HANSEN, BARNETT & MAXWELL
Salt Lake City, Utah
April 7, 1999
1
<PAGE>
CAPSOURCE, INC.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
ASSETS
1998 1997
------------- --------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 9,747 $ 5,991
------------- --------------
TOTAL CURRENT ASSETS 9,747 5,991
PROPERTY AND EQUIPMENT
Furniture and fixtures 987 987
Office equipment 2,770 555
------------- --------------
TOTAL PROPERTY AND EQUIPMENT 3,757 1,542
Less: Accumulated depreciation (829) (77)
------------- --------------
NET PROPERTY AND EQUIPMENT 2,928 1,465
COST OF MORTGAGE LICENSE, NET OF
AMORTIZATION 1,075 1,375
------------- --------------
TOTAL ASSETS $ 13,750 $ 8,831
------------- --------------
------------- --------------
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES -- --
STOCKHOLDER'S EQUITY
Common stock - no par value;
2,500 shares authorized; 100
shares issued and outstanding 5,022 5,022
Accumulated earnings 8,728 3,809
------------- --------------
TOTAL STOCKHOLDER'S EQUITY 13,750 8,831
------------- --------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 13,750 $ 8,831
------------- --------------
------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
CAPSOURCE, INC.
STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD APRIL 30, 1997 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1997
<TABLE>
<CAPTION>
1998 1997
------------- --------------
<S> <C> <C>
INCOME
Brokerage fees $ 213,764 $ 37,424
Other fees 3,285 4,700
Interest Income 1,621 --
------------- --------------
TOTAL INCOME 218,670 42,124
------------- --------------
EXPENSES
Consulting and other 186,356 30,235
Referral fees 5,932 250
Rent 6,962 3,388
Other General and administrative expenses 14,501 4,442
------------- --------------
TOTAL EXPENSES 213,751 38,315
------------- --------------
NET INCOME $ 4,919 $ 3,809
------------- --------------
------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
CAPSOURCE, INC.
STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE PERIOD APRIL 30, 1997 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1997 AND FOR THE
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION> COMMON STOCK
---------------------- TOTAL
ACCUMULATED STOCKHOLDER'S
SHARES AMOUNT EARNINGS EQUITY
-------- ----------- ---------------- --------------
<S> <C> <C> <C> <C>
BALANCE - APRIL 30, 1997 -- $ -- $ -- $ --
Common stock issued for cash 100 5,022 -- 5,022
Net income -- -- 3,809 3,809
------------- ----------- ---------------- -------------
BALANCE - DECEMBER 31, 1997 100 $ 5,022 $ 3,809 $ 8,831
Net income -- -- 4,919 4,919
------------- ----------- ---------------- -------------
BALANCE - DECEMBER 31, 1998 100 $ 5,022 $ 8,728 $ 13,750
------------- ----------- ---------------- -------------
------------- ----------- ---------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
CAPSOURCE, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD APRIL 30, 1997 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1997
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 4,919 $ 3,809
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization 300 125
Depreciation 752 77
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,971 4,011
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of mortgage license -- (1,500)
Purchase of property and equipment (2,215) (1,542)
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (2,215) (3,042)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Stock issued for cash -- 5,022
------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES -- 5,022
------------- -------------
NET INCREASE IN CASH 3,756 5,991
CASH AT BEGINNING OF PERIOD 5,991 --
------------- -------------
CASH AT END OF PERIOD $ 9,747 $ 5,991
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
CAPSOURCE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE 1-ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY -- On April 30, 1997, CapSource, Inc. (the Company)
was incorporated under the laws of the State of Nevada. The Company has
elected S-Corporation status under the Internal Revenue Code. The
Company is engaged in the business of mortgage services, specifically
the origination and the buying and selling of mortgages, principally in
the greater Las Vegas area.
USE OF ESTIMATES -- The preparation of 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 at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
ACCOUNTING POLICY -- Revenues and expenses are recognized on the
accrual basis in accordance with generally accepted accounting
principles.
CASH EQUIVALENTS -- Cash equivalents include highly liquid short-term
investments with original maturities of three months or less, readily
convertible to known amounts of cash.
