<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 16, 2000
HOME FINANCING CENTERS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Nevada 0-25795 93-1249831
---------------------------- --------------------- ---------------------------------
(State or other jurisdiction (Commission File No.) (IRS Employer Identification No.)
Of Incorporation)
</TABLE>
112-114 Burrill Street, Swampscott MA 01907-1808
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrants telephone Number (including area code) (781) 596-1992
MAS Acquisition X Corp.
1710 E. Division St., Evansville, IN 47711
-------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
A change of control of the registrant occurred on or about May 16,
2000, pursuant to the terms and conditions of an stock exchange agreement (the
"Agreement"), dated April 26, 2000, between MAS Acquisition X Corp., an Indiana
corporation ("MAS") and Home Financing Centers, Inc., a Nevada corporation (the
"Company"), which provided for the acquisition by the Company of 8,250,000
shares of common stock, par value $.001 per share of MAS in exchange for 315,000
shares of common stock of the Company (the "Transaction"). As a result of the
Transaction, the Company is the direct beneficial owner of 8,250,000 or
approximately 96.83% of MAS. A copy of the Exchange Agreement between the
Company and MAS is attached to this Report as an exhibit.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
As a result of the Transaction, the Company has acquired a controlling
interest in MAS, which is a reporting company under the Securities and Exchange
Act of 1934, as amended (the "Exchange Act"). In accordance with Section
12g-3(a) of the Rules of the Exchange Act, the Company became the successor
issuer to MAS and has elected to report under the Act effective May 16, 2000.
For a more detailed description of the Transaction, See Item 1. Changes in
Control of the Registrant in this Report.
MAS does not currently conduct any business. Therefore, the Company
intends to continue to conduct its businesses as currently conducted. A brief
summary of the Company's business is set forth below and may contain "forward
looking statements" as defined in Section 21E of the Exchange Act.
Forward-looking
1
<PAGE> 3
statements can often be identified by terminology such as may, will, expect,
plan, intend, anticipate, believe, estimate, predict, potential, or continue,
the negative of such terms or other comparable terminology. Such forward-looking
statements may involve known or unknown risks, uncertainties and other factors
that may cause the actual results, performance or achievements of the Company,
or developments in the Company's industry, to differ materially from the
anticipated results performance or achievements expressed or implied by such
forward-looking statements. The Company cautions readers that nay such
forward-looking statements are based upon management's current expectations and
beliefs but are not guaranties or future performance Actual results could differ
materially from those expressed or implied in forward-looking statements.
The Company currently operates a leading Internet site (www.hfci.com)
which provides on-line access to a wide selection of mortgages and information
geared toward the homeowner and homebuyer. The Company provides a wide range of
services to consumers through direct and third party channels in an effort to
attract the largest number of consumers in connection with buying, selling or
refinancing of residential property. Specifically, the Company reaches its
customer base through its web site, and its relationships with Realtors,
mortgage brokers, financial institutions, homebuilders, employers and
relocation specialists. The Company believes that by providing a wide variety
of services through its multi-channel, business to consumer strategy, it has
positioned itself to reach the broadest audience and has distinguished itself
in the residential home buying market.
The primary objective of the Company is to become the leading provider
of online content and e-commerce services for homeowners and prospective
homeowners by aggressively growing its customer case and capitalizing on the
full range of market opportunities currently available. These strategic
initiatives include:
- Developing a leading brand as a provider of online content and
e-commerce services for homeowners and home buyers through advertising,
co-branding partnerships and promotions using both the Internet and
traditional off line media;
- Expanding third party channels to increase revenues and acquire
mortgage originations by extending the Company's technology infrastructure
to parties who traditionally participate in home purchases, including real
estate agents, homebuilders, relocation companies and mortgage brokers,
- Enhancing core mortgage services and expanding mortgage offerings by
more efficiently accessing and interfacing with capital markets and adding
product lines such as sub- prime mortgages, home equity credit lines and
construction loans.
- Maintaining a commitment to customer service by offering value-added
self-service tools such as online loan status updates that empower
customers to make informed decisions and by continually improving our
customer service both online and offline through state of the art
management center.
- Delivering a more integrated homeownership experience by extending and
monetizing customer relationships by providing related products and
services, such as title insurance, appraisal, home insurance, moving and
home improvement services.
The Company's revenues are derived from the brokering of loans and the
origination and sale of loans. Brokered loans are funded directly through
lending partners of the Company. Therefore, the Company does not acquire title
to such loans at any time during the mortgage lending process. Brokerage
revenues are comprised of a mark up to the lending partner's loan price and
processing and credit reporting fees which are paid upon the closing of the
mortgage loan. Originated and sold loans are loans that are funded through the
Company's warehouse lines of credit and sold to mortgage loan purchasers. Loan
origination and sale revenues consist of proceeds in excess of the carrying
value of the loan, origination fees less direct origination costs and processing
fees. The Company earns additional revenues from its loan origination and sale
operations as compared to brokered loan operations because the sale of loans
includes a service release premium.
The Company operates in a highly competitive industry area. The market
for web-based mortgage services is expanding rapidly and there are no
substantial barriers to entry, making it possible for new competitors to
proliferate rapidly. In addition, many of these competing businesses have longer
operating histories
2
<PAGE> 4
in the traditional mortgage and Internet markets, greater name recognition,
larger customer bases and significantly greater financial, technical and
marketing resources than the Company. Currently, the Company's principal
competitors include:
- traditional lenders and mortgage brokers with no online presence;
- traditional lenders and brokers offering both online and traditional
services;
- websites, such as Priceline.com, Lending Tree and Microsoft's Home
Advisor, offering access to real estate related content and services,
including mortgage calculators and information on the home buying
process, which generate leads for mortgage providers;
- websites, such as CyberHomes, HomeSeekers, Homes.com, and Homestore.com
which offer real estate listings and related services;
- general purpose consumer websites, such as Alta Vista, Excite@ Home,
Lycos, Go.com and Yahoo!, that offer real estate related services;
- newspapers and magazines that advertise real estate listings; and
- financial institutions, such as DLJ Direct, E*Trade, and Fidelity, that
are partnering with mortgage brokers to offer related services.
The Company does not own any real property, however, it leases its office
space located at 112-114 Burrill Street, Swampscott, MA 01907-1808 from the
President of the Company. The Company's phone number is 781-596-1992. The
Company also maintains an internet web site located at WWW.HFCI.COM.
The Company currently employs approximately 15 persons at its headquarters
who provide services with respect to processing and originating loans brokered
or originated by the Company. As the Company's business expands into additional
markets, the Company will seek to open additional offices and expand its work
force accordingly. All Internet and administrative services other than those
provided by its current employees are performed by consultants.
The Company is organized under the laws of the State of Nevada and is
authorized to issue (i) 50,000,000 shares of common stock, par value $.001 per
share of which 18,802,124 is outstanding and (ii) 2,000,000 convertible
preferred stock, of which 1,615 is issued and outstanding as of the date of this
Report. The Company has been a non -reporting publicly traded company formally
known as Kentex Energy, Inc. On or about January 13, 2000, the Company acquired
Home Financing Centers, Inc., a Massachusetts corporation pursuant to a Plan and
Agreement of Reorganization. The Company changed its name to Home Financing
Centers, Inc. immediately prior to the merger. The Company's common stock is
quoted on the OTC Bulletin Board pink sheets under the symbol "HFCI.". The
Company has not paid any dividends as of the date hereof and does not anticipate
that dividends will be paid in the near future.