PROPERTY AND EQUIPMENT -- Property and equipment are carried at cost
and depreciated over five years using the straight-line method.
Depreciation expense for 1998 and 1997 was $752 and $77, respectively.
MORTGAGE LICENSE -- The mortgage license is recorded at its cost of
$1,500 and is amortized over five years using the straight-line method.
Amortization expense for 1998 and 1997 was $300 and $125, respectively.
ADVERTISING -- The Company follows the policy of charging the costs of
advertising to expense as incurred. Advertising expense for the period
April 30, 1997 (date of inception) through December 31, 1997, and for
the year ended December 31, 1998 was $0 and $2,919, respectively.
INCOME TAXES -- The Company is treated as an S-Corporation for income
tax purposes. Elements of income and expense are passed through to the
stockholders to be included in their personal income tax returns.
Accordingly, no income tax effects are included in the financial
statements.
RECENT ACCOUNTING PRONOUNCEMENTS-- In June 1998, the Financial
Accounting Standards Board (FASB) issued Financial Accounting Standards
No. 130, REPORTING COMPREHENSIVE INCOME (FAS 130). FAS 130 establishes
standards for reporting and display of comprehensive income and its
components in the financial statements. FAS 130 is effective for fiscal
years beginning after December 15, 1997. Reclassification of financial
statements for earlier periods provided for comparative purposes is
required. The adoption of this
6
<PAGE>
standard has no impact on the Company's results of operations,
financial position or cash flows.
NOTE 2--LEASE COMMITMENTS
During 1997, the Company rented its office space on a month-to-month
basis. In 1998, the Company entered into a 12-month noncancellable
lease. The minimum lease payment is $575 per month. On June 30, 1999,
when this lease expires, the Company has the option to continue leasing
its office space on a month-to-month basis. This lease is classified as
an operating lease. The Company's future minimum obligation under this
lease amounts to $3,450, payable in 1999.
Rent expense for the period April 30, 1997 (date of inception) through
December 31, 1997, and for the year ended December 31, 1998 was $3,388
and $6,962, respectively.
7
<PAGE>
DEL MAR HOLDINGS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Certified Public Accountants 1
Financial Statements:
Balance Sheet - December 31, 1998 2
Statements of Operations for the Year Ended
December 31, 1998 and for the Period from
October 23, 1997 to December 31, 1997 3
Statements of Stockholders' Equity for the Year
Ended December 31, 1998 and for the Period
from October 23, 1997 to December 31, 1997 4
Statements of Cash Flows for the Year Ended
December 31, 1998 and for the Period from
October 23, 1997 to December 31, 1997 5
Notes to Financial Statements 6
</TABLE>
---------------
<PAGE>
[LETTERHEAD]
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders
Del Mar Holdings, Inc.
Las Vegas, Nevada
We have audited the accompanying balance sheet of Del Mar Holdings, Inc. as of
December 31, 1998 , and the related statements of operations, stockholders'
equity, and cash flows for the year then ended and for the period from October
23, 1997 to December 31, 1997. 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 Del Mar Holdings, Inc. as of
December 31, 1998, and the results of its operations and cash flows for the year
then ended and for the period from October 23, 1997 to December 31, 1997 in
conformity with generally accepted accounting principles.
/s/ Hansen, Barnett & Maxwell
-----------------------------
HANSEN, BARNETT & MAXWELL
Salt Lake City, Utah
May 21, 1999
1
<PAGE>
DEL MAR HOLDINGS, INC.
BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash $ 355,115
Shareholder receivable 535,646
Other receivables 11,709
Trust deed investments 2,460,724
Other current assets 3,038
---------------
TOTAL CURRENT ASSETS 3,366,232
---------------
FIXED ASSETS
Furniture and equipment 18,067
Less accumulated depreciation (1,687)
---------------
TOTAL FIXED ASSETS 16,380
---------------
TOTAL ASSETS $ 3,382,612
---------------
---------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 218,380
Payable 350,000
Short-term advance 100,000
---------------
TOTAL CURRENT LIABILITIES 668,380
---------------
COMMITMENTS AND CONTINGENCIES --
STOCKHOLDERS' EQUITY
Common stock - $.0001 par value, 3,000,000 authorized
shares, 2,874,760 issued and outstanding shares 287
Additional paid-in capital 2,574,472
Retained earnings 139,473
---------------
TOTAL STOCKHOLDERS' EQUITY 2,714,232
---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,382,612
---------------
---------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
DEL MAR HOLDINGS, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FROM OCTOBER 23, 1997 TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
REVENUES
Management and referral fees $ 301,353 $ --
Interest 307,425 --
Other 15,000 --
------------- -------------
623,778 --
GENERAL AND ADMINISTRATIVE EXPENSES 480,243 4,062
------------- -------------
NET INCOME/(LOSS) $ 143,535 $ (4,062)
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
DEL MAR HOLDINGS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
THE PERIOD FROM OCTOBER 23, 1997 TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
COMMON STOCK
-------------------------- RETAINED TOTAL
NUMBER OF PAID-IN EARNINGS/ STOCKHOLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) EQUITY
---------- ----------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
BALANCE - OCTOBER 23, 1997 -- $ -- $ -- $ -- $ --
Issuance of common stock
for cash 73,720 7 614,326 -- 614,333
Net loss -- -- -- (4,062) (4,062)
----------- ----------- ----------- ----------- -----------
BALANCE - DECEMBER 31, 1997 73,720 7 614,326 (4,062) 610,271
Issuance of common stock
for cash 2,801,040 280 2,210,786 -- 2,211,066
Contributions by shareholders -- -- 2,675,112 -- 2,675,112
Distributions to shareholders -- -- (2,925,752) -- (2,925,752)
Net income -- -- -- 143,535 143,535
----------- ----------- ----------- ----------- -----------
BALANCE - DECEMBER 31, 1998 2,874,760 $ 287 $ 2,574,472 $ 139,473 $ 2,714,232
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these inancial statements.
4
<PAGE>
DEL MAR HOLDINGS, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
THE PERIOD FROM OCTOBER 23, 1997 TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income/(loss) $ 143,535 $ (4,062)
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation 1,687 --
Interest and extension fee added to payable 100,000 --
Changes in current assets and current liabilities:
Shareholder receivable (535,646) --
Due from affiliates 465,000 (465,000)
Other receivables (11,709) --
Other current assets (3,038) --
Accounts payable and accrued expenses 218,380 --
Interest payable (3,491) 3,491
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 374,718 (465,571)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash outlay for trust deed investments (2,280,729) (179,995)
Purchase of furniture and equipment (18,067) --
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (2,298,796) (179,995)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term advance 100,000 --
Proceeds from issuance of promissory note -- 250,000
Proceeds from issuance of common stock 2,211,066 614,333
Contribution from shareholders 2,675,112 --
Distributions to shareholders (2,925,752) --
Proceeds from\(principal payment on) loan payable (280,000) 280,000
------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,780,426 1,144,333
------------- -------------
NET INCREASE/(DECREASE) IN CASH (143,652) 498,767
CASH, BEGINNING BALANCE 498,767 --
------------- -------------
CASH, ENDING BALANCE $ 355,115 $ 498,767
------------- -------------
------------- -------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
5
<PAGE>
DEL MAR HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--Del Mar Holdings, Inc. (the "Company") was incorporated in
the State of Nevada in October 1997. The Company was formed to hold
selected real estate mortgage assets and act as an investment vehicle in
related real estate activities. The Company earns its principal revenues
through interest on its real estate mortgage assets, fees for providing
management services to a related party, and referral fees from loans
originated outside the State of Nevada.
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 during the reporting period. Accordingly, actual results could
differ from those estimates.
REVENUE AND EXPENSE RECOGNITION -- The Company recognizes revenue and
expense in the period earned and incurred.
CASH -- The Company invests its cash in high quality financial
institutions, which at times may be in excess of the Federal Deposit
Insurance Corporation insurance limits.