The following table lists the directors, officers and significant employees
of the Company, including their name, age and position with the Company.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Gary J. Kovner 42 President and Chief Executive
Officer and Director
</TABLE>
GARY J. KOVNER. Mr. Kovner is the founder of Home Financing Centers, Inc. which
has been in business since 1993. Prior to founding the Company, Mr. Kovner
represented several of the top mortgage lending institutions in the Country. Mr.
Kovner is a member of the National Association of Mortgage Brokers,
Massachusetts Mortgage Association, New York Association of Mortgage Brokers and
the Massachusetts Mortgage Bankers Association.
3
<PAGE> 5
Mr. Kovner received the 1997 "Leaders Making a Difference" award given by Banker
& Tradesman, the Real Estate, Banking and Commercial Weekly for Massachusetts.
Mr. Kovner earned a B.A. degree from the University of Massachusetts in 1980 and
has been featured in many news articles and publications concerning the Mortgage
Industry.
The following tables set forth certain information regarding
beneficial ownership of the common stock of the Company as of June 30, 2000 by
each person or entity known to own beneficially more than 5% of the common stock
of the Company, each of the Company's officers, directors and officers and
directors as a group.
(a) Certain BENEFICIAL OWNERS OF COMMON STOCK
_________None.
(b) SECURITY OWNERSHIP OF MANAGEMENT OF COMMON STOCK
<TABLE>
<CAPTION>
NAME AND AMOUNT AND PERCENTAGE
ADDRESS OF NATURE OF OF CLASS
BENEFICIAL BENEFICIAL OWNERSHIP OWNER (1)
OWNER
<S> <C> <C>
Gary J. Kovner
112-114 Burrill Street
Swampscott, MA 01907 13,000,000 69%
All Directors and Executive
Officers as a Group 13,000,000 69%
</TABLE>
-----------------------------
(1) Except as otherwise noted all shares are beneficially owned and the sole
voting and investment power is held by persons indicated.
Executive Compensation. The following table sets forth the Executive
Compensation for the Company for fiscal years 1998 and 1999.
<TABLE>
<CAPTION>
Name Salary Bonus Other Compensation
<S> <C> <C> <C>
Gary J. Kovner $114,000 $50,000 $ 0
</TABLE>
---------------------
Currently, the Company does not have any stock option plans or long term
compensation plans for its officers, directors and significant employees. The
Company does not have a formalized employment agreement with its officers. The
Company is actively seeking qualified persons to join its board of directors and
management team.
Persons considering an investment in the Company should be advised that its
securities are speculative and involve a high degree of risk, including, but not
necessarily limited to, certain factors affecting future results, such as the
following:
- Management has broad discretion over how to spend the funds held by
the Company and while management will endeavor to act in the best interest
of the Company, there can be no assurance that the decisions made by
management with respect to such funds will prove profitable to the Company.
- The rules for listing on the OTC Bulletin Board require the Company to
be fully reporting. As of the date of this Report, the Company's common
stock does not qualify for listing on the Bulletin Board. While the company
intends to complete all future required filings on a timely basis and apply
for inclusion on the Bulletin Board, there can be no assurance that the
Company will be included on the Bulletin Board
4
<PAGE> 6
and that a market for its common stock will exist in the future.
- General market price declines or market volatility could be negative
with respect to the price of the Company's common stock in the future.
- The real estate industry is both cyclical and seasonal as well as
subject to general economic conditions, which could have an adverse effect
on the Company's financial results.
- If the Company is unable to comply with mortgage banking and mortgage
brokerage rules and regulations, its ability to originate or fund loans may
be limited or restricted. This would have a material adverse effect on the
Company's revenues.
- The Company's Internet infrastructure may be disrupted by a number of
different factors. Moreover, the Internet industry is driven by rapid
technological change, and if the Company cannot effectively adapt to these
developments, it may have a material adverse effect on the Company's
ability to compete in the Internet sector.
- The Company is highly dependant on the continued service of Mr. Kovner
as its President and Chief Executive Officer. Therefore, loss of Mr.
Kovner's services as an officer and director of the Company could have a
material adverse effect on the Company's future success.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
Not Applicable.
Item 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
(a) (1) On July 7, 2000 the Registrant changed accountants from Stark Tinter &
Associates, LLC: to Cerasi, Kraus & Associates, Inc.
(ii) The financial statements reported on by Stark Tinter & Associates, LLC
were not subject to an adverse or qualified opinion, or a disclaimer of
opinion during the past two fiscal years, and the interim period ended
July 7, 2000;
(iii) The decision to change accountants was approved by the Registrant's Board
of Directors; and
(iv) (A) There were no disagreements related to accounting principles or
practices, financial statement disclosure, or auditing scope or procedure
during the past two fiscal years and the interim period ended July 7,
2000.
(B) Not applicable;
(C) Not applicable;
(D) Not applicable; and
(E) Not applicable.
(2)
(i) Home Financing Centers, Inc.'s certifying accountants were Cerasi,
Kraus & Associates, Inc. prior to the merger with MAS Acquisition X
Corp. and will remain in that capacity.
(3) The Registrant has provided to Stark Tinter & Associates, LLC,
its former accountants, a copy of the disclosures contained
in this Item 4 and the Registrant has requested a letter from
Stark Tinter & Associates, LLC addressed to the Commission,
confirming the statements made by the Registrant in this
Item 4.
A copy of such letter is attached hereto.
(b) not applicable
(ii) Not applicable.
ITEM 5. OTHER EVENTS.
Not Applicable
ITEM 6. RESIGNATION OF REGISTRANT'S DIRECTORS.
As a result of the Transaction, MAS has accepted the resignation of Aaron
Tsai as the sole officer and director of MAS and has appointed Mr. Gary J.
Kovner to replace him as the President and Director of MAS.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
See audited financial statements following statement on Form 8-K
Exhibit Number Description
-------------- -----------
16.1 Letter Re Change of Accountants
23.1 Consent of Cerasi, Kraus & Associates, Inc.,
independent public accountants
27.1 FDS for Fiscal Years Ending 12/31/98, 12/31/99
& Interim period ending 3/31/2000
99.1 Stock Exchange Agreement, between Home Financing
Centers, Inc. and MAS Acquisition X Corp.
ITEM 8. CHANGE IN FISCAL YEAR.
Not Applicable
ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S.
Not Applicable.
5
<PAGE> 7
SIGNATURE
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 authorized.
HOME FINANCING CENTERS, INC.
/s/ Gary J. Kovner
------------------------------------------
Name: Gary J. Kovner
Title: President and Chief Executive Officer
6
<PAGE> 8
HOME FINANCING CENTERS, INC.
(A SubChapter S Corporation)
--------------------------------------------------------------------------------
Comparative Financial Statements
Together With
Supplementary Financial Information
For the Years Ended
December 31, 1999 and 1998
Prepared By:
CERASI, KRAUS & ASSOCIATES, INC.
Certified Public Accountants
150 East Sprague Road
Broadview Heights, Ohio 44147
( 440) 546-9359
<PAGE> 9
Home Financing Centers, Inc.
(A SubChapter S Corporation)
Comparative Financial Statements
For the Years Ended December 31, 1999 and 1998
--------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Independent Accountants' Report ..................................... 1
Comparative Balance Sheets .......................................... 2-3
Comparative Income Statements ....................................... 4
Comparative Statement of Shareholder's Equity........................ 5
Comparative Statements of Cash Flow ................................. 6
Notes to Comparative Financial Statements ........................... 7-10
</TABLE>
Comparative Supplemental Financial Information
For the Years Ended December 31, 1999 and 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Accountants' Report On Additional Information ....................... 11
Comparative Statements of
Selling, General & Administrative Expenses ........................ 12
Comparative Statements of Key Analytical Ratios ..................... 13-14
</TABLE>
<PAGE> 10
CERASI, KRAUS & ASSOCIATES, INC.
Certified Public Accountants
150 East Sprague Road
Broadview Heights, Ohio 44147
--------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
To Mr. Gary J. Kovner
President
HOME FINANCING CENTERS, INC.
(A SUBCHAPTER S CORPORATION)
We have audited the accompanying Comparative Balance Sheets of Home Financing
Centers, Inc. (a SubChapter S Corporation) as of December 31, 1999 and 1998 and
the related Comparative Statements of Income, Retained Earnings and Cash Flow
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on the
financial statements based on our audit.
We conducted the 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 this 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 Home Financing Centers, Inc.,
(a SubChapter S Corporation) as of December 31, 1999 and 1998 and the results of
its operations and cash flows for the years then ended in conformity with
generally accepted accounting principles.
There is no provision for Income Taxes included in these statements since the
Corporation is taxed as a SubChapter S Corporation and taxes are considered the
responsibility of the shareholder.
/s/ Cerasi, Kraus & Associates, Inc.
Cerasi, Kraus & Associates, Inc. CPA's
May 22, 2000
-1-
<PAGE> 11
Home Financing Centers, Inc.
(a SubChapter S Corporation)
Comparative Balance Sheets
As of
December 31,
--------------------------------------------------------------------------------
ASSETS
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Current Assets:
Cash $ 16,390 $ 26,291
Restricted Cash 131 2,439
Accounts Receivable 100,000 --
Shareholder Loan Receivable 136,854 97,701
Prepaid Insurance 1,643 --
-------- --------
$255,018 $126,431
Fixed Assets:
Office Furniture 6,123 5,703
Office Equipment 23,873 19,670
-------- --------
29,996 25,373
Less: Accumulated Depreciation 12,164 6,515
-------- --------
$ 17,832 $ 18,858
Other Assets:
Deposits 1,243 1,343
Computer Software, Net of Amortization 2,420 2,583
Cash Surrender Value of Officer's Life Insurance 4,515 2,250
-------- --------
$ 8,178 $ 6,176
-------- --------
Total Assets $281,028 $151,465
======== ========
</TABLE>
The Accompanying Notes Are An Integral Part of These Financial Statements.
-2-
<PAGE> 12
Home Financing Centers, Inc.
(A SubChapter S Corporation)
Comparative Balance Sheets
As of
December 31,
--------------------------------------------------------------------------------
LIABILITIES
1999 1998
---- ----
Current Liabilities:
Line of Credit Payable $ 81,666 $ 70,718
Accounts Payable 7,873 3,197
Accrued Profit Sharing 30,000 20,000
Accrued Taxes 12,138 --
-------- --------
Total Liabilities $131,677 $ 93,915
SHAREHOLDER'S EQUITY
Common Stock,(No Par Value) 200,000 Shares Authorized,
100 Shares Issued & Outstanding 100 100
Retained Earnings 149,251 57,450
-------- --------
$149,351 $ 57,550
-------- --------
Total Liabilities & Shareholder's Equity $281,028 $151,465
======== ========
The Accompanying Notes Are An Integral Part of These Financial Statements.
-3-
<PAGE> 13
Home Financing Centers, Inc.
(A SubChapter S Corporation)
Comparative Income Statements
For the Years Ended
December 31,
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Net Mortgage Fees Earned $ 547,148 $ 584,141
--------- ---------
Cost Of Closing:
Appraisal Fees 43,648 78,790
Closing Expenses 4,638 10,515
Referral Fees 32,958 27,225
Credit Report Fees 12,188 16,766
Delivery Cost 3,573 2,366
Title Fees -- 1,005
Internet Services 16,595 --
Other Miscellaneous Fees 3,451 2,803
--------- ---------
Total Costs Of Closing $ 117,051 $ 139,470
Gross Profit $ 430,097 $ 444,671
--------- ---------
Selling, General & Administrative Expenses $ 329,751 $ 297,540
--------- ---------
Operating Income $ 100,346 $ 147,131
Other (Deductions):
Interest Income $ 4 $ --
Interest Expense (6,549) (8,404)
--------- ---------
$ (6,545) $ (8,404)
--------- ---------
Net Income $ 93,801 $ 138,727
========= =========
</TABLE>
The Accompanying Notes Are An Integral Part of These Financial Statements.
-4-
<PAGE> 14
Home Financing Centers, Inc.
(A SubChapter S Corporation)
Statement of Shareholder's Equity
For the Years Ended
December 31, 1999 and 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Retained
Stock Earnings Total
------ -------- -----
<S> <C> <C> <C>
Balance - January 1, 1998 $ 100 $ 5,813 $ 5,913
Net Income 138,727 138,727
Distributions -- (87,090) (87,090)
--------- --------- ---------
Balance - December 31, 1998 $ 100 $ 57,450 $ 57,550
Net Income 93,801 93,801
Distributions -- (2,000) (2,000)
--------- --------- ---------
Balance - December 31, 1999 $ 100 $ 149,251 $ 149,351
========= ========= =========
</TABLE>
The Accompanying Notes Are An Integral Part of These Financial Statements.
-5-
<PAGE> 15
Home Financing Centers, Inc.
(A SubChapter S Corporation)
Comparative Statements of Cash Flow
As of
December 31,
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net Income $ 93,801 $ 138,727
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) by Operating Activities:
Depreciation 5,649 3,100
Amortization 163 41
Change in Current Assets and Liabilities:
Increase in Accounts Receivable (100,000) --
Increase in Prepaid Insurance (1,643)
Increase in Accounts Payable 4,676 233
Increase in Accrued Profit Sharing 10,000 20,000
Increase in Accrued Taxes 12,138 --
--------- ---------
Total Adjustments $ (69,017) $ 23,374
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 24,784 $ 162,101
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures (4,623) (15,363)
Purchase of Computer Software -- (2,624)
Refund of Deposits 100 --
Distributions Paid (2,000) (87,090)
--------- ---------
NET CASH (USED BY) INVESTING ACTIVITIES $ (6,523) $(105,077)
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease (Increase) in Restricted Cash Accounts 2,308 (2,439)
(Increase) in Cash Surrender Value of Officer's Life Insurance (2,265) (2,250)
Payments on Borrowings (37,881) (4,152)
Borrowings on Line of Credit 48,829 --
Borrowings on Shareholder Loan Receivable (39,153) (48,884)
--------- ---------
NET CASH (USED BY) FINANCING ACTIVITIES $ (28,162) $ (57,725)
--------- ---------
NET (DECREASE) IN CASH $ (9,901) $ (701)
CASH BALANCE, BEGINNING OF YEAR $ 26,291 $ 26,992
--------- ---------
CASH BALANCE, END OF YEAR $ 16,390 $ 26,291
========= =========
CASH PAID DURING THE YEAR FOR:
Interest $ 6,549 $ 8,404
========= =========
</TABLE>
The Accompanying Notes Are An Integral Part of These Financial Statements.