PROPERTY AND EQUIPMENT -- Property and equipment are stated at cost less
accumulated depreciation. Depreciation is provided principally on the
straight-line method over the estimated useful lives of the assets. The
cost of repairs and maintenance is charged to expense as incurred.
Expenditures for property betterments and renewals are capitalized. Upon
sale or other disposition of depreciable assets, cost and accumulated
depreciation are removed from the accounts and any gain or loss is
reflected in other income (expense).
INCOME TAXES--In accordance with provisions of Subchapter S of the
Internal Revenue Code, the Company does not pay federal corporate income
taxes on its taxable income, nor is it allowed a net operating loss
deduction on a taxable loss. Instead, stockholders are liable for
individual federal income taxes on the Company's taxable income or include
the Company's net operating loss on the individual tax returns.
FAIR VALUE OF FINANCIAL INSTRUMENTS -- The carrying amounts of cash,
accounts receivable, accounts payable and accrued liabilities, approximate
fair value because of the short-term maturity of these instruments.
RECENT ACCOUNTING PRONOUNCEMENTS -- In June 1997, the Financial Accounting
Standards Board issued SFAS No. 130, REPORTING COMPREHENSIVE INCOME. SFAS
No. 130 established standards for reporting and display of comprehensive
income and its components in the financial statements. SFAS No. 130 is
effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required. Adoption of this Statement did not have
a material impact on the Company's financial position, results of
operations, or cash flows.
6
<PAGE>
NOTE 2-SHAREHOLDER RECEIVABLE
As of December 31, 1998, the shareholder receivable balance of $535,646
represents amounts advanced to the Company's primary shareholder. This
receivable is collateralized by the primary shareholder's stock in
Sunderland Acquisition Corp. The outstanding balance bears no interest and
is due on demand.
NOTE 3-TRUST DEED INVESTMENTS
Trust deed investments are funds invested in promissory notes secured by
real estate deeds of trust. These trust deed investments have maturities
of one year or less with interest rates ranging from 12% to 14% payable
monthly, with principal due at maturity.
NOTE 4-PAYABLE
The payable totaling $350,000 at December 31, 1998, represents the
negotiated settlement of a promissory note with an unrelated party. The
note was issued in November, 1997 with an interest rate of 10% and a
principal amount of $250,000. The unrelated party intended to participate
in the Company's planned public offering. In lieu of participation in a
potential public offering, the Company incurred a $25,000 interest expense
and $75,000 loan extension fee. The $350,000 is due July, 1999.
NOTE 5-SHORT-TERM ADVANCE
The short-term advance totaling $100,000 at December 31, 1998, represents
a short-term, non-interest bearing advance due on demand. The advance was
repaid in January 1999.
NOTE 6-COMMITMENTS AND CONTINGENCIES
The Company is involved in various routine legal proceedings arising in
the ordinary course of business. Management believes that these
proceedings are without merit and will not have a material adverse effect
on the Company's financial position, results of operations or liquidity.
NOTE 7-SUBSEQUENT EVENT
An agreement was reached on April 27, 1999 with Sunderland Acquisition
Corp., a public filing company, whereby the public filing company acquired
the Company's shareholder receivable, trust deed investments, and "other
current assets" for 2,874,760 shares of common stock in the public filing
company. In addition, the public filing company assumed the Company's
$350,000 payable.
NOTE 8-RELATED PARTY TRANSACTIONS
The Company has an arrangement with a related party wholly-owned by the
Company's majority shareholder, whereby, the Company paid certain
expenses, such as processing payroll and other operating activities on
behalf of the related party. The related party subsequently reimbursed the
Company for expenses paid in behalf of the related party. Reimbursements
from the related party for the year ended December 31, 1998 totaled
$3,008,542.
7
<PAGE>
On February 11, 1999, the State of Nevada, Department of Business and
Industry, Financial Institutions Division (the Division), issued an order
taking possession of a mortgage company wholly-owned by the Company's
majority stockholder. The Company provides management services to the
mortgage company. The Division alleged that certain violations of State
statutes had occurred and established a conservator to oversee the
mortgage company's operations. On February 16, 1999 the mortgage company
filed a complaint against the Division resulting from its actions.