-6-
<PAGE> 16
Home Financing Centers, Inc.
(SubChapter S Corporation)
Notes to Comparative Financial Statements
For the Years Ended
December 31, 1999 and 1998
--------------------------------------------------------------------------------
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Home Financing Centers, Inc.
(A SubChapter S Corporation) (the Company) is presented to assist in
understanding the financial statements. The financial statements and notes are
representations of the Company's management who is responsible for their
integrity and objectivity. These accounting policies conform to generally
accepted accounting principles and have been consistently applied in the
preparation of the financial statements.
Business Activity
The Company was formed in May 1993 to provide residential mortgage loans,
refinancing and home equity loans. The company's offices are located in
Swampscott, Massachusetts.
SubChapter S Corporation Tax Status
The Company with the consent of its' shareholder has elected under the Internal
Revenue Code to be treated as an S Corporation. In lieu of Corporation income
taxes, the shareholder is taxed on the income at his personal tax rate.
Therefore, no provision for federal income tax (Current or Deferred) has been
included in these statements.
Basis of Financial Statement Presentation
The accompanying financial statements have been prepared on the accrual basis of
accounting. The accounting method recognizes revenues in the accounting period
in which they are earned and expenses when they are incurred regardless of when
cash is paid or received.
NOTE B - CASH - RESTRICTED BALANCES
The Company acts as an escrow agent for certain closings by specific lenders.
The Company can only access these funds after a settlement sheet is presented by
the title company at closing.
-7-
<PAGE> 17
Home Financing Centers, Inc.
(SubChapter S Corporation)
Notes to Comparative Financial Statements
For the Years Ended
December 31, 1999 and 1998
--------------------------------------------------------------------------------
NOTE C - RELATED PARTY TRANSACTIONS
Shareholder Loan Receivable
The shareholder borrows funds from the company in anticipation of an earnings
distribution. No formal written agreement exists for this loan.
Lease of Office Building
The Company rents its' office building from the shareholder on twelve month
lease at $1,000 per month.
NOTE D - FIXED ASSETS
Fixed Assets are carried at historical cost. The depreciation of the Property
and Equipment is provided using the straight-line method for financial reporting
purposes.
The estimated useful lives of the assets are as follows:
Office Furniture 7 Years
Office Equipment 5 Years
Expenditures for maintenance and repairs are charged to expense as incurred.
NOTE E - COMPUTER SOFTWARE
The Company capitalizes its software costs and amortizes these costs over five
years.
-8-
<PAGE> 18
Home Financing Centers, Inc.
(SubChapter S Corporation)
Notes to Comparative Financial Statements
For the Years Ended
December 31, 1999 and 1998
--------------------------------------------------------------------------------
NOTE F - LINES OF CREDIT
The Company has two Lines of Credit, one in the amount of $75,000, with $64,493
outstanding at December 31, 1999. This line bears interest at prime plus 1 1/2%
and is due on demand. The other Line of Credit is in the amount of $50,000 with
$17,172 outstanding. This line bears interest at 10% (fixed) and is due on
demand.
NOTE G - WAREHOUSE LINE OF CREDIT
The Company has a Warehouse Line of Credit in the amount of $1,000,000, with no
outstanding balance at December 31, 1999. The loan bears interest at prime and
expires at the end of July, 2000
Under the terms of the agreements the Company can draw funds on pre-approved
mortgages based on certain underwriting criteria. These funds are paid back as
each loan is closed with the ultimate lender.
NOTE H - COMMON STOCK
The Company has 200,000 shares of common stock authorized, 100 shares issued and
outstanding at no par value.
-9-
<PAGE> 19
Home Financing Centers, Inc.
(SubChapter S Corporation)
Notes to Comparative Financial Statements
For the Years Ended
December 31, 1999 and 1998
--------------------------------------------------------------------------------
NOTE I - RENTALS UNDER OPERATING LEASES
The Company has Office buildings and Office Equipment under operating leases
that expire over the next three years.
The following is a schedule of the minimum rental payments required under the
operating leases that have remaining non-cancelable lease terms.
<TABLE>
<CAPTION>
Year Ended
December 31, Amount
------------ ------
<S> <C>
2000 11,513
2001 3,513
2002 2,508
2003 --
2004 --
-------
$17,534
=======
</TABLE>
10
<PAGE> 20
HOME FINANCING CENTERS, INC.
(a SubChapter S Corporation)
--------------------------------------------------------------------------------
Comparative Supplemental Financial Information
For the Years Ended
December 31, 1999 and 1998
<PAGE> 21
CERASI, KRAUS & ASSOCIATES, INC.
Certified Public Accountants
150 East Sprague Road
Broadview Heights, Ohio 44147
(440) 546-9359
--------------------------------------------------------------------------------
ACCOUNTANTS' OPINION ON
COMPARATIVE SUPPLEMENTAL FINANCIAL INFORMATION
To Mr. Gary J. Kovner
President
HOME FINANCING CENTERS, INC.
(A SUBCHAPTER S CORPORATION)
Our report on the audited comparative financial statements of Home Financing
Centers, Inc. (a SubChapter S Corporation) for the years ended December 31, 1999
and 1998 appears on Page 1. The Comparative Statements of Selling, General and
Administrative Expenses and Comparative Statements of Key Analytical Ratios are
presented for the purposes of additional analysis and is not a required part of
the basic Financial Statements. The Comparative Statements of Selling, General
and Administrative expenses have been compiled by us and, in our opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as a whole. The Comparative Statements of Key Analytical
Ratios, which is of a non-accounting nature which have been compiled by us
during the audit of the basic financial statements, and we express no opinion on
it.
/s/ Cerasi, Kraus & Associates, Inc.
Cerasi, Kraus & Associates, Inc. CPA's
May 22, 2000
-11-
<PAGE> 22
Home Financing Centers, Inc.
(A SubChapter S Corporation)
Comparative Statements of Selling, General & Administrative Expenses
For the Years Ended
December 31,
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Administrative Salaries $143,880 $139,951
Payroll Taxes 9,264 7,932
Advertising 26,371 37,734
Automobile Expenses 8,721 6,569
Computer Rental Expenses -- 3,204
Depreciation & Amortization 5,812 3,141
Dues & Subscriptions 1,811 2,442
Insurance Expense 17,500 3,686
Office Supplies 12,272 10,834
Professional Fees 5,034 2,418
Profit Sharing Plan Contribution 30,000 30,000
Rent Expense 12,000 12,000
Repairs & Maintenance 8,416 3,875
State & Local Taxes 12,594 456
Telephone Expenses 11,586 12,246
Travel & Entertainment 17,828 12,873
Utilities 2,777 3,860
Miscellaneous 3,885 4,319
-------- --------
Total General & Administrative Expenses $329,751 $297,540
======== ========
</TABLE>
The Accompanying Notes Are An Integral Part of These Financial Statements.
-12-
<PAGE> 23
Home Financing Centers, Inc.
(A SubChapter S Corporation)
Comparative Statements of Key Analytical Ratios
As of
December 31,
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Profitability Ratios:
Return on Equity 62.81% 241.05%
Return on Total Investment 163.27% 241.05%
Return on Total Assets 33.38% 91.59%
Return on Operating Profit to Net Worth 67.19% 255.66%
Liquidity Ratios:
Working Capital $ 123,341 $ 32,516
Current Ratio 1.94 1.35
Asset Productivity Ratios:
Net Fixed Assets to Total Assets 6.35% 12.45%
Total Liabilities to Equity 0.88 1.63
Long Term Debt to Equity N/A N/A
Net Worth to Debt 1.13 0.61
Interest Coverage N/A N/A
Net Worth to Total Assets 0.53 0.38
Current Assets to Total Assets 90.74% 83.47%
Turnover Ratios:
Cash Turnover 10.9 Days 16.4 Days
Accounts Payable Turnover 24.6 Days 8.4 Days
</TABLE>
The Accompanying Notes Are An Integral Part of These Financial Statements.
-13-
<PAGE> 24
Home Financing Centers, Inc.
(A SubChapter S Corporation)
Comparative Statements of Key Analytical Ratios
As of
December 31,
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Efficiency Ratios:
Sales Increases (Decreases):
Dollars $ (36,993) $ 323,248
Percent (14.18)% 123.90%
Total Assets to Sales 0.51 0.26
Fixed Assets to Sales 0.03 0.03
Sales to Working Capital 4.44 17.96
Sales Per Day $ 1,499 $ 1,600
Contribution Ratios:
Gross Profit:
Dollars $ 430,097 $ 444,671
Percent 78.61% 76.12%
Sales Breakeven Point
Monthly $ 34,958 $ 32,572
Annually $ 419,493 $ 390,863
</TABLE>
The Accompanying Notes Are An Integral Part of These Financial Statements.
-14-
<PAGE> 25
PRELIMINARY
HOME FINANCING CENTERS, INC.
(Formerly Kentex Energy, Inc.)
--------------------------------------------------------------------------------
Financial Statements
Together With
Supplementary Financial Information
For the Three Months Ended
March 31, 2000
Prepared By:
CERASI, KRAUS & ASSOCIATES, INC.
Certified Public Accountants
150 East Sprague Road
Broadview Heights, Ohio 44147
(440) 546-9359
<PAGE> 26
PRELIMINARY
Home Financing Centers, Inc.
(Formerly Known as Kentex Energy, Inc.)
Financial Statements
For the Three Months Ended March 31, 2000
--------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Accountants' Report ................................................ 1
Balance Sheet ...................................................... 2 - 3
Income Statement.................................................... 4
Statement of Shareholder's Equity .................................. 5
Statement of Cash Flow ............................................. 6
Notes to Financial Statements ...................................... 7-8
</TABLE>
Supplemental Financial Information
For the Three Months Ended March 31, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Accountants' Report On Additional Information ...................... 9
Statement of Selling, General & Administrative Expenses ............ 10
Statements of Key Analytical Ratios ................................ 11-12
</TABLE>
<PAGE> 27
PRELIMINARY
CERASI, KRAUS & ASSOCIATES, INC.
Certified Public Accountants
150 East Sprague Road
Broadview Heights, Ohio 44147
--------------------------------------------------------------------------------
ACCOUNTANTS' REPORT
To Mr. Gary J. Kovner
President
HOME FINANCING CENTERS, INC.
(FORMERLY KENTEX ENERGY, INC.)
We have compiled the accompanying Balance Sheet of Home Financing Centers, inc.
(Formerly Kentex Energy, Inc.) as of March 31, 2000 and the related Statements
of Income, and Retained Earnings for the three months then ended in accordance
with the Statements on Standards for Accounting and Review Services issued by
the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying statements and accordingly, do not express an opinion
or any other form of assurance on them.
/s/ Cerasi, Kraus & Associates, Inc. CPA's
------------------------------------------
Cerasi, Kraus & Associates, Inc. CPA's
July 6, 2000
1
<PAGE> 28
PRELIMINARY
Home Financing Centers, Inc.
(Formerly Kentex Energy, Inc.)
Balance Sheet
As of
March 31, 2000
--------------------------------------------------------------------------------
ASSETS
------
<TABLE>
<CAPTION>
<S> <C>
Current Assets:
Cash $163,810
Restricted Cash 623
Shareholder Loan Receivable 136,854
Prepaid Insurance 657
--------
$301,944
Fixed Assets:
Office Furniture 6,123
Office Equipment 25,468
--------
31,591
Less: Accumulated Depreciation 13,662
--------
$ 17,929
Other Assets:
Cash Surrender Value of Officer's Life Insurance 4,515
Deposits 1,243
Computer Software, Net of Amortization 33,186
Prepaid Taxes 12,374
--------
$ 51,318
--------
Total Assets $371,191
========
</TABLE>
See Accountant's Compilation Report
2
<PAGE> 29
PRELIMINARY
Home Financing Centers, Inc.
(Formerly Kentex Energy, Inc.)
Balance Sheet
As of
March 31, 2000
--------------------------------------------------------------------------------
LIABILITIES
-----------
<TABLE>
<CAPTION>
<S> <C>
Current Liabilities:
Line of Credit $ 86,227
Accounts Payable 10,689
Accrued Profit Sharing 30,000
Accrued Taxes 9,138
---------
Total Liabilities $ 136,054
SHAREHOLDER'S EQUITY
--------------------
Common Stock,(No Par Value) 50,000,000 Shares
16,827,122 Shares Issued & Outstanding 236,991
Convertible Preferred Stock, ($0.01 Par Value
2,000,000 Shares Authorized; 1615 Issued & Outstanding) 9,002
Additional Paid In Capital 299,500
Retained Earnings (310,356)
---------
$ 235,137
---------
Total Liabilities & Shareholder's Equity $ 371,191
=========
</TABLE>
See Accountant's Compilation Report
3
<PAGE> 30
PRELIMINARY
Home Financing Centers, Inc.
(Formerly Kentex Energy, Inc.)
Income Statement
For the Three Months Ended
March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Net Mortgage Fees Earned $ 30,773
--------
Cost Of Closing:
Appraisal Fees 1,175
Closing Expenses 519
Referral Fees 1,035
Credit Report Fees 4,866
Internet Services 11,876
Other Miscellaneous Fees 86
--------
Total Costs Of Closing $ 19,557
--------
Gross Profit $ 11,216
Selling, General & Administrative Expenses $ 93,099
--------
Operating Income (Loss) $(81,883)
Other (Deductions):
Interest Income $ --
Interest Expense (2,162)
--------
Income (Loss) Before Income Tax Expense (Benefit) $(84,045)
Income Tax Expense (Benefit) $(12,374)
--------
Net Income (Loss) $(71,671)
========
</TABLE>
See Accountant's Compilation Report
4
<PAGE> 31
PRELIMINARY
Home Financing Centers, Inc.
(Formerly Kentex Energy, Inc.)