Negotiations between the mortgage company and the Division were concluded
on March 26, 1999 resulting in the dismissal of the order and the removal
of the conservator.
8
<PAGE>
(b) Pro forma Financial Information.
Effective April 27, 1999, Sunderland Corporation completed concurrent
transactions in which it acquired all of the outstanding capital stock of
Capsource, Inc., a Nevada corporation ("CAPSOURCE"),and consummated the related
acquisitions of certain assets of Del Mar Mortgage, Inc.,a Nevada corporation,
("DEL MAR MORTGAGE")and Del Mar Holdings, Inc., a Nevada corporation ("DEL MAR
HOLDINGS"), in exchange for shares of common stock of Sunderland Corporation
(collectively, the "TRANSACTIONS").
The following statements set forth certain selected financial
information for Sunderland Corporation, and the assets acquired from Capsource,
Del Mar Mortgage, and Del Mar Holdings, on an unaudited pro forma consolidated
basis giving effect to the Transactions as if the Transactions had become
effective on December 31, 1998, in the case of the balance sheet information
presented, and as if the Transactions had become effective at the beginning of
the periods indicated, in the case of operations information presented.
The unaudited pro forma condensed consolidated financial information
set forth in the following tables is based on historical financial statements of
Del Mar Mortgage, Capsource and Del Mar Holdings and the assumptions and
adjustments described in the notes accompanying the same, is presented for
information purposes only, and is not necessarily indicative of the consolidated
financial position or results of operations that would have occurred had the
transactions been consummated on December 31, 1998, or at the beginning of the
periods indicated, or which may occur in the future.
The unaudited pro forma consolidated financial data are based upon
assumptions that Sunderland Corporation believes are reasonable and should be
read in conjunction with the financial statements of Del Mar Mortgage, Capsource
and Del Mar Holdings and the accompanying notes thereto, included elsewhere in
this Form 8-KA.
<PAGE>
SUNDERLAND CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Historical
-----------------------------------------------------------------------
Disaggregated Businesses Pro Forma
Sunderland ---------------------------------------------- Pro Forma Consolidated
Corporation DMM Capsource DMH Total Total Adjustments Balance
----------- ---------- --------- ---------- ---------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Current assets
Cash $ 416 $ 524,438 $ 9,747 $ 355,115 $ 889,300 $ 889,716 $ (689,300) b $ 416
Accounts receivable - 401,526 - - 401,526 401,526 (401,526) b -
Shareholder receivable - - - 547,355 547,355 547,355 (11,709) b 535,646
Trust deed investments - 1,009,410 - 2,460,724 3,470,134 3,470,134 (1,009,410) b 2,480,724
Deposits - - - 3,038 3,038 3,038 3,038
Dues from related party - - - - - - -
----- ---------- ------- ---------- ---------- ---------- -----------
Total current assets 416 1,935,374 9,747 3,368,232 5,311,353 5,311,769 2,999,824
Property and equipment
Furniture and equipment - 58,119 3,757 18,067 79,942 79,942 (39,645) b 40,297
Leasehold improvements - 1,754 - - 1,754 1,754 1,754
----- ---------- ------- ---------- ---------- ---------- -----------
- 59,672 3,757 18,067 81,696 81,696 42,051
Less accumulated depreciation - 22,319 829 1,687 24,835 24,835 (2,516) b 22,319
----- ---------- ------- ---------- ---------- ---------- -----------
Net property and equipment - 37,553 2,926 16,380 56,661 56,661 19,732
Cost of mortgage license, net
of amortization - - 1,075 - 1,075 1,075 (1,075) b 35,576
----- ---------- ------- ---------- ---------- ---------- -----------
Total assets $ 416 $1,972,927 $13,750 $3,382,612 $5,369,289 $5,369,705 $ 3,055,132
----- ---------- ------- ---------- ---------- ---------- -----------
----- ---------- ------- ---------- ---------- ---------- -----------
Current liabilities
Accounts payable and
accrued expenses $ - $ 34,701 $ - $ 218,380 $ 253,081 $ 253,081 $ (253,081) b $ -
Due to related party - - - - - - -
Notes payable - - 450,000 450,000 450,000 (100,000) b 350,000
Trust liabilities - 1,431,032 - - 1,431,032 1,431,032 (1,431,032) b -
Current portion of capital
lease obligations - 4,103 - - 4,103 4,103 (4,103) b -
----- ---------- ------- ---------- ---------- ---------- -----------
Total current liabilities - 1,469,836 - 668,380 2,138,216 2,138,216 350,000
Long-term portion capital
lease obligations - 13,718 - - 13,718 13,718 (13,718) b -
----- ---------- ------- ---------- ---------- ---------- -----------
Total liabilities - 1,483,554 - 668,380 2,151,934 2,151,934 350,000
Shareholders' equity
(35,576) a
Common stock 500 2,500 5,022 287 7,809 6,309 (7,693) b 616
Additional paid-in capital 75 - - 2,574,472 2,574,472 2,574,547 129,969 b 2,074,516
Retained earnings (159) 466,873 8,728 139,473 635,074 634,915 (634,915) b -
----- ---------- ------- ---------- ---------- ---------- -----------
Total stockholders' equity 416 489,373 13,750 2,714,232 3,217,355 3,217,771 2,705,132
----- ---------- ------- ---------- ---------- ---------- -----------
Total liabilities and
stockholders' equity $416 $1,972,927 $13,750 $3,382,612 $5,369,289 $5,369,705 $ 3,055,132
----- ---------- ------- ---------- ---------- ---------- -----------
----- ---------- ------- ---------- ---------- ---------- -----------
</TABLE>
a Capitalization of goodwill related to acquired customer lists.
b Assets not included in acquisition of Del Mar Mortgage, Inc., Capsource,
Inc. and Del Mar Holdings, Inc.
<PAGE>
SUNDERLAND CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Historical
---------------------------------
Sunderland Acquired Pro Forma
Corporation, Inc. Assets Adjustments Pro Forma
----------------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
Revenues $ - $7,061,279 $7,061,279
Cost of revenues - 335,679 335,679
------- ---------- ----------
Gross profit - 6,725,600 6,725,600
Advertising, general and administrative
expenses
Advertising - 536,077 536,077
General and administrative expenses 159 4,115,813 11,859(a) 4,127,672
------- ---------- ----------
Total advertising, general and
Administrative expenses 159 4,651,890 4,663,749
------- ---------- ----------
Income from operations (159) 2,073,710 2,061,851
Other income
Interest income - 646,698 646,698
------- ---------- ----------
Total other income - 646,698 646,698
------- ---------- ----------
Income before provision for income taxes (159) 2,720,408 2,708,549
Provision for income taxes - - 920,907(b) 920,907
------- ---------- ----------
Net income (loss) $ (159) $2,720,408 $1,787,642
------- ---------- ----------
------- ---------- ----------
</TABLE>
(a) Amortization of goodwill related to acquired businesses calculated over a
sixty month period.
(b) Provision for income taxes using a federal tax rate of 34%.
<PAGE>
(c) Exhibits.
There is attached hereto the following exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBITS.
- ----------- ------------------------
<C> <S>
23.1 Consent of Accountants.
</TABLE>
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 hereunto duly authorized.
Sunderland Corporation
By: /s/ Stephen J. Byrne
--------------------------------------
(Print name and title of signing officer)
Stephen J. Byrne, President
Dated: July 12, 1999
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders
Del Mar Mortgage, Inc.
Del Mar Holdings, Inc.
CapSource, Inc.
We have issued our report dated April 9, 1999 on the December 31, 1998 and 1997
financial statements of Del Mar Mortgage, Inc. and our report dated May 21, 1999
on the December 31, 1998 and 1997 financial statements of Del Mar Holdings, Inc.
and our report dated April 7, 1999 on the December 31, 1998 and 1997 financial
statements of CapSource, Inc.. We consent to the use of our reports in the 8-K\A
Amendment No. 1 of Sunderland Corporation dated July 12, 1999 which amends their
Form 8-K dated May 5, 1999.
2