Statement of Shareholder's Equity (Deficit)
For the Three Months Ended
March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Retained
Common Preferred Additional Earnings
Stock Stock Paid In Capital (Deficit) Total
------ --------- --------------- --------- -----
<S> <C> <C> <C> <C> <C>
Balance - January 1, 2000 $ 208,891 $ 9,002 $ -- $(387,936) $(170,043)
Merger with HFCI $ 100 $ 149,251 $ 149,351
Net Income (Loss) (71,671) $ (71,671)
Common Stock Issued 28,000 $ 299,500 $ 327,500
--------- --------- --------- --------- ---------
Balance - March 31, 2000 $ 236,991 $ 9,002 $ 299,500 $(310,356) $ 235,137
========= ========= ========= ========= =========
</TABLE>
See Accountant's Compilation Report
5
<PAGE> 32
PRELIMINARY
Home Financing Centers, Inc.
(Formerly Kentex Energy, Inc.)
Statement of Cash Flow
For the Three Months Ended
March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net Income (Loss) $ (71,671)
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) by Operating Activities:
Depreciation 1,498
Amortization 1,757
Change in Current Assets and Liabilities:
Decrease in Accounts Receivable 100,000
Decrease in Prepaid Insurance 986
Increase In Prepaid Taxes (12,374)
Decrease in Accounts Payable (167,427)
Decrease in Accrued Taxes (3,000)
---------
Total Adjustments $ (78,560)
---------
NET CASH PROVIDED BY OPERATING ACTIVITIES $(150,231)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures (1,595)
Development of Website (32,523)
Additional Paid in Capital Received 299,500
Issuance of Common Stock 28,000
---------
NET CASH (USED BY) INVESTING ACTIVITIES $ 293,382
CASH FLOWS FROM FINANCING ACTIVITIES
(Increase) in Restricted Cash Accounts (492)
Payments on Borrowings (4,500)
Borrowings on Line of Credit 9,061
---------
NET CASH (USED BY) FINANCING ACTIVITIES $ 4,069
---------
NET (DECREASE) IN CASH $ 147,220
CASH BALANCE, BEGINNING OF YEAR $ 16,590
---------
CASH BALANCE, END OF QUARTER $ 163,810
=========
CASH PAID DURING THE YEAR FOR:
Interest $ 2,162
=========
</TABLE>
See Accountant's Compilation Report
6
<PAGE> 33
Home Financing Centers, Inc.
(Formerly Kentex Energy, Inc.)
Notes to Financial Statements
March 31, 2000
--------------------------------------------------------------------------------
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of HOME FINANCING CENTERS, INC.
(FORMERLY KENTEX ENERGY, INC.) (the Company) is presented to assist in
understanding the financial statements. The financial statements and notes are
representations of the Company's management who is responsible for their
integrity and objectivity. These accounting policies conform to generally
accepted accounting principles and have been consistently applied in the
preparation of the financial statements.
BUSINESS ACTIVITY
The Company was formed in May, 1993 to provide residential mortgage loans,
refinancing and home equity loans. The company's offices are located in
Swampscott, Massachusetts.
On January 13, 2000, the Company shareholder exchanged his stock with Kentex
Energy, Inc. Over the Counter (OTCBB). As part of the exchange Kentex Energy,
Inc. agreed to change its name to Home Financing Centers, Inc. pursuant to a
planned reorganization.
BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying financial statements have been prepared on the accrual basis of
accounting. The accounting method recognizes revenues in the accounting period
in which they are earned and expenses when they are incurred regardless of when
cash is paid or received.
NOTE B - CASH - RESTRICTED BALANCES
As part of a contractual relationship with the company's lendors certain fees
earned by the company are not immediately available. The fees are required to
remain on deposit with the lendor until certain reserves are met. Additionally,
the Company acts as an escrow agent for certain closings by specific lendors.
The Company can only access these funds after a settlement sheet is presented by
the title company at closing.
7
<PAGE> 34
Home Financing Centers, Inc.
(Formerly Kentex Energy, Inc.)
Notes to Financial Statements
March 31, 2000
--------------------------------------------------------------------------------
NOTE C - FIXED ASSETS
Fixed Assets are carried at historical cost. The depreciation of the Property
and Equipment is provided using the straight-line method for financial reporting
purposes.
The estimated useful lives of the assets are as follows:
<TABLE>
<CAPTION>
<S> <C>
Office Furniture 10 Years
Office Equipment 5 Years
Computer Equipment 3 Years
Capitalized Leases 5 Years
</TABLE>
Expenditures for maintenance and repairs are charged to expense as incurred.
NOTE D - WAREHOUSE LINE OF CREDIT
The Company has a Warehouse Line of Credit in the amount of $1,000,000, with
nothing outstanding at March 31, 2000. This line bears interest at prime plus
1%. Under terms of the agreement the Company can draw funds on pre-approved
mortgages based on certain underwriting criteria. These funds are paid back as
each loan is closed with the ultimate lender. Interest is payable monthly on
construction loans and at the time of sale for all other loans. This loan
commitment can be terminated only upon 120 days written notice from either
party.
NOTE E - COMMON STOCK
The Company has 50,000,000 shares of common stock authorized, 16,827,122 shares
issued and outstanding at a par value of $.01.
8
<PAGE> 35
PRELIMINARY
HOME FINANCING CENTERS, INC.
(Formerly Kentex Energy, Inc.)
--------------------------------------------------------------------------------
Supplemental Financial Information
For the Three Months Ended
March 31, 2000
<PAGE> 36
PRELIMINARY
CERASI, KRAUS & ASSOCIATES, INC.
Certified Public Accountants
150 East Sprague Road
Broadview Heights, Ohio 44147
(440) 546-9359
--------------------------------------------------------------------------------
ACCOUNTANTS' OPINION ON
SUPPLEMENTAL FINANCIAL INFORMATION
To Mr. Gary J. Kovner
President
HOME FINANCING CENTERS, INC.
(FORMERLY KENTEX ENERGY, INC.)
Our report on the compiled financial statements of Home Financing Centers, Inc.
(Formerly Kentex Energy, Inc.) for the three months ended March 31, 2000. The
Statement of Selling, General and Administrative Expenses and Statements of Key
Analytical Ratios are presented for the purposes of additional analysis and is
not a required part of the basic Financial Statements. The Statement of Selling,
General and Administrative expenses have been compiled by us and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole. The Statements of Key Analytical Ratios,
which is of a non-accounting nature which have been compiled by us during the
compilation of the basic financial statements, and we express no opinion on it.
/s/ Cerasi, Kraus & Associates, Inc. CPA's
------------------------------------------
Cerasi, Kraus & Associates, Inc. CPA's
July 6, 2000
HOME FINANCING CENTERS, INC.
9
<PAGE> 37
PRELIMINARY
Home Financing Centers, Inc.
(Formerly Kentex Energy, Inc.)
Statement of Selling, General & Administrative Expenses
For the Three Months Ended
March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Administrative Salaries $36,796
Payroll Taxes 4,416
Employee Benefits 2,199
Advertising 3,681
Automobile Expenses 2,999
Depreciation & Amortization 3,255
Dues & Subscriptions 182
Licenses 525
Insurance Expense 5,331
Office Supplies 9,028
Professional Fees 6,500
Rent Expense 3,000
Repairs & Maintenance 1,694
State & Local Taxes 100
Telephone Expenses 4,729
Travel & Entertainment 7,371
Utilities 432
Miscellaneous 861
-------
Total General & Administrative Expenses $93,099
=======
</TABLE>
See Accountant's Compilation Report
10
<PAGE> 38
PRELIMINARY
Home Financing Centers, Inc.
(Formerly Kentex Energy, Inc.)
Statement of Key Analytical Ratios
As of
March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Profitability Ratios:
Return on Equity -30.48%
Return on Total Investment -23.10%
Return on Total Assets -19.31%
Return on Operating Profit to Net Worth -34.82%
Liquidity Ratios:
Working Capital $252,117
Current Ratio 6.06
Asset Productivity Ratios:
Net Fixed Assets to Total Assets 4.83%
Total Liabilities to Equity 0.58
Long Term Debt to Equity N/A
Net Worth to Debt 1.73
Interest Coverage N/A
Net Worth to Total Assets 0.63
Current Assets to Total Assets 81.34%
Turnover Ratios:
Cash Turnover 1943.0 Days
</TABLE>
See Accountant's Compilation Report
11
<PAGE> 39
PRELIMINARY
Home Financing Centers, Inc.
(Formerly Kentex Energy, Inc.)
Statement of Key Analytical Ratios
As of
March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Efficiency Ratios:
Total Assets to Sales 12.06
Fixed Assets to Sales 58.26%
Sales to Working Capital 12.21%
Sales Per Day $ 341.92
Contribution Ratios:
Gross Profit:
Dollars $ 11,216
Percent 36.45%
Sales Breakeven Point
Monthly $ 21,286
Annually $255,433
</TABLE>
See Accountant's Compilation Report
12
<PAGE> 40
KENTEX ENERGY, INC.
(Formerly International Texas Industries, Inc.)
(A Development Stage Company)
--------------------------------------------------------------------------------
Comparative Financial Statements
For the Year Ended December 31, 1999
And
Seven Months Ended December 31, 1998
and
Thirty-One Months Ended
June 1, 1997 to
December 31, 1999
Prepared By:
CERASI, KRAUS & ASSOCIATES, INC.
Certified Public Accountants
150 East Sprague Road
Broadview Heights, Ohio 44147
(440) 546-9359
<PAGE> 41
Kentex Energy, Inc.
(Formerly International Texas Industries, Inc.)
(A Development Stage Company)
Financial Statements
For the Year Ended December 31, 1999
And
Seven Months Ended December 31, 1998
and
Thirty-One Months Ended
June 1, 1997 to
December 31, 1999
--------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Independent Auditor's Report ........................................ 1
Balance Sheet ....................................................... 2
Statements of Net Loss .............................................. 3
Statement of Shareholders' Equity ................................... 4
Statements of Cash Flow ............................................. 5
Notes to Financial Statements ....................................... 6-8
</TABLE>
<PAGE> 42
CERASI, KRAUS & ASSOCIATES, INC.
Certified Public Accountants
150 East Sprague Road
Broadview Heights, Ohio 44147
--------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
To Mr. Matthew Markin
KENTEX ENERGY, INC.
(FORMERLY INTERNATIONAL TEXAS INDUSTRIES, INC.)
(A DEVELOPMENT STAGE COMPANY)
We have audited the accompanying Comparative Balance Sheets of Kentex Energy,
Inc. (Formerly International Texas Industries, Inc.) as of December 31, 1999 and
1998 and the related Comparative Statements of Income, Retained Earnings and
Cash flows for the year and seven months then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statements based on our audit.
We conducted the 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 this audit provides a reasonable basis for opinion.
In our opinion, the comparative financial statements referred to above preseent
fairly, in all material respects, the financial position of Kentex Energy, Inc.,
as of December 31, 1999 and 1998 and the results of its operations and cash
flows for the year and seven months then ended in conformity with generally
accepted accounting principles.
The accompanying comparative financial statements have been prepared assuming
the Company will continue to operate as a going concern. As discussed in Note D
to the comparative financial statements, the Company has not yet commenced
operation. This condition raises substantial doubt about the Company's ability
to continue as a going concern. Management's plans are also discussed in Note D.
The financial statements do not include any adjustments should the Company be
unable to continue as a going concern.
/s/ Cerasi, Kraus & Associates, Inc. CPA's
------------------------------------------
Cerasi, Kraus & Associates, Inc. CPA's
May 29, 2000
-1-
<PAGE> 43
Kentex Energy, Inc.
(Formerly Texas Industries, Inc.)
(A Development Stage Company)
Comparative Balance Sheets
As of
December 31, 1999 and 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
---- ----
ASSETS
------
<S> <C> <C>
Current Assets:
Cash $ 200 $ 200
--------- ---------
Total Assets $ 200 $ 200
========= =========
LIABILITIES & SHAREHOLDERS' EQUITY (DEFICIT)
--------------------------------------------
LIABILITIES
-----------
Current Liabilities:
Accounts Payable $ 170,243 $ 167,500
--------- ---------
Total Liabilities $ 170,243 $ 167,500
SHAREHOLDER'S EQUITY (DEFICIT)
------------------------------
Common Stock,($0.001 Par Value,
50,000,0000 Shares Authorized;
21,801,360 Issued & Outstanding in 1999
& 10,801,360 Issued & Outstanding in 1998) $ 208,891 $ 197,891
Convertible Preferred Stock, ($0.01 Par Value
2,000,000 Shares Authorized;
1,615 Issued & Outstanding in 1999 & 1998) 9,002 9,002
Accumulated Deficit (387,936) (374,193)
--------- ---------
Total Shareholders' Deficit $(170,043) $(167,300)
--------- ---------
Total Liabilities & Shareholder's Equity (Deficit) $ 200 $ 200
========= =========
</TABLE>
The Accompanying Notes Are An Integral Part of These Financial Statements
-2-
<PAGE> 44
Kentex Energy, Inc.
(Formerly Texas Industries, Inc.)
(A Development Stage Company)
Comparative Statements of Net Loss
For the
Year Ended December 31, 1999
&
Seven Months Ended December 31, 1998
&
Thirty-One Months Ended December 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the
For the For the Thirty-One Months
Year Seven Months Beginning
Ended Ended June 1, 1997
December 31, 1999 December 31, 1998 To December 31, 1999
----------------- ----------------- --------------------
<S> <C> <C> <C>
Net Sales $ -- $ -- $ --
--------- --------- ---------
General & Administrative Expenses:
Salaries & Wages 322,000 117,602 439,602
Legal & Professional Fees -- -- 2,914
Licenses -- -- 695
Office Supplies -- -- --
Bad Debt Expense -- 11,078 11,078
Miscellaneous 2,743 1,609 4,480
--------- --------- ---------
Total General & Administrative Expenses $ 324,743 $ 130,289 $ 458,769
--------- --------- ---------
Operating (Loss) $(324,743) $(130,289) $(458,769)
Other Income :
Interest Income -- -- 66
Gain on Extinguishment of Debt $ 311,000 $ -- $ 311,000
--------- --------- ---------
(Loss) Before Income Taxes $ (13,743) $(130,289) $(147,703)
Income Tax (Benefit)
--------- --------- ---------
Net (Loss) $ (13,743) $(130,289) $(147,703)
========= ========= =========
</TABLE>
The Accompanying Notes Are An Integral Part of These Financial Statements
-3-
<PAGE> 45
Kentex Energy, Inc.
(Formerly Texas Industries, Inc.)
(A Development Stage Company)
Statement of Shareholders' Equity
For the
Seven Months Ended December 31, 1998
&
For the
Year Ended December 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Preferred Stock
-------------------------- ------------------------
Shares Issued Shares Issued Total
& & Accumulated Shareholders'
Outstanding Amount Outstanding Amount Deficit Equity (Deficit)
------------- ------ ------------- ------ ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Balance - June 1, 1998 92,465 $ 46,592 1,615 $9,002 $ (64,604) $ (9,010)
Issuance of Common Stock 10,708,895 $ 151,299 -- $ -- $ 151,299
Costs of Issuance of Common Stock (179,300) $(179,300)
Net Loss for Seven Months Ended
December 31, 1998 $ -- (130,289) $(130,289)
---------- --------- ----- ------ --------- ---------
Balance - December 31, 1998 10,801,360 $ 197,891 1,615 $9,002 $(374,193) $(167,300)
---------- --------- ----- ------ --------- ---------
Issuance of Common Stock 11,000,000 $ 11,000 -- $ -- $ 11,000
Net Income for Year Ended
December 31, 1999 (13,743) $ (13,743
---------- --------- ----- ------ --------- ---------
Balance - December 31, 1999 21,801,360 $ 208,891 1,615 $9,002 $(387,936) $(170,043)
========== ========= ===== ====== ========= =========
</TABLE>
The Accompanying Notes Are An Integral Part of These Financial Statements
-4-
<PAGE> 46
Kentex Energy, Inc.
(Formerly Texas Industries, Inc.)
(A Development Stage Company)
Comparative Statements of Cash Flow
For the
Year Ended December 31, 1999
&
Seven Months Ended December 31, 1998
&
Thirty-One Months Ended December 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the
For the For the Thirty-One Months
Year Seven Months Beginning
Ended Ended June 1, 1997
December 31, 1999 December 31, 1998 To December 31, 1999
----------------- ----------------- --------------------
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net (Loss) $ (13,743) $(130,289) $(147,703)
Change in Current Assets and Liabilities:
(Increase) Decrease in Note Receivable & Accrued Interest -- 10,078 10,012
(Increase) Decrease in Prepaid Expenses -- 1,200 --
Increase in Accounts Payable 2,743 146,916 149,904
Increase in Accrued Liabilities -- -- --
Increase (Decrease) in Accrued & Withheld Taxes -- -- --
--------- --------- ---------
Total Adjustments $ 2,743 $ 158,194 $ 159,916
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ (11,000) $ 27,905 $ 12,213
CASH FLOWS FROM INVESTING ACTIVITIES
Principal Payments on Notes Receivable -- -- 1,488
--------- --------- ---------
NET CASH FROM (USED BY) INVESTING ACTIVITIES $ -- $ -- $ 1,488
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Common Stock 11,000 151,299 165,799
Costs of Issuance of Common Stock -- (179,300) (179,300)
--------- --------- ---------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES $ 11,000 $ (28,001) $ (13,501)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH $ -- $ (96) $ 200
CASH BALANCE, BEGINNING OF PERIOD $ 200 $ 296 $ --
--------- --------- ---------
CASH BALANCE, END OF PERIOD $ 200 $ 200 $ 200
========= ========= =========
SUPPLEMENTAL DISCLOSURE:
Sale of Common Stock $ 11,000 $ 151,299 $ 177,299
Less: Note Receivable -- -- 11,500
--------- --------- ---------
$ -- $ -- $ 165,799
========= ========= =========
</TABLE>
The Accompanying Notes Are An Integral Part of These Financial Statements
-5-
<PAGE> 47
Kentex Energy, Inc.
(Formerly International Texas Industries, Inc.)
(A Development Stage Company)
Notes to Financial Statements
December 31, 1999 and 1998
--------------------------------------------------------------------------------
NOTE A - COMPANY HISTORY
Kentex Energy, Inc. was originally incorporated on May 6, 1968 in the State of
Nevada as Arizona Nevada Gold-Copper and Silver Mining Company. The name was
changed to Arizona-Nevada Mining Company on December 30, 1968. On July 9, 1982
the name was changed to International Texas Industries, Inc. This Company has
been inactive for many years and its last 10-K filing with the Securities and
Exchange Commission (SEC) was on July 20, 1989.
On December 10, 1997 International Texas Industries, Inc. was reinstated as a
Company in good standing in the state of Nevada. On June 11, 1998 the Company
changed the name to Kentex Energy, Inc.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Kentex Energy, Inc. (Formerly
International Texas Industries, Inc.) (A Development Stage Company)(The Company)
is presented to assist in understanding the financial statements. The financial
statements and notes are representations of the Company's management who is
responsible for their integrity and objectivity. These accounting policies
conform to generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.
Basis of Financial Statement Presentation
The accompanying financial statements have been prepared on the accrual basis of
accounting. The accounting method recognizes revenues in the accounting period
in which they are earned and expenses when they are incurred regardless of when
cash is paid or received.
-6-
<PAGE> 48
Kentex Energy, Inc.
(Formerly International Texas Industries, Inc.)
(A Development Stage Company)
Notes to Financial Statements
December 31, 1999 and 1998
--------------------------------------------------------------------------------
NOTE B - RELATED PARTY TRANSACTIONS
On May 11, 1998, International Texas Industries, Inc. sold 25,000,000 shares of
restricted common stock (pre-reverse split) to Executive Business Services (EBS)
for $15,000. EBS is an entity related to the Company's former president. The
proceeds from the stock sale were used to cover expenses incurred in connection
with reactivating the Company.
$11,078 of this note was deemed uncollectible during 1998 and written off. At
December 31, 1998 there was no outstanding receivable.
NOTE C - INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between the financial
statements carrying amounts of existing assets and liabilities and their
respective tax bases, and to net operating loss and tax credit carryforwards,
measured by enacted tax rates for the years in which taxes are expected to be
paid or recovered.
There are no deferred tax assets or liabilities at December 31, 1998.
NOTE D - GOING CONCERN
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company's Management is currently
searching for businesses to acquire, and intends to use the securities markets
to help finance the business. It is not certain whether or not the Company will
obtain the necessary financing to continue its operations. These factors raise
substantial doubt about the Company's ability to continue as a Going Concern.
The financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.
-7-
<PAGE> 49
Kentex Energy, Inc.
(Formerly International Texas Industries, Inc.)
(A Development Stage Company)
Notes to Financial Statements
December 31, 1999 and 1998
--------------------------------------------------------------------------------
NOTE E - SUBSEQUENT EVENT
On January 13, 2000 the Company agreed to merge with Home Financing Centers,
Inc. (HFCI). As part of the exchange, the Company agreed to change its name to
Home Financing Centers, Inc. pursuant to the planned reorganization.
-8-
<PAGE> 50
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
16.1 Letter Re Change of Accountants
23.1 Consent of Cerasi, Kraus & Associates, Inc.,
independent public accountants
27.1 FDS for Fiscal Years Ending 12/31/98, 12/31/99
& Interim period ending 3/31/2000
99.1 Stock Exchange Agreement, between Home Financing
Centers, Inc. and MAS Acquisition X Corp.
